David O'Byrne in Istanbul -
If the offer made by Russian President Vladimir Putin last December to re-route his South Stream gas pipeline through Turkey came as a complete surprise to Ankara, then the offer made by Gazprom CEO Alexei Miller on January 27 to deliver the first gas to Turkey by the end of next year appears to have convinced Ankara of Russia's serious intent. Commenting on the offer, Turkish Energy Minister Taner Yildiz suggested discussions over the project would now continue at a more serious level. The venture is not without its risks, though.
Developing major international gas pipelines takes years of planning before a single pipe is welded. Promising to lay close on 900 kilometres of pipeline through the inhospitable and surprisingly deep Black Sea in order to deliver gas within two years implies seriousness verging on desperation.
Putin's offer to reroute his pet 63bn cubic metre a year (cm/y) South Stream gas pipeline was made not through any altruistic intent to Turkey, but rather to avoid having to bow to EU rules stipulating that should the line follow the preferred route through Bulgaria, it would have to be open to third-party access. This is a condition that Russia is in no mood to comply with, not least because the sole reason for constructing South Stream was to bypass Ukraine, with which Moscow has long running "issues", in order to maintain absolute control over its main gas export route to Southeast Europe.
According to a statement by Yildiz, Russia's latest offer involves developing the new "Turk Stream" pipeline, as it has been dubbed. It will consist of four separate lines with annual capacities of 15.75bn cm/y, the first of which will be laid via the Black Sea to deliver gas to Turkey's European province of Thrace, through which Turkey currently receives 14bn cm/y of supply from Russia via the Transbalkan pipeline from Ukraine. That gas supplies both Turkey's main residential and industrial conurbation of Istanbul and surrounding cities, as well as the power plants which supply most of northwest of Turkey with power.
The offer makes sense for Russia, despite the huge expense of laying a single offshore line across the Black Sea to supply a single customer, which is unlikely to be able to pay for itself, even before Turkey's long-standing request for a 15% discount on the price it pays Gazprom for the gas it already buys. On the one hand it will be able to make use of pipe and onshore facilities already ordered for the now cancelled South Stream line, while also replacing the gas it already supplies Turkey in Thrace at the point it currently receives it – addressing many of Ankara's concerns about the project.
At the same time it would avoid all the time-consuming bureaucracy that would be needed to lay a new line largely overland through Turkey – a process which would involve host government agreement, an inter-governmental agreement, an environmental impact assessment, compulsory excavation of any archaeological sites on the route etc. Turkey already ratified an agreement to allow South Stream to pass through its Exclusive Economic Zone (EEZ) in the Black Sea, which would only have to be modified to allow landfall and a short overland section.
It also allows Russia the option of halting or severely reducing gas flows through the existing Transbalkan line, thus cutting supplies to Ukraine as well as most of Southeast Europe without affecting Turkey. It wouldn’t then have to restart supplies to Southeast Europe until it got round to completing the other three planned "Turkish stream" lines – a useful bargaining chip for a regime which appears to have no intention of backing down on either its covert military involvement in the insurrection in eastern Ukraine or on its apparent intention to use gas as a "weapon" to get what it wants from the EU.
When and how those other three lines with their total 47.25bn cm/y capacity will be built is unclear, although it seems safe to assume that unlike the first line, the other three will be constructed more exclusively over land, cutting costs and increasing development time, which again could prove to be a useful bargaining tool.
Interest in the gas that these lines will supply has already been expressed by Hungarian Foreign Minister Peter Szijjarto, who announced in Ankara also on January 27 that Hungary has already launched talks with Turkey, Greece, Macedonia and Serbia over transiting the gas to central European markets.
Turkish officials later denied that they had opened any such talks, mindful perhaps of the possible effects on its own existing plans to transit Azeri and possibly Turkmen gas through the planned 31bn cm/y TANAP pipeline, which is also planning to supply Central European markets, albeit via Italy.
Whatever decision it opts to take over Putin's "South Stream" offer, Ankara will need to tread very carefully if it wants to avoid annoying either Russia, its main gas supplier; or Azerbaijan, the single biggest source of foreign investment in Turkey and soon to become its second biggest gas supplier.
It remains to be seen just how much Ankara takes into account its difficult relations with Russia over other issues, namely Russia's treatment of its own Muslim minority populations such as the Chechens, and its role in arming and supporting the Assad regime in Syria, which Turkey has vowed to help overthrow. Not to mention its actions in Ukraine, a country which has for decades been Russia's main conduit for gas exports to Europe and which now faces the twin prospects of losing large swathes of territory and its gas supplies.
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