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    What will be the effects of South Stream’s termination?



Short-term effects of South Stream’s termination and the fate of the new pipeline proposal will and should mostly be determined by the Ankara-West axis, not by the Russia-West confrontation.

by: PISM

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What will be the effects of South Stream’s termination?

The main outcome of Putin’s visit to Turkey was the announcement that the $40 billion South Stream gas pipeline project would be cancelled. The effects of this cancellation on Russia and Turkey differ, even though the project was interpreted as a rapprochement of their strategic visions.

For Russia, under pressure from tough Western sanctions, the increasing financial cost of South Stream made the project hard to bring to fruition. The Russian economy, and especially joint energy projects, has suffered greatly during the last six months under the sanctions. Given this, saving the country’s image was made possible by way of a political explanation, despite the economic reasons.

Second, the proposal of a new project with Turkey, though all of the details are not yet known, would include almost the same amount of gas (63 bcm) to be delivered by Russia. This would pave the way for Russia to more or less maintain its influence on European energy security through the use of a more sovereign-oriented instrument on Turkey, a non-EU member that is not totally bound to the legislative proposals of the EU’s Third Energy Package. 

Third, the Russia–West confrontation has pushed Moscow to differentiate its foreign policy partners, not only in security terms but also in the context of economic cooperation. Perhaps for the first time since 1991, the current isolation of Russia has become a strong motivation for the Kremlin to pursue a long-ignored agenda of cooperation with non-Western and non-ex-Soviet countries. Here, Russia has mostly been focusing on China, India, Pakistan, Iran and Turkey as regional actors and new or emerging markets. Taking into account Russia’s 2015 presidency of BRICS and the Shanghai Cooperation Organisation (SCO) and the fact that some of these countries are interested in closely cooperating with or even joining SCO, Moscow’s termination of South Stream and its intention to start a new project with Turkey presents an opportunity for Russia to overcome, at least partly, its recent isolation.

Last, it should be noted that the discovery of new energy resources in the Eastern Mediterranean region and the possible revocation of Western sanctions on Iran in the coming year, if resolution is reached on the country’s nuclear programme, hints at the possible development of new gas pipelines to Europe that could act to diversify its sources of energy. Yet, with Azeri gas to be pumped through TANAP, the Kremlin feels the need to accelerate more feasible and profitable projects and, at least, to attain the upper hand by taking preliminary moves in the new emerging geopolitics and geo-economics of the Wider Black Sea Region.

On the other hand, putting an end to South Stream brings both opportunities and challenges for Turkey. Ankara has two main aims with regard to the new project. First, Turkey hopes to change its one-way energy dependence on Russia into reciprocal energy interdependence. As Gazprom’s head Alexey Miller has said, the newly planned pipeline under the Black Sea is supposed to pump almost the same amount of gas (14 bcm)to Turkey as it currently receives via the West Line passing through Ukraine now. The approximate remainder of 49-50 bcm of gas will be transferred to Europe at the border between Turkey and Greece, where a delivery point would be arranged. According to Gazprom statistics, Russia sold 133 bcm of gas to EU member countries in 2013. This means that Turkey would like to seek privileges with regard to gas prices and transit fees while also benefiting from the geopolitical and geo-economic results that this energy interdependency with Russia could provide.

However, if Turkey increases the amount of gas it imports from Russia via this new pipeline, it would likely cause a boomerang effect for Ankara, especially considering the existing imbalance in trade volume between the two countries. Moreover, if an increase occurs, Russia could impede Turkey’s ability to  take independent steps in various foreign policy issues from Central Asia and the Caucasus to the Balkans in general. This could be especially true for Turkish policies on the Syria and Ukraine crises, where it differs significantly with Russia’s.

The second hope for Ankara is that Russia’s proposal could offer Turkey the opportunity to assume the role of regional energy hub in Southeastern Europe, much like that of Germany in Northern Europe. From Ankara’s perspective, Europe’s increasing demand for gas not only makes it possible to implement the TANAP project and transfer more Caspian and Middle Eastern gas in the direction of the EU but also adds to the fact that the new project could amplify Turkey’s status in the region and strengthen its strategic relations with the EU in favour of the country’s membership in the near future. Nonetheless, building more robust relations with the West should be a priority for Ankara if it looks to play such a role while it also pursues in parallel rapprochement with Moscow. Whereas Ankara should focus more on the Western orientation of its foreign policy, both the U.S. and the EU should also beware of excluding Turkey from the ongoing integration processes in the Transatlantic region, such as the TTIP project, and instead welcome Ankara’s desire to join them. Ankara’s deteriorating relations with the West should not be supplanted by increasing its ties with Moscow.

As a result of these factors, it can be said that the short-term effects of South Stream’s termination and the fate of the new pipeline proposal will and should mostly be determined by the Ankara-West axis, not by the Russia-West confrontation.

This article was firstly published in Polish Institute of International Affairs (PISM)