Russia and Greece inked a deal on Friday to build an extension for Turetskiy Potok (Turkish Stream), the prospective gas pipeline planned to carry Russian gas to European markets via the Black Sea and Turkey. The agreement was signed at the margins of an international co-operation forum in St. Petersburg, albeit in the absence of a key stakeholder. The Turkish Minister of Energy, Taner Yıldız, cancelled his trip to Russia at the last minute, without an explanation by Turkish authorities. An agreement between Turkey and Russia for the Turkish Stream pipeline project is yet to be signed. But nobody really knows when this is going to happen.

The Turkish Stream project is both important and urgent for Russia. Having abandoned an earlier version, the South Stream, which would have taken Russian gas beneath the Black Sea to Bulgaria, in response to European sanctions, Moscow now relies on the yet-to-be-built Turkish route for access to Western markets. Russian energy company Gazprom has recently announced that deliveries are envisioned to start as early as December next year.


From the Turkish perspective, however, the picture is more complicated. The aims of Turkey’s energy policy are two-fold: first, to satisfy surging energy demand from a growing economy, and second, turning Turkey into an energy transit corridor between the producers to its east and the consumers to its west. Under the right conditions, Turkish Stream can serve both aims, and this is why, instead of rushing to jump on the Russian bandwagon as the debt-ridden Greeks did, Ankara wants to bargain its way to an optimal deal.

Turkey is an energy-buying country and it currently depends on imports for about 93% of its oil consumption and 98% of its gas consumption. Russia is a main source for Turkey’s energy imports: out of the 41.1 billion cubic meters (bcm) of gas Turkey bought from abroad during 2014, 26.9 bcm came from Russia. In recent years, Turkey managed to diversify its sources; ten years ago, in 2004, Russia’s share in Turkey’s gas imports was 80%, it has gone down to 65% by 2014. However, given the large volumes involved, and the instability plaguing alternative sources in the Middle East, Turkey is likely to remain dependent on Russia for its gas in the foreseeable future.

The planned capacity of the Turkish Stream project is 63 bcm per year and Turkey is to use about 14 bcm of this for domestic consumption while the rest will be exported to Europe via Greece. Turkey relies on gas imports from Russia, while at the same time Russia relies on Turkish collaboration for selling its gas to Europe, and from Ankara’s point of view, this interdependence creates a favorable setting for obtaining a better deal from Moscow. A discount of 10.25% on the sale of gas is currently on the table. However, the parties have so far not managed to agree on a contractual formula to apply it. In the meantime, arguments are being made in the corridors of Ankara that the discount should be no less than 15% so that Turkish Stream can actually benefit Turkey.

Turkey and Russia are likely to agree on a discount rate for the price of gas in the near future. However, the other dimension of the project about Turkey becoming an energy transit corridor indicates a more complex situation. The Turkish Stream, if and when completed, will for sure consolidate Turkey’s position as a Eurasian energy bridge. However, it is not the only project under consideration in that respect. The Trans-Anatolian Natural Gas Pipeline (TANAP) is expected to carry 16 bcm of Azeri gas per year as an initial component of a larger project, the Southern Gas Corridor (SGC), which will carry 60 bcm of gas from the entire Central Asian and Caucasian region through Turkey to Europe. Russia, with its options dramatically shrunk after the Ukrainian crisis, is very keen on the Turkish Stream; while at the same time SGC/TANAP, which involves neither Russian gas nor Russian territory, is supported by the EC and the US.

Turkish authorities take every opportunity to claim that they do not have to choose between the Turkish Stream and SGC/TANAP; these two projects are not competitors, but they are complementing each other, etc. While this line of argumentation can make sense from a purely economic perspective, the geopolitical nature of the issue puts Turkey in a position where it will have to strike a fine balance between its interests vis-à-vis Russia and those with NATO allies. This will be a difficult task, similar to the one Turkey has recently experienced with respect to the procurement of a missile defense system. Turkey had to choose between a Chinese offer that made more sense economically and the offers made by its allies in the West. Turkish authorities argued then that the missile defense system to be bought from China didn’t necessarily compete with those from the NATO allies. The argument was that they could actually complement each other, etc. The fact is, however, that Ankara still has not made a final decision on the issue and with each passing day the likelihood increases for the missile defense system tender to fall victim to a clash between conflicting economic and geopolitical concerns and may have to be annulled.

Minister Yıldız’s no-show in St. Petersburg reveals that Turkey is going through a similarly difficult decision-making process with respect to the new pipeline. The Turkish Stream can still stream, if the Turks can figure out how to maximize economic benefits while at the same time balancing conflicting geopolitical concerns. In the meantime, it is important to keep in mind that it is not uncommon for pipeline projects to succumb to geopolitical wrangling, even though they might seemingly offer economic benefits for all the parties involved. Remember Nabucco?

Dr. Altay Atlı is a research fellow at the Asian Studies Center of Boğaziçi University in Istanbul, and a lecturer at the Asian Studies graduate program of the same university.

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