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Published in Stream:
Russia Update: December 1, 2014
Press by
The Interpreter
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Russia Cancels South Stream, Plans New Black Sea Pipeline with Turkey
7 years
Kremlin Officials Responsible for 'People's Republics' Resign FromTheir Posts

As oil prices continued to fall along with the ruble's value, President Vladimir Putin announced in Ankara today, December 1, that Moscow will halt development of the South Stream natural gas pipeline to Europe due to EU opposition, the Financial Times reported:

"If Europe does not want this project to be implemented, we will not implement this project," he said at a press conference with Recep Tayyip Erdogan, his Turkish counterpart.

"We will redirect our energy resources to other regions of the world, in part through implementing our liquefied natural gas projects and speeding them up.. This would be contrary to European economic interests, this will negatively impact our economic cooperation, but that is the choice on the part of our European friends."

Putin is in Turkey to discuss further economic ties and prospective pipeline projects. Russia is offering Turkey a 6 per cent price cut on natural gas from January 1 and an increase in deliveries by 3 billion cubic meters (bcm).

RIA Novosti said Putin explained his decision as follows (translation by The Interpreter):

Meanwhile, taking into account the position of the European Commission, which has not enabled the implementation of this project, taking into account that we received only just recently permission from the relevant bodies in the Netherlands....they made a positive decision. Taking into account that we have not obtained permission from Bulgaria, we believe that Russia under these circumstances cannot continue to implement this project. We cannot begin building in the sea and wait until we get permission from Bulgaria.

At a press conference at the conclusion of the Russian-Turkish talks Aleksei Miller, CEO of Gazprom, Russia's state gas monopoly, said, "That's it, the project is closed" and would not be revisited, RIA Novosti reported.

He said Moscow and Ankara had reached agreement to build a new pipeline themselves across the Black Sea, to carry 63 billion cubic meters a year, the business daily RBC reported (translation by The Interpreter).

Today a memorandum of understanding has been signed with [the Turkish petroleum company] Botas on building the sea pipeline across the Black Sea in the direction of Turkey with a volume of 63 billion cubic meters a year.

He added that Turkey would take about 14 billion cubic meters, and the rest would be sent to the border of Turkey and Greece. Regarding the price, Miller said:

To the extent the cooperation develops, and deepens, I think that we will be prepared for a further reduction of price [for Turkey]. I think to the extent of implementation of joint projects, including in the gas transport area, we can say that the level of prices for Turkey will in the future come to the level of prices that Germany has today.

Gazprom has provided $4.66 billion, half of the cost of South Stream and looked for the rest to come from European investors, which included Italy's Eni, Germany's Wintershall and France's EDF, even as the project grew more expensive -- the estimate of the sea portion grew to 14 billion euros and the land route to 9.5 billion euros. The European Commission complained that the project did not meet European standards. With growing alarm about Russia's war on Ukraine and the imposing of sanctions, the project was stalled, with only Austria's gas giant OMV pursuing it enthusiastically with the Russians. The pipeline was to feed Bulgaria, Serbia, Hungary and Slovenia.

Russia had already agreed last year to build a nuclear power station for Turkey and has been increasing ties in recent years even as the West has pursued Turkey's help in confronting the war in Syria. The EU has also ultimately sought Turkey as a partner in its Southern Corridor pipeline projects to circumvent Russia and lessen dependence on Gazprom.

Although the Trans-Caspian Pipeline was shelved due to lack of cooperation between Turkmenistan and Azerbaijan in terms of demarcating their disputed Caspian Sea border, shorter, less expensive projects have been moving forward and are expected to start construction in 2015. Turkey is part of the TANAP (Trans-Anatolian Natural Gas Pipeline) project with Azerbaijan which is planned to hook up to the Trans-Adriatic Pipeline (TAP) which will bring gas from the Shah Deniz II fields in Azerbaijan to Europe. 

South Stream was once begun to compete with the EU's now-abandonded cumbersome Nabucco project; now it is junked in favor of what could be a competitor to to the EU's now less-ambitious Southern Corridor projects. It will be interesting to see whether Russia diverts Turkey from its participation in those other projects by enlisting it in an ambitious new Black Sea project.

-- Catherine A. Fitzpatrick