The circulation of the Southern Ocean is studied in the eddy-resolving model POP (Parallel Ocean Program) by an analysis of zonally integrated balances. The TEM formalism (Transformed Eulerian Mean) is extended to include topography and continental boundaries, thus deviations from a zonally integrated state involve transient and standing eddies. The meridional circulation is presented in terms of the Eulerian, eddy-induced, and residual streamfunctions. It is shown that the splitting of the meridional circulation into Ekman and geostrophic transports and the component induced by subgrid and Reynolds stresses is identical to a particular form of the zonally integrated balance of zonal momentum. In this balance, the eddy-induced streamfunctions represent the interfacial form stresses by transient and standing eddies and the residual streamfunction represents the acceleration of the zonal current by density fluxes in a zonally integrated frame. The latter acceleration term is directly related to the surface flux of density and interior fluxes due to the resolved and unresolved eddies. The eddy-induced circulation is extremely vigorous in POP. In the upper ocean a shallow circulation, reversed in comparison to the Deacon cell and mainly due to standing eddies, appears to the north of Drake Passage latitudes, and in the Drake Passage belt of latitudes a deep-reaching cell is induced by transient eddies. In the resulting residual circulation the Deacon cell is largely cancelled and the residual advection of the zonal mean potential density is balanced by diapycnal eddy and subgrid fluxes which are strong in the upper few hundred meters but small in the ocean interior. The balance of zonal momentum is consistent with other eddy-resolving models; a new aspect is the clear identification of density effects in the zonally integrated balance. We show that the wind stress and the stress induced by the residual circulation drive the eastward current, whereas both eddy species result in a braking. Finally, we extend the Johnson-Bryden model of zonal transport to incorporate all relevant terms from the zonal momentum balance. It is shown that wind stress and induction by the residual circulation carry an eastward transport while bottom form stress and the stress induced by standing eddies yield westward components of transport. © Springer-Verlag 2001.