With the new pipeline agreement signed in the presence of Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan, the entire energy outlook of Eurasia is bound to change. Instead of the South Stream pipeline, which has now become history in reaction to European attitudes, the new Thrace Stream would carry natural gas to Europe. With the new pipeline, a distribution hub would be set up on the Greek border. With the expansion of the capacity of the Blue Stream and the flow of Azeri oil to Europe via TANAP, Turkey would become a distribution center of natural gas. Some US newspapers interpreted Putin’s cancellation of the South Stream and turning to Turkey as a defeat for Russia. Putin used to claim that the United States selling its own natural gas was an attempt to obstruct the South Stream pipeline.
Alexei Miller, the chairman of Russian Gazprom, and Mehmet Konuk, the deputy chairman of the board of Turkey’s Botas Corporation, signed an agreement for the construction of a pipeline under the Black Sea that would reach Turkey.
The capacity of the new pipeline would be 63 billion cubic meters, the same as that of the now-defunct South Stream. Of that, 14 billion cubic meters would be reserved for Turkish consumers and the remaining roughly 50 billion would flow to the hub on the Turkish-Greek border. The pipeline’s starting point would be Russkaya Station in Russia’s Krasnodar province.
Turkey, which bought 26.7 billion cubic meters of natural gas from Gazprom last year, receives its supply via the Blue Stream and Western Stream pipelines. The new pipeline would replace the gas that comes via the Western Stream pipeline. Bypassing Ukraine would mean direct delivery of the gas to the Turkish market.
Turkey has long wanted a hub on the Greek border and with the sudden decision by Putin to cancel the South Stream, this can now become a reality. Russian energy officials did not expect such a drastic move.
Asked about Turkey’s benefits from a new pipeline that would cross Turkey, Minister of Energy Taner Yildiz said, “What is signed now is an intention of goodwill. If finalized, Turkey’s gain will be much, much higher than 400 million euros [$490 million] as we intend to be not only a transit country but a natural gas center in Thrace.” He added that TANAP would not sustain any losses from the new pipeline.
US media outlets interpreted Putin’s giving up the South Stream and opting for a pipeline via Turkey as a defeat for Russia. The New York Times reported that the only winner in this deal is Turkey. Turkey, China and other energy-hungry countries are exploiting the rivalry between the West and the East to secure long-term, cheaper energy resources, it added.
At the moment, Turkey is Gazprom's second-largest market after Germany. A reduction in the price of gas for Turkey will depend on the extent of cooperation developed with Gazprom. If the volume of gas trade grows, a new pricing structure will be possible.
Gazprom has agreed to supply Turkey with an additional annual gas supply of 3 billion cubic meters starting in 2016. Russia now has to boost its gas-supply capacity, including expanding the Blue Stream pipeline that crosses the Black Sea. Since 2003, the Blue Stream has supplied 16 billion cubic meters of Russian natural gas each year directly to Turkish consumers. Since the beginning of its operation, Turkey has received more than 110 billion cubic meters from the pipeline. With the anticipated capacity expansions, the infrastructure would be ready to transport even larger amounts.
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