March 13, 2015

The Kremlin's “Turkish Gambit” (Ukrainian Dimension)

Along with the Russian Federation's search for reliable allies in the West and the East, able to neutralize the system negative impact of international political and economic sanctions (about which “Borysfen Intel” regularly informs readers), today the Kremlin has once again activated diplomatic and foreign economy (including confidential) efforts to energy blackmail European consumers as an important element of Putin's “anti-sanction strategy.”

In addition to Vladimir Putin's visit (immediately before the summit in Minsk in the “Norman format” to Egypt (Feb. 9-10), which was meant to demonstrate the possibility of Moscow's diversifying risks to Russian foreign policy and economy, the government and the leaders of Gazprom have been actively “working” another country-candidate for the status of “energy hub” in the Eastern Mediterranean — Turkey. Some Western experts consider it a strong enough candidate for this role.

Besides Moscow skillfully uses objective resource constraints to implement the Turkish authorities' ambitious plans for the sustainable economic development of the country: the leading analysts, not without reason believe that after 2020, Turkey will need extra long-term and reliable suppliers of natural gas in addition to the existing ones.

Due to the lack of alternative sources and limited production of hydrocarbons in the region, Turkey in the current situation has to buy expensive Russian and Iranian gas, the price of which is higher than the average for European countries and does not meet the market prices. The Kremlin-Gazprom strategists are sure that this will make Ankara extend the Agreement on purchasing about 18-19 billion cubic meters of Russian gas through the “Western Corridor”, passing through the territory of Ukraine (Ukraine — Moldova — Romania — Bulgaria — Turkey), as well as agree with the construction of the “substitute” for the Ukrainian gas transportation system (GTS) and the failed (by joint efforts of the European Commission and leading EU member states) Russian project the “South Stream” — a new gas pipeline the “Turkish Stream” by which Russian natural gas through Turkey will be supplied to Europe, bypassing Ukraine.

The idea of ​​the gas pipeline “Turkish Stream” came to replace the project “South Stream”, which, as announced by Putin, will stop working on 1st December, 2014. Later, the Russian side offered the Turkish government and the state pipeline company “BOTAS” something that will be hard to refuse, — construction of a four-strand gas pipeline under the Black Sea with access to the shore in Turkey and an onshore pipeline towards the Turkish-Greek border with a total capacity of 63 billion cubic meters per year. Let's be frank: the idea of ​​the gas pipeline the “Turkish Stream” is provocative and cynical both towards Ukraine and towards the European Union.

During January and February of this year, after the meeting of “Gazprom’s” Head A. Miller with the Minister of Energy and Natural Resources of Turkey T. Yildiz, was determined the route of the new pipeline (including its offshore and onshore sections), as well as were discussed the results of the estimated technical and economic calculations on it. It is expected that 660 km of the pipeline “Turkish Stream” will be held on the old route of the “South Stream” (which means that there will be need to spend time and money on new marine researches) and 250 km — by a new corridor in the direction of the European part of Turkey (in the near future is expected receiving of permission for planning and surveying works on the new Turkish offshore section of the pipeline). “Gazprom” promises to do the marine part of the project on its own, and to build the onshore capabilities in Turkey teaming up with local companies. The parties agreed to enter the intergovernmental agreement on the gas pipeline “Turkish Stream” in the second quarter of this year.

Besides, the parties marked on the map the key reference points: the exit of the pipeline onto the shore - near the village of Kiyikoy, giving gas to Turkish consumers — Luleburgaz and the exit of the pipeline on the Turkish-Greek border — near the village Іpsala. The length of the Turkish shore section of the pipeline “Turkish Stream” is 180 km.

It is envisaged that the first of the four strands of the “Turkish Stream” will be put into operation in December 2016. It is planned to deliver 15.75 billion cubic meters of Russian natural gas to the Turkish market alone. In the future, Moscow is going to annually commission one of the other three strands, in order to achieve maximum gas supply (63 billion cubic meters) by the end of 2019. A. Miller believes that such plans are very real.

For example, in 2014 the Russian Federation supplied to Turkey 26.67 billion cubic meters of natural gas, of which 16 billion cubic meters — through the “Blue Stream” (under the Black Sea), and the rest — by the “Western Corridor” through the Ukrainian GTS (Ukraine — Moldova — Romania — Bulgaria — Turkey). Total amounts of supplies from December 2016 will be about 35 billion cubic meters of natural gas. It is understood that the capability of “Blue Stream” will be increased from 16 to 19 billion cubic meters of natural gas per year. With regard to this, an agreement was reached between Putin and Erdogan, December 1, 2014 (19 + 15.75 = 34.75 billion cubic meters). All in all, the share of Russia in the Turkish gas market will grow from 58 % to 75 %.

Prior to the introduction into operation of the “Blue Stream”, through the “Western Corridor” (transit through Ukraine) were transported about 34 billion cubic meters of natural gas annually, of which 7.1 billion cubic meters were taken by Moldova, Romania and Bulgaria, the rest was taken by Turkey. After the introduction of the “Blue Stream”, the “Western Corridor” was transporting 18-19 billion cubic meters of natural gas per year (as of today — 14 billion cubic meters). It is possible that in two years the whole “Western Corridor” (which is a powerful four-strand pipeline construction, delivering natural gas to the whole South of Ukraine) will work only for the sake of Bulgaria (2.9 billion cubic meters) on whose market (unlike Romania) “Gazprom” remains a monopolist.

The seriousness of Putin's “anti-sanction strategy” is confirmed by “Gazprom” (read — Russia)'s practical measures in preparation for the implementation of the “Turkish Stream.”

Thus, in December 2014, “Gazprom” bought 50 % of shares of the offshore section of the “South Stream” from European partners Eni, Wintershall and EdF, which cost it 1 billion US dollars.

“Gazprom” is also critically interested in preserving the contract of the South Stream Transport B.V. for laying pipes with the Italian company Saipem — especially under the EU's sanctions against the Russian oil and gas industry. As you know, the South Stream Transport B.V. (registered in Amsterdam) received the Netherlands' permission for the construction of this pipeline. Italian authorities also allowed the company Saipem to lay the pipe in the Black Sea. In reality, the pipes for the construction of the offshore section of the pipeline “South Stream” (and today this is for the pipeline “Turkish Stream”) have been manufactured, delivered and stocked in the Bulgarian port of Varna.

According to international systems of control of the location of ships, the mobilized for laying the gas pipeline “South Stream” pipe-laying Saipem's fleet is currently in the Bulgarian port of Burgas. At this, “Gazprom” continues to pay for the stay of Saipem's vessels hundreds of thousands of Euros per day in anticipation of the start of construction of the gas pipeline “Turkish Stream”

Besides, it is necessary to bear in mind the fact that economic relations between Turkey and Russia are not limited to implementation of plans for the new pipeline, “Turkish Stream”. This is just part of the “package agreements” — in the defense, nuclear and aerospace industries, construction, food and other sectors. The fuel-energy complex is just one of their components. Turkey has big ambitions, and in this (gas transportation) context, it wants to be not just a transit country, but exactly the hub for selling of natural gas to Europe.

So, if the plans of Putin's “anti-sanction strategy” on the Turkish direction get implemented, in the opinion of leading experts, Russian gas will go to the Turkish market a year earlier than Azerbaijan's one, although earlier this was thought to be impossible. The first thread of the “Turkish Stream” (for the construction of which a bilateral agreement between Moscow and Ankara is enough) actually there is. There remain only technical issues, to solve which “Gazprom” will spare nothing and won't be stopped by anything.

According to some Western experts, in this case, in fact, Ankara has “let down” Azerbaijan. Now it is clear also, in a certain sense the hidden meaning of T. Yildiz' latest statement that after determining the route of the pipeline “Turkish Stream” between it and the Trans-Anatolian gas pipeline project (TANAP) a normal (reasonable) competition has begun. Let us remember — T. Yildiz previously stated that the “Turkish Stream” would not be a competitor to the TANAP.

At the same time, taking into consideration Baku's fairly calm reaction, the question of laying the new gas pipeline “Turkish Stream” was not too unexpected to it. It is possible that these issues were discussed and agreed upon by the parties during I. Aliyev's recent visit to Turkey.

Some European countries (under pressure from a number of influential political forces and even leaderships of individual countries) have already expressed their support for the construction of a new gas pipeline “Turkish Stream”, — namely, Greece, Hungary, Bulgaria. Some Balkan countries are also quite positive about this project. However, no one knows so far what Washington and Brussels' reaction will be. But, according to some Western experts, unless soomething extraordinary happens, as of today, Russia has actually beat all the sides around “the issue of gas supplies to Europe”: Ukraine, the European Union, the United States and perhaps even Azerbaijan.

In this context, when the Azerbaijani gas arrives in Turkey, the market of this country will be getting about 35 billion cubic meters of Russian gas across the Black Sea. According to experts, it is unlikely that then Turkey will need several billion cubic meters of Azerbaijan's gas, which, according to previous commitments would have to be handed over to the Turkish side. And if “Gazprom” at the same pace introduces a hub at the Turkish-Greek border, Russian gas may come to Europe sooner than Azerbaijani one. And the first supplier always has a better chance!

“Gazprom's emissaries'” activity on the Turkish direction has another Ukrainian dimension. Moscow's being interested in activation of energy cooperation with Turkey is connected with the ability to supply to Turkey by the first thread of the new gas pipeline by 1.75 billion cubic meters of gas more (the already mentioned 15.75 billion cubic meters) than by the “Western Corridor” through which today Turkey imports from Russia via Ukraine 14 billion cubic meters of natural gas.

Both, Western and Ukrainian analysts do not dare in such circumstances to forecast how much the “gas interest” is able to outweigh the Crimean Tatar issue in the Turkish establishment in the situation of the Kremlin's henchmen and occupiers' total attack against the rights of indigenous people in the Crimean Peninsula of Ukraine. Especially that Ankara is expected to have a real alternative (and somewhat more efficient from both a financial and technical point of view) option of getting gas from Israeli East Mediterranean field “Leviathan”, the construction of a gas pipeline to which is capable of providing at the initial phase of delivery to Turkey 10 billion cubic meters of gas annually. Besides, this project will provide Ankara, apart from financial and economic benefits, with a number of geopolitical preferences in relations with the European Union, the USA, Israel and Egypt.

But, according to experts, there is very little hope for this. To date, Europe for Turkey can wait. Turkey was waiting for an invitation to the European Union for more than 25 years, and did not receive it. In that sense, what will prevail in Turkey's geopolitics in relation to Europe in the future: resentment, ambitions or pragmatic expediency? What if the hidden eastern revenge for the humiliation will? It is possible that then it can be shown through the mechanism of distribution and implementation of gas pricing policy in the situation when Turkey will be the sole distributor of natural gas at the hub of the Turkish-Greek border in two-three years.

But the main thing for Ukraine is that in two or three years the first of the four strands of the Ukrainian transit pipeline “Western Corridor” going through Ukraine to the south-eastern Europe, and then to Turkey will be turned off. What is Ukraine supposed to do? Sick of it!

Let's wait and see. This is so Ukrainian-like!

Or maybe we will wait a bit — and will hope that Europe and the USA, including with the help of Ukraine, will still find a way out of the present situation?

It remains to be seen.