Turkey, Russia sign key pipeline deal as ties improve

Turkey, Russia sign key pipeline deal as ties improve
After Turkey shot down its bomber, Russia retaliated by announcing a raft of economic sanctions, including the suspension of the Turkish Stream project.
By bne IntelliNews October 11, 2016

Turkey and Russia signed an intergovernmental agreement on the strategic Turkish Stream natural gas pipeline project on October 10, following a meeting between President Recep Tayyip Erdogan and the Russian leader Vladimir Putin on the sidelines of the World Energy Congress in Istanbul.

The two leaders discussed a wide range of issues at the Istanbul meeting from deepening energy cooperation to the situation in Syria.

The signing of the agreement is a step forward for Turkey to realise its ambitious plans to become an energy hub in the region and marks a milestone in the process of the normalisation of Turkish-Russian relations that turned sour last year when a Russian bomber was downed by Turkish jets near the Syrian border. Moscow responded by imposing an array of economic sanctions that have hit Turkish exports and its tourism industry hard. Tensions between the two counties also threw the future of key energy projects – the Turkish Stream and the Akkuyu nuclear power plant – into doubt.

But, Ankara this summer made diplomatic overtures to Moscow to mend ties and Russia has responded positively to Turkey’s efforts for the normalisation of the relations.

The Turkish Stream deal envisages the construction of two branches of the gas pipeline across the Black Sea bottom, CEO of Gazprom, Alexei Miller, told journalists, ahead of the Erdogan-Putin meeting. The first branch will supply gas directly to Turkey, while the second is to be used to deliver gas to European countries through Turkey, Miller said, according to RT.

A joint venture may be set up to construct the second line, Russian Energy Minister Alexander Novak said. “A Russian company will build and own the offshore segment of the first line; a Turkish company, most probably Botas, will own the onshore segment for Turkish consumers,” TASS quoted the minister as saying.

In December 2014, Turkey and Russia signed a memorandum of understanding for the construction of Turkish Stream. With an estimated price tag of €11.4bn, the project’s four-strand pipeline would carry a total of 63bn cubic metres (cm) of gas per year to Turkey and to southern Europe via Greece. Turkey will receive 14bn cm of that amount and the rest would be delivered to Europe.

Speaking at a joint press conference with Erdogan in Istanbul, Putin said Russia will again open up its markets to some Turkish agricultural products. “We also agreed on a natural gas price discount mechanism as part of the Turkish Stream deal and to intensify military contacts,” the Russian leader added.

For his part, Erdogan said the two countries will accelerate the process for the Akkuyu project. The issues related to Syria and Turkey’s Euphrates Shield operation as well as cooperation regarding humanitarian aid to Aleppo were also discussed, according to Erdogan. Russia and Turkey will also explore cooperation in space technologies.

Despite their deepening cooperation in energy and the shared understanding of the need for humanitarian aid, the two countries still seem to be far from finding a common ground to reconcile their conflicting interests in the Syrian conflict. Russia is one of the closest allies of Syrian President Bashar al-Assad, while Turkey supports opposition groups there.