The Turk­ish route for Europe

Financial Mirror (Cyprus) - - FRONT PAGE -

Vladimir Putin’s an­nounce­ment, with which the Rus­sian Pres­i­dent, on De­cem­ber 2, an­nounced the clo­sure of the South Stream project and the con­struc­tion of a new gas pipe­line with a land­ing point in Turkey, is ex­pected to sig­nif­i­cantly change the Euro­pean en­ergy map. Through the Turk­ish Stream pipe­line, in fact, Rus­sia aims to strengthen its en­ergy re­la­tions with Turkey – in search of new sup­plies to sus­tain its eco­nomic growth – but with­out block­ing ac­cess to west­ern Euro­pean mar­kets, a key point of Gazprom’s ex­port strate­gies. Moscow’s de­ci­sion helps to strengthen Turkey’s role at the cen­tre of the Eurasian en­ergy game. In ad­di­tion to the tran­sit of gas from Rus­sia, Ankara is, in ef­fect, cru­cial in the con­struc­tion of the South­ern Cor­ri­dor, the ini­tia­tive of the Euro­pean Com­mis­sion for trans­port­ing gas from the Caspian Sea (and, po­ten­tially, from the Mid­dle East) to the Euro­pean mar­kets. Thanks to this role as an in­ter­sec­tion, Turkey can con­trib­ute sig­nif­i­cantly to the devel­op­ment of the bal­ance be­tween Brussels and its en­ergy part­ners.

Based on pre­lim­i­nary de­tails pro­vided by Gazprom, the new pipe­line should partly re­trace the old South Stream project. Its start­ing point on Rus­sian ter­ri­tory, in fact, should be the same as the pre­vi­ous project, near Anapa, and its ca­pac­ity – at least ac­cord­ing to of­fi­cial an­nounce­ments – should also re­main at 63 bil­lion cu­bic me­ters (bcm) per year, again di­vided into four lines of 15.75 bcm. For 660 kilo­me­ters, the route will re­main un­changed, while the last 250 km will be di­verted to­wards the south in or­der to reach Turk­ish ter­ri­tory.

The first line of the Turk­ish Stream pipe­line should trans­port vol­umes for the Turk­ish mar­ket, while the re­main­ing three lines would be des­tined to west­ern Europe in an at­tempt to avoid – at least in part – tran­sit­ing through Ukrainian ter­ri­tory. To this end, the pipes should land near Kiyikoy, in the Euro­pean part of Turkey and, from there, should reach Ip­sala, near to the Turk­ish-Greek bor­der, to then connect to a pos­si­ble Euro­pean trans­port net­work.

Con­trary to South Stream, the new project does not pro­vide for the par­tic­i­pa­tion of Euro­pean en­ergy com­pa­nies, but shall be con­structed ex­clu­sively by Gazprom, in col­lab­o­ra­tion with Turk­ish Bo­tas. The in­volve­ment of Ital­ian Saipem in the lay­ing of off­shore pipe­lines is much more likely: last March, in fact, the sub­sidiary of Eni was awarded con­tracts for ap­prox­i­mately EUR 2.5 bln to con­struct the en­tire first South Stream line (and for ac­tiv­i­ties to sup­port the in­stal­la­tion of the sec­ond line), for which it has al­ready started op­er­a­tions.

The im­ple­men­ta­tion of Turk­ish Stream should pro­ceed in par­al­lel with an in­creased trans­port ca­pac­ity of Blue Stream, cur­rently the only gas pipe­line di­rectly con­nect­ing Rus­sia to Turk­ish ter­ri­tory. Ac­cord­ing to Gazprom’s plans, the trans­port ca­pac­ity ex­pected for Blue Stream, a joint-ven­ture be­tween Eni and the Rus­sian gi­ant, should in­crease by 3 bcm and should reach a to­tal of 19 bcm in or­der to cope with the grow­ing de­mand in Turkey and, at the same time, min­i­mize the risks of tran­sit through Ukraine, through which 14 bcm des­tined for the Euro­pean part of Turkey cur­rently tran­sit.

How­ever, in the com­ing years, Turkey will also be crossed by the Trans Ana­to­lian pipe­line (TANAP), the gas pipe­line man­aged by the Azer­bai­jan en­ergy com­pany Socar in col­lab­o­ra­tion with Bo­tas, which should trans­port gas from the Caspian Sea to the Greek-Turk­ish bor­der and, from there, connect to the Trans Adri­atic pipe­line (TAP) to land in Italy. In Ankara’s plans, Tanap should help to di­ver­sify Turk­ish sup­plies, ini­tially thanks to 6 fur­ther bcm of gas per year from the off­shore oil­field of Shah Deniz II, which should reach Turkey in around 2020.

The nat­u­ral gas sec­tor is par­tic­u­larly crit­i­cal for Turkey, mainly due to its to­tal de­pen­dence on im­ports. Do­mes­tic con­sump­tion has more than dou­bled within a decade, and is ex­pected to grow fur­ther due to eco­nomic ex­pan­sion and at­tempts to re­duce the use of coal to pro­duce elec­tric­ity. Its part­ner­ship with Moscow is for Ankara, which im­ports 60% of its gas sup­plies Gazprom.

Mean­while, Turkey is Rus­sia’s sec­ond largest ex­port mar­ket out­side of the for­mer Soviet Union, af­ter Ger­many. In an at­tempt to re­duce its de­pen­dence on Rus­sian gas and to sup­port Euro­pean en­ergy di­ver­si­fi­ca­tion strate­gies, in past years Turkey has played a cen­tral role in the process of defin­ing the South­ern Cor­ri­dor, the gas high­way ini­tially con­ceived by the Euro­pean Com­mis­sion to trans­port gas from the Caspian Sea, Iran and Iraq to Europe.

Turk­ish com­pany Bo­tas should have been among the share­hold­ers of the Nabucco gas pipe­line, de­signed by Brussels to cross the whole of Turkey and to trans­port Caspian gas to Aus­tria through the eastern Balkans. How­ever, faced with the grow­ing role of Azer­bai­jan in the re­gional en­ergy game, the gov­ern­ment of Ankara has de­cided to pro­tect its in­ter­ests by sup­port­ing Baku and help­ing to bury Nabucco for good in favour of Tanap. In this con­text, the con­struc­tion of Turk­ish Stream helps to reshuf­fle the cards. On the one hand, Ankara strength­ens its strate­gic po­si­tion, re­main­ing cru­cial to Europe for di­ver­si­fy­ing its sup­plies and to Azer­bai­jan for fi­nally reach­ing the Euro­pean mar­ket, while also be­com­ing es­sen­tial for Rus­sian at­tempts to di­ver­sify ex­port mar­kets and, above all, for Gazprom’s need to avoid tran­sit through the Ukrainian net­work.

It is highly likely that the Turk­ish gov­ern­ment will use this pow­er­ful sit­u­a­tion to max­imise its ad­van­tages against all en­ergy part­ners in­volved in the game. Dis­counts of over 10% re­cently ap­plied by Gazprom to gas sup­plies are an ex­am­ple of the ne­go­ti­at­ing power cur­rently in the hands of Ankara.

On the other hand, how­ever, the new gas pipe­line will help to in­crease the Turk­ish mar­ket share in the hands of the Rus­sian gi­ant, by partly negat­ing the di­ver­si­fi­ca­tion strate­gies out­lined by Ankara but con­sol­i­dat­ing the in­ter­de­pen­dence be­tween the two coun­tries.

The Euro­pean Union and Azer­bai­jan are those who would lose as a re­sult of this sit­u­a­tion, since, for more than a decade, they have been try­ing to cre­ate strong en­ergy re­la­tions thanks to the role of Turkey. In fact, although Rus­sian gas that will reach Turkey through the Turk­ish Stream pipe­line can safely co­ex­ist with Az­eri vol­umes trans­ported through TANAP, there is still the pos­si­bil­ity that a strong en­ergy part­ner­ship be­tween Moscow and Ankara may (in­ten­tion­ally or not) cre­ate a bot­tle­neck along the route of the South­ern Cor­ri­dor. cru­cial al­most

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Af­ter dis­miss­ing the South Stream project, Rus­sia an­nounced the con­struc­tion of the new Turk­ish Stream, which avoids Ukrainian ter­ri­tory and strength­ens the role of Ankara in man­ag­ing en­ergy re­la­tions be­tween Asia and Europe

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