In the latest installment of the evolving post-South Stream story, it is first of all necessary to correct two wrong assumptions or assertions that have proliferated through the press reports in recent weeks. Both of these have to do with the Blue Stream natural gas pipeline that has been in service from Russia under the Black Sea to Turkey since 2005.

Errors and Misconceptions

The first concerns the volume of the Blue Stream pipeline from Russia under the Black Sea to Turkey. Following the Putin-Erdogan meeting in December 2014, it was announced by the two sides that Russia would increase the flow of gas through the Blue Stream by 3 billion cubic meters per year (bcm/y) beginning in 2015. Many reports asserted that this meant that the flow would be increased from 16 to 19 bcm/y, but in fact it means that the flow will be increased from 13 to 16 bcm/y.

The Blue Stream’s maximum volume is 16 bcm/y, and numerous reporters and press agencies appeared to assume that it was operating at full capacity and would somehow magically expand to operate at over a full capacity. In fact, until early this decade, Blue Stream in fact operated at about one-half of full capacity, and it is only in the last four years that it has ramped up to anything close to 16 bcm/y. Deliveries for 2013 and 2014 each amount to about 13 bcm/y. This error by itself should invite skepticism over other “instant analyses” of the result of the Putin-Erdogan meeting.

A more serious error in some but not all press dispatches has been the assumption that the so-called the Turkish Stream gas pipeline project would not run across the breadth of the Black Sea, as the South Stream pipeline would have done. The assumption supposes that Turkish Stream would instead quadruple or quintuple the volumes delivered through Blue Stream by laying parallel pipelines across the bed of the Black Sea following its same same path.

Blue Stream makes landfall not far from the Turkish city of Samsun, which is roughly midway along the Turkish coast of the Black Sea, between the South Caucasus and the Turkish Straits. Such a path of an expanded Blue Stream pipeline is in fact and old idea proposed by Putin and Erdogan a decade ago, at the time called Blue Stream Two. It was intended as a political initiative to block the building of the Nabucco pipeline after the latter project was launched. The Blue Stream Two idea was discarded and replaced by the South Stream project.

The assumption that Turkish Stream would be a new Blue Stream Two arises from the fact that this is Moscow’s preferred route; however, it is not Turkey’s. Turkey wants Turkish Stream to cross the Black Sea east-to-west as South Stream would have done, and end on the Black Sea coast of Turkish Thrace in Europe. Turkey also wants LNG plants to be constructed as a part of Turkish Stream. For this, there would have to be a further pipeline across Turkish Thrace from the Black Sea and ending on the Mediterranean Sea coast for export not only to European and also to world markets. Russia, however, wants to build a gas hub on the Turkish-Greek border so that the gas can enter European markets overland.

This fundamental conflict between Russia and Turkey is not yet resolved, and nothing can happen with Turkish Stream until it is. The routes preferred by Russia and by Turkey have no segments in common. The Blue Stream Two version of Turkish Stream goes mainly south, whereas the South Stream version of Turkish Stream went mainly west.

What the Russian-Turkish Announcement Means

Having cleared this ground and established the necessity for careful attention to actual facts, there is another salient aspect of the Russian-Turkish announcement in December that requires attention. This is the fact that in order to obtain the Turkish assent even to a joint communiqué concerning a putative Memorandum of Understanding, it was necessary for Moscow not only to agree to increase the flow through Blue Stream by 3 bcm/y but also to agree to a 6 percent discount to Turkey over the price of gas for the current year.

The Turkish side has since his stated that in fact negotiations since December over the price of this gas have not led to agreement. One of the reasons for this is that the price of gas between the two countries is indexed against the price of oil, which has declined 50 percent since it was last fixed by bilateral contract. Turkish experts and negotiators simply do not believe that they are getting an equitable deal.

Indeed, as Amamda Paul puts it: “EU decision-makers are not taking Turkish Steam seriously. They see it as … a desperate attempt [by Russia] to get the EU to reconsider its conditions for South Stream as well as … the sanctions” due to Russia’s conflict in Ukraine. According to her, the EU decision-makers do not “belie[ve] that Turkey would never sell out, [but rather that it is] … ‘playing’ in order to get something sweet from the EU on other issues of importance.”

Turkey Has the Upper Hand over Russia

If Russia is in fact trying to take advantage of the deterioration of EU-Turkey relations, Turkey indeed is not yet taking the Russian bait. Besides driving a hard bargain on prices for existing contracts, Turkey’s energy minister declared even in early December that his country was not interested in the Turkish Stream project as outlined by the Russian side: “Turkey will not merely be a transit country for the new natural gas pipeline project from Russia through the Black Sea,” he said, “but it could have a compact facility including an LNG terminal.”

As noted above, he seeks “an alternative gas pipeline project with Russia, its route through the Black Sea ensuring that the Thrace region will become a gas hub,” ostensibly as early as 2019. Gazprom’s chief Alexei Miller has publicly admitted the possibility of constructing a gas hub on the Turkish-Greek border for Southeastern Europe but has not gone so far as to include an LNG terminal. Russia’s energy minister Aleksandr Nowak insists it would be for “Eastern and Southeastern Europe”, implicitly excluding the LNG option.

Turkey currently imports 60 per cent of its natural gas from Russia. The new Turkish-Iraqi accords (with Kurdish Regional Government, or KRG, in northern Iraq) provide, in addition to an important oil agreement, provisions for eventual construction of a new projected natural gas pipeline. The question whether this gas would be for domestic Turkish consumption or would be re-exported to Europe via the TANAP pipeline, or both, remains as yet unanswered, as does the question of the pipeline’s volume.