"Turkish Stream": Ankara and Europe

By Arthur Dunn

Negotiations with Turkey on the "Turkish Stream" are not easy - but it is clear that for Russia this project is so priority that it is ready to make various concessions on other issues. In particular, she unofficially agreed with the Turkish army's operation in the Syrian province of Idlib - in order not only to expand its sphere of influence in the north of Syria, but also to prevent the creation of Kurdish autonomy on Syrian territory. Since December 1, the Turkish tomatoes are returning to the Russian market.

Also, Turkish President Recep Tayyip Erdogan can include in his asset the liberation from criminal punishment of two leaders of the Crimean Tatar Mejlis (banned in Russia) Ilmi Umerov and Akhtem Chiygoz who arrived in Turkey and then to Ukraine. Erdogan was able to show his voters in Turkey, which makes real steps in defense of the figures of the Crimean Tatar movement.

In October, Turkey issued a positive environmental report on the report on the environmental impact of the Turkish Stream. And on November 4, Gazprom completed the construction of the offshore sections of the two threads of the Turkish Stream in Russia and continued construction of the first string of the exclusive economic zone of Turkey. Completion of the first thread is planned in March 2018, the second - by the end of 2019. If the political relations between Moscow and Ankara are again not strongly spoiled (and so far nothing points to this), the project will be implemented. In this case, Russia is easier than with the "Nord Stream-2" - it has to communicate with one partner, and not with a large number of players with different interests.

To date, the main complicating factor of the "Turkish Stream" is the prospects for the continuation of the second line of the gas pipeline - without this, gas exports to Europe are impossible. Currently, two options are considered. The first is the Poseidon gas pipeline, designed and approved to connect the gas transmission systems of Greece and Italy. The head of IGI Poseidon Elio Ruggieri said that it can be built in 2023 - the final decision on the project is planned to be taken at the end of 2019, after the completion of the construction of the second thread of the Turkish Stream, and the construction of Poseidon will take 3-4 years.

Another option technologically looks simpler - it is the connection in the reverse mode of the existing gas pipeline, which delivers Russian gas from Bulgaria to Turkey. Serbia and Hungary agreed to modernize their gas transmission systems to receive gas from the second thread of the Turkish Stream. However, so far no agreements have been reached with Bulgaria - we recall that it was the position of the Bulgarian government that led to the disruption of the implementation of the previous gas pipeline project bypassing Ukraine - the South Stream. Now at the head of the government of Bulgaria is the same prime minister - Boyko Borisov - who refused the "South Stream".

In addition, there are no agreements with the European Union that it will not oppose this project. However, the EU leadership must take into account the interests of its members and partners from Southern Europe. Therefore, at the end of 2015, three gas pipelines from the South-East to Central Europe were immediately included in the list of priority European infrastructure projects approved by the European Commission, whose projects were considered as possible continuations of the Turkish Stream gas pipeline. One of the projects recognized as priority is the Tesla gas pipeline from Greece to Austria, the other - Eastring, initiated by Slovakia with the participation of Bulgaria, Romania, Hungary. The third project in the list of priority gas pipelines is the expansion of the future gas pipeline Bulgaria - Romania - Hungary - Austria. At the same time, this status does not provide any relief from the point of view of the implementation of the Third Energy Package. If Gazprom wants to use these pipes, it will need to either book not more than half of their capacity, or sell gas to Europeans on the EU border.

Russia's serious argument for pressure on the European Union was the threat of reorienting supplies to other markets - primarily the Chinese. But now Americans break into this market. During Donald Trump's visit to China, an agreement was concluded on China's investment in natural gas production in Alaska and its subsequent export as LNG to China. This project should not be seen as a substitute for the Russian "Siberia Power" gas pipeline, but it is an example of the diversification that China is undertaking. And if so, then the opportunities for reorientation are very limited.

The launch of any of the "roundabout" projects is a serious blow to the economy of Ukraine. Ukraine only this year received at least $ 3 billion from gas transit. The launch of each thread of the Turkish Stream will deprive Ukraine of annual revenues of $ 500 million. According to experts, "Nord Stream-2" will deprive Ukraine of 3% of GDP. But it's not only that. Now Ukraine does not buy gas from Russia, but uses reverse schemes, acquiring it from European countries. But if the Turkish Stream is launched, such a practice will not be possible.

At the same time, a number of these obstacles to the implementation of projects lead to the fact that Russia can not exclude the preservation of transit through Ukraine after 2019. If in 2015 Moscow said that the contract with Ukraine would not be extended, then in 2016 it softened the position. There have been statements that Russia is ready to hold further negotiations on the extension of this contract despite the high risks. Alexey Miller, Chairman of the Gazprom Management Committee assumes that the route through Ukraine can be used, but deliveries on it will be drastically reduced to 10-15 billion cubic meters. But this in case of successful implementation of both the Northern and Turkish "flows", as well as taking into account the position of Merkel that it is impossible to block the full Ukrainian transit. If Nord Stream-2 is braked seriously, the rate will be much higher - and Russian-Ukrainian negotiations will be extremely difficult - with the possible involvement of European consumers as intermediaries.
 

 

22.12.2017
 
 
 

 

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