Turkish Stream project success promises benefits, profits to many South-Eastern EU states Analytic

10 April 2015. PenzaNews. Greece is interested in expanding its energy cooperation with Moscow and the construction of an extension pipeline to the Turkish Stream project, said the Prime Minister Alexis Tsipras during his meeting with the President of Russia Vladimir Putin on Wednesday, April 8.

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According to Mr. Tsipras, the project will attract new investments in the Greek economy, stabilize the region and set up the path towards improving relations with Ankara.

The plans include the construction of a 50 bcm gas transport hub on the Turkish-Greek border. From that point, an extension pipeline may be built through Greece and further towards the European countries such as Macedonia, Serbia, Hungary, and Austria.

A day before, on April 7, the foreign ministers of Turkey and four Balkan states – Greece, Serbia, Macedonia and Hungary –spoke in support of the ways to diversify natural gas supply and said they are ready to join the Turkish Stream after a joint meeting in Budapest. The high-ranking officials also signed a declaration on energy cooperation.

In March, the President of Turkey Recey Tayyip Erdogan called the Turkish Stream an important project after his meeting with the Ukrainian President Petro Poroshenko, stressing he found the Russian gas pipeline offer acceptable after the cancellation of the South Stream. The project, Mr. Erdogan added, would allow diversifying the gas supply sources.

The Turkish Stream plans quickly got in the spotlight of the Turkish media: according to them, Mr. Erdogan’s decision would allow to transform Turkey from a transit country into the top European gas supplier, greatly improving Ankara’s position and providing additional profits.

In addition, Taner Yildiz, Turkish Minister of Energy and Natural Resources, said he sees no competition or rivalry between the Turkish Stream and the TANAP projects, since the supply routes will work at the same time. However, he admitted that the Azeri natural gas would end up being more costly, but the overall gas mix would make energy cheaper for the Turkish people.

Meanwhile, several international experts warned that the joint Russian-Turkish project might cause opposition of the Western politicians who earlier had brought the demise of the South Stream project. In particular, the visit of Alexis Tsipras to Moscow brought forward the outrage from the EU politicians, disappointed with Greece’s attempts to conduct independent policy and become closer to Russia in order to resolve internal economy issues.

Some media sources also noted that the EU and the US might choose to incite political unrest in the countries that would be involved in the Turkish Stream project, citing the prevented coup d’etat in Macedonia in January as an example.

A possible alternative to such influence, some media sources say, would be the attempts to bring out the internal tensions in Turkey, and the Crimean Tatars may be potentially used as a pawn to pull the 75-million population of the country into unrest. Officially, the population of the Crimean Tatars is set at approximately 100,000 people. However, over 5 million persons come from families of Crimean emigrants, and the outside players allegedly see them as the main force in putting a stop to the project , waiting only for a massive news and media campaign on the Tatar minority rights abuse in Crimea to happen.

According to a Turkish observer Mehmet Kubat, a dangerous tendency has taken place in the social networks recently, with messages urging the Crimean Tatars in Turkey to organize and become more socially active, and some even openly calling for blocking the access to the Turkish Stream-related construction sites.

At the same time, the journalist notes, the public opinion manipulation strategy using Twitter and Facebook has already been field-tested, and successfully used by the US State Department in Egypt, Libya, Syria and Ukraine to create civil unrest.

Meanwhile, Kamal Sido, head of Middle East Department of the Society for Threatened Peoples (STP), highlighted a list of issues that may arise in Turkey and possibly hinder the project.

“We know the Kurdish issue has not been resolved yet. There are talks between the Kurdistan Workers’ Party, [the party’s leader] Abdullah Ocalan, and the Turkish government, but currently there is no final decision. Of course this will negatively affect the gas pipeline issue until the problems have a solution,” he explained.

Moreover, the expert added, there have been other issues with other national minorities in Turkey that need to be resolved.

In addition, according to him, some Crimean Tatars that have been in Ukraine at the time when Crimea joined Russia are now banned from returning, and the human rights organizations are actively working with this issue.

The construction of the Turkish Stream is unlikely to cause any large-scale civil unrest, suggested Harun Ozturkler, economy researcher, associate professor of Economic and Administrative Sciences at the Kirikkale University.

“I am not a political expert, but I think that there is no possibility for this scenario to be staged. Even in the heat of the events, there had not been severe and continues protests,” he explained.

Discussing the value of the Turkish Stream, the expert called it a new step for strategic relations between Europe, Russia and Turkey, and expressed his hope that it would change the geography of the European energy market in the future.

“From a perspective of political economic and international relations, at this stage of the Ukrainian crisis, the importance of the project is that it will lessen the role of Ukraine for EU, and provide Russia with a new advantage in its international political moves against the west and USA,” the economy researcher stressed, adding that Europe is yet to find a full alternative to the Russian natural gas supply.

In his opinion, Greece will gain the most out of the Turkish Stream.

“This project [Turkish Stream] will help Greece’s struggling economy though its investment and employment effects,” Harun Ozturkler explained.

At the same time, he pointed out that Turkey may greatly profit from the joint project with Russia, especially along with the TANAP gas pipeline project that officially went into the construction phase in March 2015.

“I do not think these two projects are alternative to each other; rather, they complete each other in increasing EU energy supply security. From the Turkey’s perspective, this new project together with TANAP, Turkey will have the chance to upgrade its position from being an energy bridge to an energy market,” the economy researcher said.

Talking about the opponents of the Turkish Stream, he suggested that the start of the project may interfere with the plans of the United States and several Middle Eastern countries.

“This project is against the economic and political interests of Iran, the Kurdistan Regional Government and the USA. This move will make alternative natural gas projects involving Iran, and Northern Iraqi natural gas less competitive,” the expert explained, noting that Tehran may potentially influence the situation in the future.

Moreover, from his point of view, the influence of Tel Aviv or a possible instability in Greek-Turkish relations may affect the talks.

“Israel may use its energy deal with South Cyprus to influence Greece’s position towards the project. Furthermore, there might be problems between Turkey and Greece as well. The potential problem between Turkey and Greece is that both parties will struggle to have the marketing hub of the project rather than just be a transfer country,” the economy researcher pointed out.

The Turkish Stream talks, he reminded, are taking place in the midst of a large-scale confrontation of the world powers.

“Russia and China are the two most important competitors for the west, and Ukraine is a new battlefield in this completion. Therefore, it is natural that both sides are after new moves against each other. But I think, in the long run, the EU is more dependent on Russia for both its energy needs and as market for its products than Russia needs Europe. Russia’s latest energy agreement with China and Shanghai are the two proofs for my claim,” Harun Ozturkler stressed.

On the same subject, Chi Kong Chyong, research associated of the Energy Research Group at the University of Cambridge, Director of Energy Policy Forum, noted that once fully constructed, the Russian-Turkish pipeline will present a great threat to the political and economic position of Ukraine.

“Politicians and public perception about the project is such that if Turkish Stream is built in full (with four lines) then it could jeopardize Ukraine’s position in Europe, as one of the largest transporter of Russian gas to Europe, hence leaving Ukraine with little economic option to influence Russia,” the expert explained in an interview to PenzaNews agency.

However, according to him, the European Union will only benefit from simultaneous gas supplies from Russia and Azerbaijan.

“Co-existence between the two is not an issue, at least for Europe as the clients of Russian and Azeri gas – the more competition between the suppliers, the better for the consumers,” the analyst said.

At the same time, Chi Kong Chyong added, the transit countries will also profit from the project, gaining direct access to an energy supply line, an additional source of income, and more political weight and importance vis-à-vis Brussels and Moscow.

If the legal and technical issues are resolved, the European Union will not interfere with the project, the energy researcher said.

“If Gazprom could prove that it could build Turkish Stream pipelines at least cost and benchmark these costs against best practices of building offshore pipelines and abide by laws and regulation, particularly on competition, procurement and transparency issues then only Turkey could potentially stop the project,” he clarified.

Moreover, Chi Kong Chyong expressed his belief that the new project far surpasses the South Stream from a commercial and rational standpoint.

“Turkey is one of the fastest growing gas markets in the region, and hence for Gazprom, having already invested a substantial amount of money, it makes sense to build at least the first two lines of the Turkish Stream. The first line will replace the existing flows from Russia through Ukraine to Turkey, and the second line should serve as an option for Gazprom to meet any additional demand from Turkey. In a nutshell, the first two lines can be easily built since money has already been spent, and they should also serve as an option for Gazprom to expand the project and build the third and fourth lines to serve Europe, should the political environment in Europe allows Gazprom to do so,” said the speaker.

However, Necdet Pamir, renowned energy policy expert, Chairman of the Energy Commission of the oppositional Republican People’s Party of Turkey, reminded that the United States and the European Union have begun a full-fledged campaign to exert pressure on Russia, and stressed that Moscow’s opponents are using both sanctions and Saudi-supported oil market speculations.

“With one stone, the Americans and the Saudis are trying to kill many birds. [America is] trying to limit the oil and gas revenues of Russia, Iran and even Venezuela, while decreasing the US oil import bill. Saudis are also trying to increase their influence in the region against the Russians and Iranians while trying to capture the market share of Russia in the oil market,” Necdet Pamir explained.

In his opinion, the current state of the economy may make the project prohibitively expensive, especially if one notes that laying a pipeline through Turkey and Greece into Europe is a difficult task.

The success of the Turkish Stream, Necdet Pamir added, will greatly depend on the relations between Russia and the EU and the prospects of Brussels buying Russian natural gas from a different supplier.

“Whether through Bulgaria or through Turkey – it doesn’t matter. If you come to Turkey, then you have to go to Europe. If the European countries are not going to buy your gas, such an economically ambitious project would go nowhere,” he stated, also saying that the South Stream project might be reborn if the relations between Moscow and Brussels recover.

At the same time, he expressed his doubt that Turkey would be able to gain any profit from the project under the currently known conditions. In particular, according to the expert, the parties need to resolve the issues of gas price, re-export rights, and construction of gas storage facilities required for the task.

Turkey already imports as much as 59% of gas, 32% of coal and 8% of oil from Russia, he pointed out.

Discussing the issue of co-existence of the Turkish Stream with the Azeri TANAP, Necdet Pamir stressed that both projects may end up in a situation when one of the supply routs would be made redundant.

“The EU is trying to diversify, but also trying to reduce its consumption and increase the percentage of the renewables in its energy mix. Therefore, there seems to be not enough room for both projects,” he explained.

However, the member of the Republican People’s Party of Turkey struggled to compare the Turkish Stream to TANAP. The Moscow project, he clarified, wins in terms of supply volume but goes against the EU energy policy, while the Azeri gas suits the political needs but is made less attractive by high shipping expenses and small volume of supply.

According to Necdet Pamir, TANAP will supply only 10 bcm a year to Europe during the first step, while Russia has already been supplying the EU and Turkey with over 160 bcm per year in 2013.

In his turn, Jonathan Stern, chairman of the Natural Gas Research Program at the Oxford Institute for Energy Studies, thought the Turkish Stream and TANAP will have no trouble working side by side, and in a best-case scenario may even be connected to the projected Trans Adriatic Pipeline (TAP) on the Turkish-Greek border.

However, the expert stressed that the project is still largely obscure, since very little information had been made public.

“I would expect this to progress much faster. We know nothing about Turkish Stream yet, except what Gazprom would like to do. We don’t know whether the Turkish government has indeed agreed, we don’t know if the seabed [exploitation] has started, we don’t know when the pipe will start to be laid,” he clarified.

At the same time, Jonathan Stern expressed his belief that neither Kiev nor Brussels would be able to prevent Russia and Turkey from working on the project.

“It has nothing to do with either the European Union or Ukraine. All the European Union can say is when the gas enters into EU countries, then it will be subject to EU law and regulations. That is all it can say,” the analyst stated.

Currently, it would be difficult to make any guesses on the development of the Turkish Stream extension through the Balkan countries, he added.

“It very much depends on the extension of Russian Gazprom’s transportation contracts with those countries,” the expert said, adding that some states may potentially decline to take part in the “Balkan Stream” extension in favor of gas supply through Ukraine.

Meanwhile, Salihe Kaya, research assistant at the Economic and Social Studies Department of the SETA Foundation in Turkey, said she strongly believes that the Turkish Stream will become a great opportunity for the Balkan states to improve their economy and industry.

“The relationship between Greece and Turkey will go on the road. Apart from Greece, this project will be a good opportunity for Macedonia, Bosnia and Herzegovina, Serbia, Albania and Montenegro,” the expert explained.

In her opinion, Ankara had everything it needed for a large-scale joint energy project with Moscow.

“Turkey is blessed with its geographical excellence on the crossroads of Balkans, Middle East and Caucasus. In addition, Russia and Turkey have succeeded in developing a very constructive relationship across a variety of policy areas. Their economic cooperation goes beyond energy and holding the keys to the Black Sea,” the researcher said, adding that both the Turkish Stream and TANAP are relevant to the country’s multipolar geopolitical and economic interests.

Moreover, the project is likely not to attract any public outrage, she suggested.

“In my opinion, there is no negative situation in the progress because this project has been supported by both the Turkish government and the society,” Salihe Kaya pointed out.

In conclusion, the SETA Foundation representative added that Ankara’s growing energy cooperation with Moscow would allow Turkey to cash in its strategic advantage in the region and make the country more attractive for investors.

This project advantages and disadvantages. In spite of the disadvantages of this project, it will help Turkey to be the energy terminal in the long term. Turkey will be a country that sets the prices and the trade of natural gas. It will be very important for Turkey’s future,” Salihe Kaya summed up.