ATHENS – Russia’s Turkish Stream, which is as an alternative to the South Stream pipeline that Moscow shelved last year in the face of objections from the European Union, is essentially a maneuver to overcome European laws, namely the Third Energy Package, a Russian analyst told New Europe.
From a political and geographical prospective Turkish Stream resembles what we have seen already with South Stream, said Alexander Kornilov, a senior oil and gas analyst at Moscow’s Alfa Bank.
“From a geographical standpoint it goes through the southeastern part of Europe, through the same countries basically – maybe except from Bulgaria – and from the political prospective, of course, it looks like [Russian President Vladimir] Putin is coming back with Russia’s intentions to bypass Ukraine through the southeastern part of Europe,” Kornilov said. “But, at the same time, there is a key difference here. In South Stream, Gazprom was expected to be involved in the financing of the onshore parts running through the European territory but now Gazprom is only committed to finance the offshore part of Turkish Stream only up to the border between Greece and Turkey,” he said, adding that the rest of the pipeline to Southeastern and Central Europe is going to be financed by companies in the member states but without the participation of the Russian gas monopoly.
South Stream has been scrapped because of Gazprom’s unwillingness to observe the rules of the Third Energy Package and European laws.
Kornilov said Gazprom is not willing to participate in constructing the pipeline through the European territory because it wants to avoid the Third Energy Package. “Gazprom is currently battling with European regulators with Nord Stream going through Germany’s territory. I guess Gazprom is aware of this headache and it wants to avoid this particular problem going forward as much as it can,” Kornilov said.
Turkish Stream will have an annual capacity of 63 billion cubic metres of gas. Around 14 billion cubic metres of gas will supply Turkey, and the rest pumped to a hub on the Turkish-Greek border for customers in Europe.
Greece and Russia have agreed to cooperate in the Turkish Stream project which might help Greece become one of the main energy distribution centres in Europe.
Greek Productive Reconstruction, Environment and Energy Minister Panagiotis Lafazanis said recently that he expects a deal between Greece and Russia for extending the Turkish Stream across Greek territory, which will have a different name, to be signed soon.
Lafazanis said that it is possible that Russia will give an economic contribution to Greece as pre-payment for the pipeline’s construction which Greece can repay from the transit fees after the pipeline becomes operational in 2019.
Kornilov told New Europe that it could be some financial aid to build the pipeline but the important thing is that Gazprom is not taking any equity stake in the project. “They could potentially make some upfront payments which could be compensated going forward with transit fees or some other ways but that’s a different thing than the equity participation as it has been expected with South Stream,” he said.
Gazprom CEO Alexei Miller said on April 13 that Russia will stop delivering gas to Europe through Ukraine when the current contract expires in 2019 and redirect transit to the Turkish Stream pipeline.
The contract with Ukraine will not be renewed after 2019, Miller told a conference in Berlin, adding that the main reason behind South Stream’s suspension was to keep gas routed through Ukraine.
A third of Russian gas delivered to Europe goes through Ukraine. However, Moscow has repeatedly expressed concerns over the reliability of safe gas transit via Ukraine. Gazprom switched Ukraine to a gas prepayment scheme in June due to Kiev’s failure to pay its gas bills. At the beginning of April, Gazprom and Naftogaz of Ukraine signed a new contract for gas deliveries in the second quarter of 2015 with a 25% price discount.
Kornilov said the key goal that Gazprom is currently pursuing is that the Russian company wants to bypass Ukraine because the transit contract with Naftogaz expires in 2019. “Gazprom doesn’t want to prolong it and this is the reason why Gazprom is in a rush to run Turkish Stream,” he said.