The European Union's refusal to participate in constructing the South Stream, a $40 billion pipeline for delivering Russian gas through the Black Sea to Bulgaria and further, pushed Russia's President Vladimir Putin to announce an alternative project – the Turkish Stream.
This comes as another attempt to bypass Ukrainian gas transportation
system, which still transports most of Russia’s Europe-bound gas, in doing
energy business with the EU. Last year, Russia transported 59.4 billion cubic
meters of gas to European Union countries through Ukraine.
So far, Gazprom, a Moscow-headquartered gas monopolist, spent $4.7
billion on the South Stream, while industry analysts estimate the cost of the
Turkish Stream at $10 billion with 63 billion cubic meters annual capacity – 14
billion for Turkey’s needs and the rest for the EU market. As of now, Turkey
gets 60 percent of its gas from Russia with a third of it going through
Ukraine.
Under this plan, the EU will have to build own link to the Turkish
stream to get Russian gas.
“(South Stream) is closed. The Turkish stream now is the only
pipeline. There are no other options,” Gazprom chief executive officer
Aleksey Miller said in January, according to TASS, a Russian news agency. He
added that Turkey will receive its first gas via this route by December 2016.
Putin has already promised Turkey a six percent price discount for gas,
though Ankara seeks for better terms for the deal. Turkish Prime Minister Ahmet
Davutoglu said the country is energy hungry, though doesn’t see itself as an
alternative to Ukraine in conducting gas deliveries to the Western Europe.
Russia’s war against Ukraine makes it harder to negotiate any business
affairs with the country led by a dictator, making Russia seem like a less
reliable partner.
The price of gas on the European market dropped, following the oil
price, pushing Gazprom to look for a
cheaper option to carry its gas to the Western clients. Moreover, the Russian
monopolist can’t do much about the Third Energy Package, a document that prohibits
gas suppliers from owning tranport pipe for the blue fuel deliveries. Right
now, Russia supplies gas to the EU at a slower rate than Norway, another
energy-rich country with a far more democratic regime.
“This (Turkish Stream) makes far more sense than South
Stream,” commented Jonathan Stern of the Oxford Institute for Energy
Studies. “What Russia needs to do is nail this market down; everything
else is not growing.”
However, other analysts doubt the project will ever come true.
“Gazprom’s negotiating position is weak. It is backed by nothing
other than statements that Europe can’t do without Russian gas,” says
Sergey Pukin, head of Energy Development Fund, a think tank in Moscow.
“Unfortunately, it can.”
Mikhail Korchemkin of East European Gas Analysis, an energy consultancy
in the U.S., suspects the new project will become another corruption scheme for
stealing the public money. “In fact, there won’t be any … pipeline to
Turkey. They (Gazprom circle) will get all the South Stream budget and maybe
even more,” he wrote in a Jan. 14 blog post.
Meanwhile, Amanda Paul, a foreign policy analyst with Today’s Zaman, an
English-language daily in Turkey, says: “EU decision makers are not taking
Turkish Stream seriously. They see it as a Russian red herring; a desperate
attempt to get the EU to reconsider its conditions for South Stream as well as
its stance vis-à-vis Ukraine and the sanctions placed on Russia. The fact that
the Russian economy is in such a fragile state would make the financing of this
project very improbable.”
Previously, Turkey was considering participation in the projects
bringing additional gas to gas-starving Ukraine. Two countries can cooperate in
construction the pipeline between Samsun, Turkey and Odesa under the Black sea
and it could deliver Eastern Mediterranean gas resources, said Oktay Tanrisever
of Ankara-based Center for European Studies during a conference in Kyiv on July
3, 2014.
Construction of a liquefied natural gas terminal near Odesa is another
option. It could cover up to half of Ukraine’s annual gas needs of 43 billion
cubic meters. LNG-bearing tankers from, say, Qatar could go through the
Dardanelles that Turkey controls. “In line with NATO’s concept of critical
energy infrastructure security, Turkey seeks to enhance safety of the straits
and the people living around the straits without any restriction on tanker
traffic at all,” commented Tanrisever.
However, business interests still prevail when it comes to the energy
deals. It will be too naïve to think Ukraine can count on Turkey just because
it’s a victim of Russia’s aggression. Stronger arguments needed.
Kyiv Post associate
business editor Ivan Verstyuk can be reached at [email protected].
