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    August 20, 2016

    Turkish Stream Gambit: Putin lays the pipe on Erdogan

    August 20, 2016 - Fort Russ News - 
    - Fort Russ exclusive - By Silvia Vittoria Missotti -

    On August 9th, there was a meeting between the Presidents of Russia and Turkey. In general, for the package of proposals for a new Russian-Turkish rapprochement, the important part is played by the energy projects. Some experts in Russia believe that those are actually the main reason of the unexpected reconciliation with Ankara, and perhaps the only one. They expressed with confidence that, after a first conflict because of the Russian bomber shot down by the Turkish Air Force, a telephone conversation between the two Presidents established a meeting at a time when Erdogan was prepared to make concessions in the energy project. 

    The failed coup attempt in Turkey and the instant support of President Putin to the Turkish counterpart contributed to outline the warming relations. As a result, as some Russian experts who shared this opinion believe, the meeting on August 9th in Saint Petersburg was really a strategic victory for Russia.

    The essence of the matter is briefly as follows. Already after the first "Maidan" (the Orange Revolution in 2004) and the deterioration of the relations between Russia and Ukraine, the situation made seriously think about a diversification of gas supplies to the European consumers. Thus was born the project "North Stream", which transported the gas from Russia, passing firstly through the Ukrainian gas transportation system (GTS). 

    However, the unpredictability of the ruling of the Kiev regime forces Moscow to build a new and expensive but safe gas pipeline, bypassing Ukraine. In Russia there are two main competing strategies that can be translated into reality: the "Nord Stream" gas pipeline or the Southern one. More precisely, the two Southern gas pipelines "South Stream” (South Stream (SS)) and "Turkish Stream". Initially, Russia made a major bid for the construction of SS. This is the shortest and therefore the cheapest branch of pipeline, which would allow to supply gas from Russia to customers in Central and Southern Europe. 

    The laying of pipes for the SS had already begun, but the project was suddenly disrupted by a fault of the Prime Minister of Bulgaria, Borisov, who unexpectedly broke the agreement with Moscow. Bulgaria, one of the EU countries, has received a banning in Brussels about the implementation of a joint gas pipeline with Russia. Brussels takes care of the economic interests of Ukraine. In the case of the Northern or Southern gas pipeline strategy, the Ukrainian budget is losing the estimated minimum of  2 billion dollars a year. This is probably an underestimation, since this includes only the direct losses, and the counting is based on the current tariffs for the gas transportation, which Ukraine increases annually. Not less tangible are the political losses: Ukraine will lose the status of transit country, and it will not be able to blackmail the Russian threats in order to cut off the gas supplies to Europe.

    Bulgaria's refusal to implement the SS forced Russia to seek common ground with Turkey. However, these negotiations were difficult. The dispute laid on a different vision by the two parties. Turkey would have liked to see Russia building, at its own expense, a pipeline conducting gas supplies to Turkish consumers only, while Russia viewed Turkey as a natural (in terms of geography) logistic center for the further transportation of gas to Southern and Central Europe. The end of the disputes was put by the incident with the Russian aircraft, shot down by the Turkish Air Force.

    Until very recently, the most realistic project seemed to be the "North Stream-2” (NS-2), which the lobbies of Brussels and Ukraine are against. For the Italian consumers, the Ukrainian arguments against the construction of NS-2 for the transportation of Russian gas are not unfounded. 

    According to Ukrainian experts, the gas which is now transported to the EU through the Ukrainian gas transportation system is designed primarily for the users in the countries of Central, Eastern, Southern Europe and Turkey; the Ukrainian transit is shorter (in comparison with NS-2), and thus cheaper. It is also important that, within the EU, the capacity to supply the gas to these customers through the north of Germany, where the NS-2 ends, is insufficient. This route that would transport gas to Southern Europe leads to disruptions of the gas supply, and therefore to an increase of the gas cost for the consumers.

    Therefore, the construction of NS-2 interests Germany (the country gets the status of informal monopoly in transporting Russian gas to the EU), and is of no interest for Southern and Central Europe.

    President Putin's meeting with Erdogan seems to have opened up new possibilities for the realization of the alternative Southern pipelines. According to Erdogan’s words in Saint Petersburg, Ankara is ready to provide gas supplies to Europe via the "Turkish Stream" in case of a resumption of the project. Perhaps the Russian side agreed not to keep waiting. But the eve of Erdogan's visit to Russia was followed by another important statement in the energy sector. 

    On August 8th, the Prime Minister Borisov of Bulgaria said that Bulgaria and Russia agreed to set up working groups in order to restore the previously canceled energy projects, including the construction of the gas pipeline "South Stream". The words of the Bulgarian Prime Minister were corrected the next day by Vladimir Putin: “The Bulgarian side would like to return to this project. But we suffered some losses due to the failure of the European partners on the project. Now some intentions are not enough, we absolutely need a reinforced concrete guarantee of legal nature ".

    President Putin has created an intrigue around the Southern Russian gas transportation routes. The construction of the "Southern" flow or "Turkish stream" is still very far away, but some improvements are likely to be implemented. It is in the interests of the countries of South and Central Europe.

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