Russia faces new prospects for boosting energy cooperation with other countries. Ankara wants to increase gas supplies delivered through Blue Stream, a major Trans – Black Sea gas pipeline that carries natural gas from Russia straight to Turkey.
The 1,213-kilometer route’s maximum discharge is 16 billion cubic metres per year. 100 billion cubic meters of gas were delivered via the Stream to Turkey in the period since February 2013 to March 11, 2014.
Turkish Minister of Energy and Natural Resources Taner Yıldız said Ankara was willing to increase the annual capacity of the pipeline from 16 billion cubic meters to 19 billion cubic meters. The statement followed a meeting between Gazprom Export Chief Alexander Medvedev and Turkish Minister of Energy and Natural Resources Taner Yildiz held in the Turkish capital. «The participants in the meeting discussed development of gas cooperation between Gazprom and Turkey, including a possibility of increasing the annual capacity of the Blue Stream gas pipeline from 16 billion cubic meters to 19 billion cubic meters. The sides agreed to discuss the matter in detail», Gazprom said noting the task of increasing the pipeline’s capacity would not require the construction of any additional lines. In 2011, the Blue Stream project received a certificate proving that Gazprom could technically increase the carrying capacity of the pipeline’s underwater section, which runs on the bottom of the Black Sea, by 20% from 16 billion to more than 19 billion cubic meters. Turkey is the world’s second biggest importer of Russian gas after Germany. In 2013, Gazprom supplied 26.61 billion cubic meters of gas to Turkey by an overland route and on Blue Stream.
The deal with Turkey is sealed at the moment when the cooperation between Gasprom and its European partners has started to hit snags. It puts into doubt the EU partners' credibility. For instance many were stunned by a statement made by the chief executive of Italian oil major Eni on the prospects for South Stream. The future of the pipeline is "somewhat gloomy", Paolo Scaroni said during a parliamentary hearing in Rome on March 20. According to him, the Ukraine’s crisis could threaten the complex permitting process for the pipeline which will bypass Ukraine, running through the Black Sea and a number of European states. "It will put into question the many authorizations that European countries must give to complete the project," Scaroni said. The 2,400 km (1,500-mile) pipeline, led by Russia's Gazprom, is expected to be fully operational by 2018 at an estimated cost of around 17 billion euros ($23.4 billion). Eni is a 20% shareholder in the project.
On April 21, the talks between Alexander Medvedev, Deputy Head of Russian gas giant Gazprom, and Taner Yildiz were successfully completed. Turkey wants a lower price (which is over $425 per 1000 cubic meters at present) and secure supplies going around the unstable Ukraine. The discount Ankara hopes for has not been revealed. It could be surmised the Gasprom southern partner bargains for the same price as paid by Azerbaijan ($335). Turkish companies pay $370 per 1000 cubic meters for the gas they get from the Trans-Balkan pipeline. It allows them to operate on the Turkish market without subsidies.
Turkey insists on reviewing the price for the gas coming from Iran, its second largest gas supplier. The dispute may end up in the Vienna International Arbitral Centre. According to Ankara’s stance, the issue may be settled without trial procedures in case the price is lowered in exchange for manifold supply increase. Turkey sticks to the same bargaining formula with Russia – to lower the gas price supplied to Turkey on the condition that it increases the volume of imported gas.
Some time ago Gasprom let know it had no intention to discuss the price issue in the near future. Instead it pays interest in building new pipeline branches to diversify the market and create vast opportunities for cooperation. The Gasprom and ENI have equal shares (50 to 50) in the Blue Stream project, while in the case of South Stream Gasprom has 50% with the rest divided between Italian Eni, German Wintershall and French EDF. The second arrangement provides more opportunity for Russia to find at least one European partner willing to enter the European market from the South.
Ankara is concerned over the stability of supplies coming from the Tran-Balkan pipeline while Blue Stream is viewed as a riskless project. Last year Gasprom delivered 26, 7 billion cubic meters to Turkey with 13, 7 billion more going through Blue Stream. By and large, it made the supplies divided in two almost equal parts delivered along diversified routes. That’s how it had been before the crisis in Ukraine sparked to change many things in Eastern Europe and the Black Sea-Caucasus region.
The Turkey critically needs energy supplies and there is no alternative to Russian gas no matter the Erdogan government has adopted a program of energy dependence reduction.
There are many reasons that make Turkey cement the energy cooperation with Russia. The country is losing hope to enter the European Union though its importance for Brussels has grown as a result of the events in Ukraine. No way will Ankara oppose Russia. The Erdogan’s government is looking for ways to boost bilateral cooperation. For this purpose it comes up with the proposals to expand gas supplies adding new branches to South Stream. It serves the interests of the ruling Party of Justice and Development. A presidential election is close (August 2014) and the Prime Minister appears to be an undisputed leader. His party held a sweeping victory at local election on March 30. Istanbul was the place of fierce battle with the opposition Republican People's Party, the Turkish capital fully depends on the Trans-Balkan pipeline. Many Turkish private companies take part in the project; they give jobs to many people and pay taxes. Erdogan will do his best to avoid any problems related to energy security before the election.
As previous experience shows, the Russia-Turkey energy talks won’t be easy. But Turkey has no choice. Ankara believes the European Union’s sanctions policy is doomed to failure, so solidarity with the EU is the last thing on the mind of Turkish politicians.
