By Colin Chilcoat, a specialist in Eurasian energy affairs and political institutions currently living and writing in the former oil capital of the world. Originally published at OilPrice
Not that Russia was ever a slouch, but there’s no denying the recent uptick in activity. As we approach the juicy middle of President Vladimir Putin’s third term, Russia is extending, and fighting for, its interests in nearly every corner of the globe. Somewhat lost amid the bombing in Syria – though hardly unaffected – is Russia’s Turkish gambit.
Putin has long valued Turkey as a territorial and ideological play against NATO and the EU. The strategic partnership has taken time to develop, but 2014 was a particularly notable year for the Eurasian nations. Cross border trade exceeded $31 billion – good for sixth among Russia’s major trading partners – and U.S. and EU sanctions have expanded the horizons for further trade between the two nations.
Natural gas in particular forms the backbone of this growing trade relationship. In 2014, Gazprom delivered 27.3 billion cubic meters (bcm) of gas to Turkey via its Blue Stream and Trans-Balkan pipelines. Gas exports from Russia are up some 34 percent since 2010, and Turkey – now Russia’s second largest market after Germany – is only getting hungrier. By 2030, gas demand in Turkey is expected to expand 30 percent, reaching 70 bcm per year.
With European demand projected to grow by just over 1 bcm per year in the same period, Russia’s South Stream pipeline proposal was as misguided as it was non-compliant with the EU’s Third Energy Package. Routed through Turkey however, Russia’s newest pipeline, TurkStream, promised to add greater utility. Turkey gets its gas and partly fulfills its transit aspirations; Russia bypasses Ukraine while opening windows to Europe and the Middle East; and Europe, if it wants it, will have gas on demand.
It sounds good – okay, at least – but as so often happens in Russia, the tale has taken a turn for the worse. TurkStream has stumbled out of the gates and larger happenings in Syria look to significantly damage Russia-Turkey relations.
Originally intended as a four-pipe 63-bcm project, TurkStream will now top out at 32 bcm, if it gets off the ground at all. As it stands, the parties have agreed to draft the text of an intergovernmental agreement, with a targeted signing date of early next year, following Turkey’s general election. And that’s it.
The primary sticking point remains the price. Gazprom conceded a 10.25 percent gas discount in February, but Turkey would like to see that figure reach 15 percent by the time TurkStream makes its first deliveries. Moreover, Ankara is wary of handcuffing its energy future to Russia; Gazprom delivered roughly 57 percent of Turkey’s gas imports in 2014.
Should TurkStream fail to get off the ground, Turkey will not be short on options. Its regasification facilities can handle greater LNG imports and domestic fixes could increase the efficiency of current piped imports. Long-term, the country is well positioned to receive gas from Israel and Turkmenistan. That being said, the country’s current, and future, imports through Azerbaijan, Iran, and Iraq are far less sound from a security perspective.
A failed TurkStream doesn’t particularly threaten Europe’s energy security either. Nord Stream-2, another Gazprom project, which has the backing of Shell and Wintershall among others, looks to provide an additional 55 bcm of capacity beneath the Baltic Sea.
The current commercial stalemate is also affecting existing infrastructure. Gazprom’s Blue Stream pipeline will do well to boost throughput by 1 bcm, after originally targeting a 3-bcm expansion. Russia’s breakthrough nuclear work in the country is also experiencing delays.
To be sure, energy is hardly Turkey’s primary concern at the moment. Russia’s bombing campaign in Syria has stoked fires in a region that was already burning. Russia’s air offensive – viewed principally as a veiled attempt to support Syrian President Bashar Al-Assad – was never going to win over Turkey, who supports the uprising, but extracurricular activities in Turkish airspace have brought the once promising relationship to a standstill.
Commercially – and barring any direct conflict, which remains unlikely – the Turkish gambit may still bear fruit, but politically, Putin failed to bring Turkey into his fold, an opportunity that now appears lost.
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The greater evil is the potential of the Qatar pipeline thru Syria for Russia. With Russia, Iraq and Iran securing the stability of Syria, the objectives of SA & Qatar are thwarted permanently.
Turkey is the long term loser because of the partners it chose.
Once Iran & Russia also help the Kurds long term carve out: Erdogan does what exactly ? Complain to NATO?
Further, LNG is not viable price wise any where – $12 mmcf or more
“LNG is not viable price wise any where” — generally this point is sort-of valid but there are notable exceptions due to unavoidable geographical constraints. Japan is a good example, the U.K. too but the case is less strong than Japan. But don’t forget too that not everything is determined by the price — LNG’s USP is on the energy security side of the equation.
The name of the game is political stability, the maintenance of the social order within national boundaries and among neighboring states. IS is a disruptive nightmare for the people within the military reach of the fanatical warrior society that is a text case of just what destroys any social order, militarism unbridled by purpose, strategy or even the eventual possibility of victory. IS will be slaughtered along with the civil societies within artillery distance. Building gas pipelines through this gauntlet is not going to happen until the IS military threat is managed to the point of irrelevance. Turkey sensing the geopolitical realignment for the Kurd’s advantage in the Northern Iraqi territory under their firm control, is engaging in historic rapprochement with the Kurds in Turkey in the form of the PPK. Order and stability is what the nation state delivers and without peace with the Kurds, a lot of opportunities for economic development and trade with Russia are challenging.
Russia for its part seems to have the chance to further re-establishment of the social order in the chaos of the North African killing fields of war, civil war and insurrection. The withdrawal of NATO patriot missile batteries and a concert of stakeholder nations are snow plowing a path for massive Russian military intervention in alliance with their long standing Arab partner, the only Arab nation that stood with the Soviets when the Red Army invaded Afghanistan and the Arab League and UN roundly condemned the the Soviets. For Russia to reestablish its geopolitical bona fides, cutting and running from Syria would render worthless almost any overtures of friendlier ties, trade, or other alignment of interest to check unbridled American unilateral militarism. Russia has to show it will stand with an ally under the worst conditions, and there does not seem to be any quagmire worse than what we are seeing in the area of Syria and Iraq.
The US seems to understand that Russia will make as significant a contribution as the one it did when it negotiated the disarming of Syria’s chemical warfare stockpiles. Of course, this crowded killing field can not have the air force of the Iranians, the US, NATO and Russia flying into each others fire. Russia looks to have the tacit green light to move into direct warfare with the purpose of defeating all enemies to the Assad government as well as IS.
http://www.brookings.edu/~/media/research/files/papers/2014/01/23-turkey-kurds-predicament-opportunity-taspinar-tol/turkey-and-the-kurds_predicament-to-opportunity.pdf
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Below is the announcement of NATO patriot missiles leaving Turkey, coinciding with Russian announcements of air and ground forces entering the Syrian war.
http://www.defensenews.com/story/defense/2015/10/11/us-begins-removing-patriot-missiles-from-turkey/73787688/
This article reads like speculation.
I’m sure a small discount on the Natural gas would assuage all Turkish qualms.
As for the LNG re-gassification plants, well, who’d pay for these. Turkey? Or the LNG suppliers, who are unidentified?
Qatar has made a significant investment in installed LNG compression infrastructure https://en.wikipedia.org/wiki/Qatargas
Sorry, that reply got mangled and then modded so isn’t complete…
Should have gone on to say that Qatar has, perhaps unsurprisingly, been happy to invest in regassification at the other end of the supply chain e.g. https://en.m.wikipedia.org/wiki/South_Hook_LNG_terminal
With the elections coming up, one wonders whether the Turkish gov’t will continue being so extremely anti-Kurd and tacitly supporting ISIS.
Aka: Erdogan’s ambitions to become Caliph.
Russia’s air offensive – spun by neo-cons as a veiled attempt to support Syrian President Bashar Al-Assad – was never going to win over Turkey (plus USG & NATO), who supports al-Qaeda and ISIS
That reads better
Funny article.
Turkstream does not signify–it has no point–as long as Europe submits to the US sanctions against Russia. Because, after the gas gets to Turkey, then what? The Turkish market alone does not justify the pipeline.
Russia would like to have Turkey as an ally, but this is impossible while Turkey supports the Islamic State and fights Syria by transhipping arms to jihadis.
As a NATO member, Turkey will not be touched. But its ventures in Syria will likely be destroyed by main force. The Russians have selected their priorities and it matters not at all what anyone thinks. The Turks could always change their policy, in which case they will be welcomed. And if not, not.
The Russians believe they are fighting for national survival. Without survival, economics does not matter. So for them costs are just costs: They will pay what they have to. The pipeline is nothing.
In five years the world will be completely changed. Maybe the pipeline will become viable. Maybe not. Either way, it can wait.
–Gaianne