President Putin announced the Turkish Stream project in December 2014, with Russian energy company Gazprom marketing the program as aiming to provide “security of supplies to Turkey and European countries”.
This move came as a result of Ukraine’s attempt to negotiate a more advantageous discount on gas supplied after labelling Gazprom’s pricing unfair. The successive failure of negotiations between parties led to Gazprom stopping exports to Ukraine at the start of July this year.
Gazprom has promised to move transit routes to bypass Ukraine by 2019, after Gazprom's contract with Ukraine’s Naftogaz expires at the end of 2018. Ukraine in turn announced that that it plans to boost gas imports from Europe by 20 million cubic meters starting from August.
Europe stands as an anxious observer in this matter – currently the majority of Russian gas destined for Europe passes through Ukraine. The impact of Russia’s refusal to supply gas to Europe due to disagreements with Ukraine in the winter of 2009 has yet to be forgotten.
The new route would comprise a network of four strings of pipelines passing through Turkey, each carrying 15.75 billion cubic meters of natural gas per year. Turkey expects to meet its growing domestic demand from one of the pipelines. The remaining three pipelines would carry 47.25 billion cubic meters into European markets through Greece.
The cost of the four line pipeline has recently been estimated to be around 11.4 billion euros, excluding VAT. This figure is approximately one and a half time less than its predecessor, the South Stream, which was cancelled due to a lack of political agreement. Currently, Russia exports 70 percent of its gas to Europe. This gas cannot be adequately shifted to other markets due to a lack of necessary infrastructure.
The pursuit of alternative suppliers of natural gas should remain a priority for the EU in order to mitigate changes to Moscow’s energy policies. Nevertheless, diversifying suppliers is a long term rather than a short term goal for Europe. So why is Europe so unreceptive towards the Turkish Stream project?
Energy security is clearly a priority for both parties. However, the very nature of the relationship between Europe and Russia is defined by mistrust and conflict. It is rife with security dilemmas since neither side can boost their own energy security without impeding the security of the other.
Russia’s concern is propping up its ailing economy. Europe is conversely concerned about depending too heavily on Russian gas. Russia has shown itself to be an unreliable supplier and it is clearly aware of the potential to utilise its gas supplies for political leverage. Some have argued that the Turkish Stream is a distraction strategy to divide Europe and to increase Russia’s soft power.
The European Union (EU) and NATO have yet to embrace the deal, preferring to focus on the South Gas Corridor project initiated by Azerbaijan. The initiative aims to bypass Russia in delivering gas to Europe from the Middle East and Central Asia. Russia is apprehensive about the Southern Gas Corridor, viewing it as a way of undermining its economy and dominance in the European market.
The belief held by the EU that the Turkish Stream is aimed at deterring the Southern Gas Corridor, and undermining EU energy security policy, is tenuous. Ideological differences aside, it would be foolhardy for Russia to jeopardise its profitable stake in the European market.
In addition, there are continuous setbacks and numerous issues yet to be resolved, such as funding arrangements and purchase contracts. These will mean that the project could be pushed back significantly or even scrapped.
The Turkish Stream is due to come online in December 2016, however delays are more than likely to push the end date of the project to past 2020. Significant disagreements between Russia and Turkey have halted talks. Further difficulties are likely to arise from the additional regulatory hurdles under EU competition legislation and increased scrutiny from the European Commission.
The feasibility of this project goes beyond economic considerations. Russia needs to secure the Turkish and Greek markets to make the first half of the project feasible. The second and third phase is likely to depend heavily upon not only creating partnerships with European companies but also on the legislative and financial support of the EU itself.
The creation of alternative and reliable transportation routes for gas is important. However, the EU needs to be realistic about its current energy mix. Russia is still an integral player and cooperation is key to ensuring energy security. The most feasible solution for Europe to reduce its dependence on Russia is by gradually phasing out Russian suppliers, while sourcing alternative suppliers and sources of energy.
Valeriia Minigoulova is the International Trade and Economy Fellow at Young Australians in International Affairs.
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Image Credit: Ken Doerr (Flickr: Creative Commons)