October 13, 2016 –
By Eduard Popov for Fort Russ – translated by J. Arnoldski –
On October 10th, during President Vladimir Putin’s visit to Turkey, Moscow and Ankara signed an intergovernmental agreement on constructing two sections of Turkish Stream. According to the report of Russian energy minister Alexander Novak, the land portion of Turkish Stream will be dealt with by the Turkish side, while Russia will handle the sea portion.
Although Putin and Erdogan discussed other important issue, in particular Syria, the conclusion can be drawn that energy issues were the central part of the negotiations between the two countries’ leaders.
Things have not yet reached the point of constructing the Turkish Stream branches, but Russia is already beginning to profit from the Putin-Erdogan talks. As media reports have noted, Brent oil overcame the $53 dollar per barrel mark following Putin’s statement that it is too early to say goodbye to the era of hydrocarbons. Putin’s statement that Russia is ready to join OPEC’s initiative on limiting oil production opens up the possibility for hydrocarbon prices to rise.
What is the significance of this agreement for Russia, which has been called a breakthrough in Russian media? And what are the risks in it for Russia?
The first question can be answered more or less clearly. The launch of Turkish Stream allows Moscow to dramatically reduce its dependence on Ukrainian transit, through which around 80% of Russian gas to Europe flowed before the launch of Nord Stream. Launching Turkish Stream and Nord Stream 2 will allow dependence on Ukrainian transit to be brought to a minimum. By doing so, at least three goals can be achieved: (1) Kiev’s ability to blackmail Moscow by threatening to block gas transport to the EU and play on these fears is eliminated; (2) Russia would deprive the hostile Kiev regime of at least $2 billion (the cost of transporting Russian gas through the Ukrainian transit system at current prices); and (3) the transportation of Russian gas to the EU would be cheapened through saving on transit payments and reducing the length of transit.
In addition, this would save Russia from participating in the very costly modernization of the Ukrainian gas transit system, which has actually developed into an exploitation of physical resources. By paying for part of the modernization of Ukraine’s system, Russia would not be able to reimburse the costs incurred, just like it can’t get its refund from Ukraine back for the $3 billion of “Yanukovich’s credit.”
Thus, Kiev would be deprived of a means of exerting tangible pressure on Moscow. It is thus no accident that Ukrainian diplomats are so fiercely resisting the launch of Turkish Stream and Nord Stream 2. It is also no accident that Ukrainian media have perceived the news from Turkey as a major defeat.
If Russian gas flows to Europe through Turkey and Greece, which are NATO members, then this would also pose an additional problem for the US. The pluses that Turkish Stream brings for Russia are thus more or less obvious.
But what about the minuses and risks?
Some colleagues, experts on the Middle East, believe that the fundamental contradiction in Russian-Turkish relations that led to the severing of relations in late November last year lies in the two countries’ divergence of positions on Syria. It is most likely that both countries agreed to some kind of delineation of their interests in Syria and will not disturb each other. Hence why Russian media has been very restrained in commenting on the Turkish army operation in northern Syria.
According to these experts on the Middle East, the other main divergence between Russia and Turkey centers around the fate of Turkish Stream in this context. From the very beginning, the Turkish side argued that Russia should lay down one single pipeline at its own expense, which would be designed only to supply gas to Turkish consumers. Obviously, Russia was and is dissatisfied with such an attitude of the Turkish side.
The news from October 10th suggests that this most sharp disagreement has been relieved. In other words, the Russian side won. But only, of course, if a new divergence doesn’t occur. It is no accident that Turkey has reserved the option of refusing to construct the second branch of Turkish Stream. If Turkey ever does so, then it would need to notify Russia. The corresponding document on this was published on a legal information portal. If, God forbid, this happens and Turkey decides to claim such a “victory,” then Russia would suffer a major defeat.
However, I do not think that things will come to this. It would be more profitable for Turkey to rake in the profits from gas transportation. Add to this that Turkish Stream would turn the country into the main gas distribution hub for all of Southern and Central Europe. This is too significant of a financial, economic, and geopolitical preference of not only regional, but global importance for Turkey to turn it down. Therein lie both the pros and cons for Russia’s interests in Turkey concluding the agreement.