bne -

On June 28, a Gazprom official expressed Russian indignation over the Trans-Anatolian natural gas pipeline (TANAP) deal, which was signed between Azerbaijan and Turkey two days previously. The $7bn pipeline is one of the main rivals to the Russian-backed South Stream pipeline and its construction will reduce European dependence on Russian gas exports by creating a direct export route from the Caspian basin.

Responding to a Turkish request for additional gas supplies following an explosion on the main Iran-Turkey gas pipeline, a Gazprom official said that the Russian gas giant would increase deliveries this time, but that if TANAP is "completed as planned in 2018, Turkey could then apply for help to Baku," Reuters reported.

The comment appears to be a reminder to Turkey that despite the agreement with Azerbaijan, Russia remains its largest natural gas exporter. In the statement, Gazprom spokesman Sergei Kuprianov stressed the importance of the company's relationship with Turkey, its second-largest customer. "Gazprom has shown that it is a dependable supplier by responding to demands of its trade partners in Turkey in cases of technical failures or cold snaps," said Kuprianov.

Russia's role in Turkey's energy sector is likely to actually grow in the near term, as Ankara reduces oil and gas imports from its second-biggest supplier Iran, in a bid to comply with international sanctions against Teheran. While Turkey is also planning to increase gas imports from northern Iraq, its dependence on Russia as the main supplier remains.

However, Ankara is also interested in becoming a transit state for gas exports from the Caspian region to Europe. Turkish state-company Botas is a minority shareholder in TANAP with a 20% stake, while the State Oil Company of the Azerbaijan Republic (Socar) holds 80%. The pipeline, which will cost $5bn-7bn to build, will run from Azerbaijan's offshore Shah Deniz field across Turkey, from where a second pipeline will carry gas from the field to Europe. TANAP will carry 16bn cubic metres of gas from Shah Deniz, and take 6bn cm for itself before sending the remainder onwards.

The crucial point of the route is that it bypasses Russia entirely, with the EU pushing to reduce energy dependence on Moscow. South Stream is Gazprom's answer, and plans to carry Russian gas across the Black Sea to Bulgaria, with a southern route running to Greece and Italy, and a northern pipeline via Serbia to Austria and Hungary. Construction of South Stream is penciled in to start in December.