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Experts: Turkish Stream talks strengthen Russia’s positions in gas dialog with Europe

The statements by Moscow and Ankara on the possible restart of the Turkish Stream project have worried officials in the EU

MOSCOW, August 2. /TASS/. The resumption of Russia-Turkey talks on building the Turkish Stream gas pipeline strengthens Moscow’s positions at negotiations with EU countries, including on Nord Stream-2, although the project of delivering natural gas via the Black Sea is fraught with political and economic risks, experts told TASS on Tuesday.

EU’s worries

The statements by Moscow and Ankara on the possible restart of the Turkish Stream project have worried officials in the European Union as its implementation will increase Europe’s dependence on Russian natural gas, the news agency Reuters reported on Monday, citing diplomatic sources.

As one of the sources said, after the Turkish Stream gas pipeline is launched, Moscow will no longer have to use Ukraine for natural gas transit to Europe while alternative supplies from the Caspian region will be shut in.

A year after the last official talks on the fate of the Turkish Stream project, Russia and Turkey returned last week to the discussion of the gas pipeline across the Black Sea.

Turkish Economy Minister Nihat Zeibekci said at a meeting with Russian Energy Minister Alexander Novak that political decisions on the Turkish Stream gas pipeline were already available and a final impulse to this undertaking would be given at a meeting of the heads of Russia and Turkey scheduled for August 9 in St. Petersburg.

"From the viewpoint of Turkey’s requirements for natural gas, we’re open for building the first stretch of the Turkish Stream," Zeibekci said.

Therefore, the Turkish side’s position has not changed compared with 2015 when Ankara was ready to sign an agreement only on one stretch of the gas pipeline. Gazprom insisted on two stretches, refusing to grant the Turkish state company Botas the promised discount for the gas price before the agreement was signed.

Gazprom viewed the new gas pipeline along the bed of the Black Sea as an alternative to the South Stream project designed to bypass Ukraine in gas deliveries to Europe but abandoned over disagreements with the EU.

The Turkish Stream project was prepared by the Russian side: infrastructure was fully available in Russia for natural gas deliveries to the Black Sea mainline, pipes had been purchased for the sea stretch and contracts had been signed for building the pipeline across the Black Sea.

Route of the gas pipeline’s 2nd stretch

The resumption of the talks on the Turkish Stream gives only advantages to Russia, Head of Analysis at the National Energy Security Fund Alexander Pasechnik said.

"Moreover, it is not so important on how many stretches they will now agree: one stretch will meet Turkey’s requirements and if there is another, Turkey will already become a transit country. But we would like to hedge risks and possibly divide the trans-Black Sea project, which is now called the Turkish Stream and was earlier called the South Stream," the expert said.

When the South Stream was on agenda, the talk was about the delivery of 64 billion cubic meters of natural gas annually and now the talk is about 32 bcm, the expert said.

The capacity of natural gas delivery along the bed of the Black Sea either to Europe or to Turkey is approximately 32 bcm so far. These are two lines 16 bcm each, with one of them intended to meet Turkey’s requirements while options exist for the second line as it may run across Turkey, the expert added.

"And, perhaps, if Russia changes its position, the pipe will branch off at the sea border of Turkey and Bulgaria, i.e. the South Stream project will be revived to some extent and these 16 bcm will go to Europe through Bulgaria," the expert said.

"It is quite possible that attempts will be made to revive the route via Bulgaria," Deputy Director of the National Energy Security Fund Alexei Grivach said.

"If the 2nd stretch goes through Turkey, then Turkey will automatically become a transit country but from the political standpoint Europe does not want this because this will strengthen Ankara’s positions. But internal biased mentality has to be overcome to get gas via Bulgaria as there is a certain circle of people who play against Russian gas in Europe," the expert said.

In case of laying the 2nd stretch via Turkey, three European countries will lose: Bulgaria, Romania and Ukraine, the expert said.

It should not be forgotten that a key task for Europeans is to reduce dependence on Russian natural gas, researcher at the Center of World Energy Market Studies at the Energy Research Institute of the Russian Academy of Sciences Svetlana Melnikova said.

"That is why, they perceive any new project from Russia not as a diversification of routes but as an increase in the dependence on one and the same source. Besides, gas consumption in Europe is now falling and the market is oversaturated with gas in general, especially liquefied natural gas, which will be in abundance in the coming years. Dumping in LNG deliveries is inevitable, as well as a sharp increase in competition on the European gas market. This is a serious challenge, which has to be assessed very soberly," the expert said.

The risks related to the construction of the Turkish Stream gas pipeline are high and are primarily of political nature, which will inevitably affect the project’s economic component, the expert said.

"If there is one stretch, this is economically disadvantageous for us. If there are two stretches, we must be, first of all, confident in Turkey’s transit faultlessness for a long perspective, which will be hard to guarantee," Melnikova said.

Nord Stream-2 to be easier to get off the ground

Experts agree that the resumption of talks on the Turkish Stream will help the implementation of the Nord Stream-2 project, which is being obstructed in Brussels.

Expert Melnikova agrees that the restart of the negotiations on the Turkish Stream project strengthens Russia’s negotiation positions on Nord Stream-2.

"Nord Stream-2 is the most workable variant of all possible options. And, I hope, Europeans will agree to this project, which has considerably lower risks, a reasonable economic component and offers the possibility to reach large markets," the expert said.

"We have an expanding field for maneuver for Nord Stream-2," Pasechnik added. "Now Europeans will think twice about how they should behave. We’ll go ahead where we’ll meet with lesser resistance."

"It may turn out that the expansion of the Nord Stream capacities will not be required. They may return to the trans-Black Sea mainline. Bargaining is possible but we still count on Brussels’ pragmatism. The German chancellor supports Nord Stream-2, even if with reservations, and it is also supported by German business," the expert said.

"It is not ruled out that Russia’s positions at the negotiations on Nord Stream-2 will strengthen," expert Grivach believes.

"This project began actively developing after the idea of the Turkish Stream emerged in 2014. Europeans turned out to be very unhappy about receiving Russian gas through Turkey in very large amounts. And after that, Gazprom’s European partners intensified very seriously talks on Nord Stream-2," the expert said.

Problems with transit via Ukraine to be solved more easily

"No doubt, we’ll also solve the issue with our most problematic transit country Ukraine," Pasechnik said.

"If we implement the project of the southern circumvention of Ukraine along with the expansion of the Nord Stream, the risk of Ukrainian transit failures will be minimized," the expert said.

"That is, in case of Ukraine’s demarches, we’ll be able to pump gas bypassing it. It is understandable that Europeans do not very much want us to deprive Ukraine of this status because then they will have to credit the country to a larger extent," he added.

"But we can do without Ukraine, if we build Nord Stream-2 and two stretches of the Turkish Stream," the expert said. "And this will be a standby scenario."

"We do not set the task of immediately giving up Ukrainian transit. If Ukraine provides the guarantees of gas pumping, then why not using it? Today we have not suspended pumping through the Ukrainian system despite the season of low demand, although we could have used the capacities of the Nord Stream to a larger extent. We even increased transit via the Ukrainian system in 2016 and it is not understandable why they are panicking," the expert said.