Russia: Putin Abandons South Stream, Attempts to Court Turkey

Russian President Vladimir Putin announced that Moscow will abandon the South Stream pipeline project. The South Stream project would have consisted of a submarine pipeline running under the Black Sea and into Central Europe. The project quickly lost momentum as relations between Russia and the European Union soured and the EU posed sanctions on the Russian economy, severely complicating Russian efforts to see the pipeline constructed. Putin lashed out against the EU for allegedly torpedoing a deal that he sees as in the interest of both sides.

Putin and Gazprom chief Alexei Miller were both in Ankara, Turkey yesterday to discuss an alternate pipeline with Turkish President Tayyip Erdogan. The new pipeline would also be undersea, and would supply Turkey with up to 63 billion cubic meters of gas, a significantly larger quantity of natural gas than Ankara currently receives from Moscow. To sweeten the deal, Putin and Miller proposed a “six percent discount” on all imports from Russia for the first year of the pipeline’s operation. Discounts and an “agreement of understanding” with Turkey’s Botas notwithstanding, reports have emerged that Turkey wants a much more significant discount, to the order of 15%, on gas imports, and for a longer period of time than on year. Policy-related differences concerning the state of Syria could also weaken the proposed deal and greater Russia-Turkey cooperation.

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News Briefs: 

  • Kazakh Prime Minister Karim Masimov announced that the country will develop its own shale gas program in the future. The minister, speaking at the International Conference on Energy, declared the issue of energy of paramount importance to Kazakhstan and that the country must utilize “all its resources” in order to obtain economic and geopolitical security. Shale gas is comprised of methane and is more difficult to extract than “normal” natural gas. The ability to successfully extract it is not a capability that Kazakhstan’s still underdeveloped chemical industry possesses.
  • A railway connecting Iran, Turkmenistan and Kazakhstan will at last be inaugurated within “the next few days.” The railway has been in the works for years, with all three sides collaborating to construct a transport network that would give Kazakh and Turkmen businesses access to the Persian Gulf. The project has proceeded unimpeded by Western sanctions imposed against Iran, and will shorten the North-South corridor by nearly 600 kilometers.
  • Natural gas pipelines that link China with resource rich Turkmenistan have funneled more than 65 million tons of natural gas since they came into operation. The pipelines bring natural gas from Turkmenistan, through Uzbekistan and Kazakhstan, and finally into western China. The pipelines are expected to transport more than 55 billion cubic meters every year and meet nearly a fifth of China’s total natural gas needs.
  • The International Energy Agency writes that the European Union will remain heavily dependent on Russian natural gas for the “foreseeable future.” European preferences notwithstanding, fossil fuel usage in key European states such as the Netherlands and Denmark is rapidly decreasing, and LNG imports from the US and other states were significantly reduced in 2014. Poor diversification and increasing demand will force the EU to import significantly more gas from Russia between 2020 and 2030, or increase its imports of LNG and make unprecedented progress in the construction of the Central Asia-EU Southern corridor
  • Allegations of Russian tampering have continued as Ukrainian officials criticized Moscow for alleged attacks perpetrated by Russian Special Forces near the Donetsk airport. The strategically important airport has been the site of sustained bouts of violence over the last few weeks, with Ukrainian military reporting three dead in the last 24 hours. The Russian government continues to deny involvement.
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