Turkish Stream versus Nordstream-2: What Is This Battle of Russia’s Pipelines About?

– Fatma Babayeva

Throughout the past year, we witnessed a number of changes in Russia’s priorities concerning its pipeline exports to Europe, and particularly in the context of transit-avoidance strategy. This strategy was developed in the mid-2000s as a reaction to Ukrainian transit crises and included two core directions of the European supplies: Northern (via the Baltic sea) and Southern (via the Black sea). The stagnating demand in the European market and challenges of regulatory nature led to a situation when the realization of this grand strategy is under a big question.

The agreement on extension of Nordstream-2 pipeline from Russia to Germany via the Baltic sea was reached during the Eastern Economic Forum, which took place in Vladivostok, Russia, on September 3-5, 2015. About week after signing a binding shareholders agreement with European energy companies, Russia’s gas giant Gazprom has announced the delay in implementation of Turkish Stream. The Turkish Stream was planned to carry 63 bcm of gas annually from Russia to Europe via Black Sea, and came as replacement for the South Stream project back in 2014. The launch of the Turkish Stream was initially scheduled for late 2016.

Russian and Turkish sides provided different explanations of reasons for this delay. For example, the Turkish Energy Minister, Taner Yildiz, said last month that there was a delay from the Russian side in terms of providing route coordinates needed to construct the Turkish part of the pipeline, and Turkey could not begin any installation without these coordinates.

Governments of Russia and Turkey have not signed a formal agreement on the implementation of the Turkish Stream. In mid-2015, the Kremlin sent two offers to the Turkish government for consideration, but did not get any reaction from Ankara. Moreover, should there be an agreement, there is no Parliament to ratify it – after the June elections in Turkey, the formation of the coalition government is still in the process. This puts the Turkish Stream on hold. The Energy Ministry of the Russian Federation expects the deal on the pipeline to be signed in November, when the government in Turkey is formed.

However, judging from the last developments, it looks like Russia, instead of pursuing an integrated transit-avoidance strategy, is actually testing which route would be easier, and which partners will be more reliable. Nordstream-2 has apparently won the spot of the favourite for now. This new pipeline will have capacity of 55 bcm and lead to Germany.

Ultimately, this battle of pipeline projects shows that Russia’s strategy for European gas supplies is still in formation and is not set in stone.

There is another dimension of the story. If we look from the European perspective, there is a lot about transit countries in this battle of transit projects. From the one side, there is Germany, whose E.ON goes on with signing a deal with Gazprom despite the complications on the European territory with third-party access to OPAL. Plus, Germany has some weight in making decisions deviating from the general political line within the EU.

On the other hand, there is Turkey, an ambitious player to play central role in possible Southern Gas Corridor, a supply corridor to bring natural gas to Europe from various sources – primarily Azerbaijan, but possibly even Iran and Turkmenistan (oh those pipe dreams). Add Russia, who agreed to provide with cheaper gas once the Turkish Stream is built, and the role of Turkey as a transit country for the EU increases significantly.

It still remains to be seen what transit option is preferred by the EU, but from the Nordstream-2 advance it seems obvious which partner is preferred by Russia.