Times: Putin declares gas war on Europe with Turkey pipeline deal
The Kremlin unleashed the full force of its gas diplomacy yesterday, cancelling a £25 billion gas pipeline to southern Europe and replacing it with a new route via Turkey that binds Ankara closer to Moscow.
On the day that the rouble endured its worst single-day fall since the default crisis of 1998, President Putin was in Turkey reshaping Russia’s export map. He said that the EU’s refusal to approve the planned South Stream pipeline had made it unworkable, and outlined how Europe would suffer as a result.
Some Russian energy resources would be redirected to other markets, he said. Bulgaria would lose out on €400 million (£320 million) a year in gas transit fees, and should demand compensation from Brussels.
The row over the pipeline is tied to the battle for influence in Ukraine that has ruptured Moscow’s relationship with the West. Russia moves half of its Europe-bound gas through Ukraine, and the proposed South Stream project would have bypassed the war-torn country and piped 63 billion cubic metres of Russian gas a year under the Black Sea, before running through Bulgaria, Serbia, Hungary, Slovenia and Italy. MORE
Arseniy Yatsenyuk, the prime minister of Ukraine, said yesterday that the South Stream pipeline “is not needed”. He called it a “political project of the Russian Federation”.
Hungary’s government had overtly backed the project, in defiance of European diplomats’ efforts to present a united front against Russia’s actions in Ukraine this year. Serbia staged a military parade for Mr Putin when he visited last month.
Russia and Turkey, despite very public differences on foreign policy in Syria and Ukraine, are also building closer relationships. Yesterday, Mr Putin announced a 6 per cent cut in the price that Turkish customers will pay for Russian gas and offered to build a new gas hub on the Turkish-Greek border to serve southern Europe.
Alexei Miller, head of the Kremlin’s gas monopoly Gazprom, confirmed that the South Stream project was dead. “The project is closed. This is it,” he said.
It would be replaced, he said, with a pipeline in Turkey with an annual capacity of 63 billion cubic metres.
Russia and Turkey are committed to increasing bilateral trade from £20 billion to more than £60 billion by 2020.
As with China, on Russia’s eastern border, Turkey is a big regional trading partner whose importance to Moscow has become much more acute since the European Union and United States imposed tough industry sanctions as punishment for Russia’s actions in Ukraine this year.
Anton Siluanov, Russia’s finance minister, said last week that sanctions would cost the Russian economy £25 billion this year, but that the falling oil price would cost it £60 billion. The price of a barrel of oil has dropped sharply since then and the rouble has followed it.
Boris Nemtsov, a leader of the largely silenced liberal opposition, said that the gathering economic crisis meant that the “long-term perspective is terrible for Putin”.