Russia vs Turkey: The Geopolitics of the South & The Turk Stream Pipelines by Lakovos Alhadeff - HTML preview

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How the Announcement of the

 Turk Stream Benefits Russia

 Without saying that it is impossible for the Turk Stream to ever be built, I  want to describe the benefits that Russia enjoys by simply announcing the  project. That is the benefits that Russia enjoys before even starting the  project. When examining the benefits of the Turk Stream there are three  things that must be kept in mind. The first one is that according to experts  it is very difficult for both the Turk Stream and TANAP to be constructed  because there is not enough demand in the Balkans to make both projects  viable, and there are no pipeline networks which can transfer the natural  gas of the Turk Stream and TANAP to the rest of Europe. The Turk  Stream will carry 63 billion cubic meters of natural gas per year, and  TANAP will reach a capacity of 31 billion cubic meters by 2025. TAP  will initially carry 10 and will finally reach a capacity of 20 billion cubic  meters per year.

 The second one is that the European Union, which will buy this natural  gas, has a clear preference towards the Southern Energy Corridor  (TANAP-TAP), in order to reduce its dependence on Russia. The third is  that Turkey, which is the country that both the TANAP and the Turk  Stream must cross in order to reach Europe, has a clear preference  towards the Southern Energy Corridor too. These three factors must be  taken into account when examining the benefits of the announcement of  the Turk Stream for Russia.

 The first benefit for Russia is that she is threatening the European Union  and Ukraine, in order to convince them to relax their stance on the issue  of the crisis in Ukraine and Crimea, and the economic sanctions that have  been imposed on Russia. Russia has informed the European Union that as  soon as the Turk Stream will start operating, Russia will stop supplying  natural gas through Ukraine. That would be a great problem for both the  Europeans and the Ukrainians, who badly need the Russian natural gas.  Moreover if the Europeans take seriously what Putin says, they will have  to construct pipelines which will connect their countries to the Greek-Turkish borders, in order to keep importing Russian natural gas.  Therefore Vladimir Putin is also trying to give the Europeans a motive to  build a pipeline network that will bypass Ukraine in order to keep  importing the Russian gas.

 However this threat is not very credible as you can read at the following  Euractiv article, titled 'Šefčovič: Turkish Stream will not work',  February 2015. According to the EU Energy Commissioner, Maros  Sefcovic, Gazprom cannot unilaterally stop supplying its clients through  Ukraine, because the contracts specify specific delivery locations, and  these locations cannot be unilaterally changed. That is even more relevant  in the case of the Greek-Turkish borders, because there is not a pipeline  network which have the ability to carry the natural gas from there to  Central Europe.

 Maros Sefcovic also mentions that the western part of Turkey only needs  15 billion cubic meters of natural gas, and the other neighbouring  countries another 15 billion, and therefore he claims that he can not see  who is going to buy the 94 billion cubic meters of natural gas that will be  delivered to the Greek-Turkish borders by the Turk Stream and the  TANAP pipelines. According to the European Energy Commissioner the  EU and Gazprom must jointly find a solution which will satisfy both  parties. The article also mentions that the European Union does not have  many alternatives to the Russian natural gas, because TANAP will  initially carry only 16 billion of natural gas. By saying so the article  seems to agree with the European Commissioner, that the EU and Russia  should sit down and find a solution.

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 Šefčovič repeated that it was very"unusual" for a company such as Russia to communicate with its clients via press conferences. Indeed, the first announcement about Moscow's change of plan was during a press conference of President Vladimir Putin, in Turkey.

 The Commission Vice-President also said that none of the countries or companies involved in the South Stream project had been officially notified of the project‘s cancelation.

 The same happens with Turkish Stream, Šefčovič said, calling it a"radical proposal", which is hardly in conformity with the bilateral agreements individual companies have signed with Russia, which stipulate a precise place of delivery.

"I doubt that this place of delivery is the Greek-Turkish border," Šefčovič said, referring to Russian statements that Turkish Stream will bring gas to a hub at the Greek-Turkish border.

 On top of it, he said he was questioning the economic viability of the project, because in his words Turkey needed some 15 billion cubic metres per year (bcm/y), and the other countries of the region needed another 15 bcm.

"Why (do) you need to ship to that part of the world more than 60 bcm of gas?" he asked, referring to the fact that Russia said Turkish Stream will have the same capacity as South Stream, that is, 63 bcm.

"This will not work. I cannot see that this would be the final solution. I think that we will have to come back to a more rational debate on what should be the economically viable solutions for this project, and for overall gas cooperation between Gazprom and the European countries," Šefčovič said.

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 He added that he didn‘t agree with this reasoning, because Kyiv was committed to energy reform, and that the EU and other financial institutions were going to provide funding for the modernisation of the gas transmission system. Moreover, he said that

 it was not possible that the current volume of transit of Russian gas of over 100 bcm could be immediately rerouted.

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 It also remains unclear what alternatives to Russian gas the region has, except some   of the 10 bcm/y which would become available via the Southern gas corridor, when   gas from Azerbaijan will start coming through the planned TANAP pipeline via   Turkey, and the TAP (Trans-Adriatic) pipeline via Greece and Albania, by 2019- 2020.

  http://www.euractiv.com/sections/energy/sefcovic-turkish-stream-will-not-work-  311836

 At page 10 of the following article of the Oxford Energy Institute, of  Oxford University, titled 'Reducing European Dependence on Russian  Gas', October 2014, you can see the demand for natural gas of individual  European countries, and what this demand is expected to be by 2030.

 Picture 47

img48.jpg

http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/10/NG-  92.pdf 

 You can see that by 2030 demand for natural gas will be 3.6 billion cubic  meters in Greece, 2.3 billion in Serbia, 3.3 billion in Bulgaria. Turkey  will need 70 billion cubic meters of natural gas by 2030, but today  Turkey needs only 45 billion cubic meters of natural gas per year, and  from this amount only 15 billion is needed by Turkey's western part,  which will supposedly be supplied by the Turk Strem or TANAP.

 At the following article of the Turkish newspaper Today's Zaman, which  is the English version of the daily newspaper Zaman, titled 'Ukrainian  ambassador calls Turkish Stream too bad to be real', March 2015, you  can read a very interesting interview given by the Ukrainian ambassador  in Turkey.

  http://www.todayszaman.com/interviews_ukrainian-ambassador-calls-turkish-stream-   too-bad-to-be-real_374469.html

 According to the Ukrainian ambassador there is no chance that the  Europeans will spend all this money that is required to connect Central  Europe with Turkey, in order to substitute the gas they receive from  Ukraine, because there is already a network that is doing that through  Ukraine. Moreover, according to the Ukrainian ambassador, the Turk  Stream cannot be constructed because its construction would mean the  end of TANAP, and the end of Turkey's ambition to become an  independent energy hub. He mentions that Putin and Erdogan only singed  a memorandum of understanding for the Turk Stream, and not a final  agreement. At the journalist's question about why Erdogan signed the  memorandum of understanding, he answers that when an energy  superpower like Russia asks you to consider a project, you have to say  'yes, sure'.

 By announcing the Turk Stream, Putin is also trying to punish Bulgaria.  Even though Bulgaria traditionally has good relations with Russia, she  has been obedient to the European Union regulations, and asked Russia to  respect the EU regulations on energy issues. Bulgaria, even though very  unhappily, announce on June 2014 that all Bulgarian projects related to  the South Stream would be halted, until a solution was reached between  the EU and Russia. You can read the following article of the Russian state  owned RT (Russia Today), titled 'Bulgaria halts Russia's South Stream  gas pipeline project', June 2014.

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 Bulgaria‘s prime minister, Plamen Oresharski, has ordered a halt to work on   Russia‘s South Stream pipeline, on the recommendation of the EU. The decision was   announced after his talks with US senators.

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 Earlier this week, EU authorities ordered Bulgaria to suspend construction on its link   of the pipeline, which is planned to transport Russian natural gas through the Black   Sea to Bulgaria and onward to western Europe. Brussels wants the project frozen,   pending a decision on whether it violates the EU competition regulations on a single   energy market. It believes South Stream does not comply with the rules prohibiting   energy producers from also controlling pipeline access.

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 In Bulgaria, the ruling Socialists support the South Stream project, while Movement   for Rights and Freedom leader Lyutvi Mestan told parliament on June 5 that Bulgaria   should defend its strategic interests ' in cooperation, not in confrontation ' with   Europe.   Earlier Serbia has said it has no plans to delay the start of construction of its leg of   the South Stream pipeline, scheduled for July. Serbian Energy Minister Aleksandar   Antic said that the position was not decisive: ' I believe the European Commission  and member states will find a solution because this is a European project in the best  interests  of  energy  security .'   Hungarian Prime Minister Viktor Orban also said June 5 that the pipeline should be   built, as there was no alternative to the project.

  http://rt.com/business/164588-brussels-bulgaria-halts-southstream/

 There are two routes by which Gazprom can enter Southern Europe, if  Ukraine is taken out of the equation. The first one is Bulgaria, and the  second one is Turkey. Putin thought that Bulgaria was very obedient to  the European Union regulations and brought forward the Turk Stream to  retaliate. Bulgaria is addicted to the Russian natural gas which reaches  Bulgaria through Ukraine with the Trans-Balkan pipeline. Therefore  Bulgaria needs either TANAP or the South Stream to increase her energy  security, but also because she desperately needs the investments that are  related to these projects, because Bulgaria is the poorest country of the  European Union.

 Bulgaria was disappointed twice, first with the cancellation of Nabucco  pipeline, and then with the cancellation of the South Stream. Bulgaria is a  battlefield between the European Union and the US on one side, and  Russia on the other, as you can read at the following article of the  American state owned Voice of America, titled 'Bulgaria Key  Battleground in US-Russia Energy War', February 2015. According to  the article the United States is trying to construct a nuclear energy plant  in Bulgaria, in order to reduce Bulgaria's dependence on Russian oil and  natural gas.

 Bulgaria is also very rich in shale gas, and the American companies have  developed the techniques required to exploit this gas. Bulgaria had signed  a contract with the American multinational Chevron, in order to exploit  her shale gas reserves. This would be a very positive thing for the US and  the EU, because it would reduce Bulgaria's dependence on Russia for  energy. But the exploitation of Bulgaria's shale gas was abandoned due to  heavy criticism and protests from pro-environment organizations.

 According to the article the Americans claim that the environmental  campaigns were funded by Russia.

 5th and 6th Paragraphs

 The U.S. recently pledged to send an energy envoy to Sofia and is promoting an   American company to build a nuclear power plant there. Washington is also looking   to help fund new gas pipelines and terminals in the region. "In the area of energy security, we're not just talking the talk, now we're walking the   walk,' U.S. Assistant Secretary of State of European Affairs Victoria Nuland said in   January of U.S. intentions.

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 The U.S. moves come amid renewed charges that Russia" through its state-controlled   energy company, Gazprom" has successfully blocked shale gas exploration in   Bulgaria through a shadowy but well-funded campaign waged to protect its regional   energy dominance.

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 Despite paying some of the highest prices in the world for energy, Bulgaria in 2012   issued an open-ended ban on hydraulic fracturing, cancelling a license for   unconventional gas exploration granted less than six months earlier to the U.S.   energy giant Chevron.

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 When Chevron moved into Bulgaria in 2010, it became the single largest investor of   the shale era. "They introduced a completely new business culture, put down €30 million [$38   million] up-front. It was an unheard of amount of money and triggered a chain   reaction when the Russians realized Chevron meant business," Vassilev said.

  http://www.voanews.com/content/bulgaria-key-battleground-in-us-russia-energy-   war/2655196.html

 Obviously the United States did not give up and tried to build the nuclear  power plant that I mentioned in order reduce the Russian influence on  Bulgaria. As you can read at the following article of the World Nuclear  Organization, titled 'Nuclear Power in Bulgaria', April 2015, Bulgaria  covers 1/3 of her energy needs with nuclear energy. Bulgaria has 2  nuclear reactors, and she had another 2, which she had to close down  when she joined the EU, because they were very old and they did not  satisfy the European regulations.

 1st Paragraph

 Bulgaria has two nuclear reactors generating about one-third of its electricity.   Two others, shut down under duress as a condition of Bulgaria joining the European   Union, could be restarted.   Bulgaria's first commercial nuclear power reactor began operating in 1974.   Government commitment to the future of nuclear energy is strong, though finance is   lacking. Construction of a new nuclear plant was planned, but instead, a 1200 MWe   unit will be added to the present plant.

 http://www.world-nuclear.org/info/Country-Profiles/CountriesA-F/Bulgaria/

 At the following Wall Street Journal article, titled 'Bulgaria Signs Deal  With Westinghouse on Nuclear Power Plant', August 2014, you can read  that an American company agreed with the Bulgarian government to  build a nuclear power plant, in order to reduce Bulgaria's dependence on  Russian know how and Russian nuclear technology, and to reduce  Bulgaria's dependence on Russian natural gas and oil. At the 18th  paragraph the article mentions that this success for the Americans came  after their failure in Hungary, where the Russian state owned nuclear  energy company Rosatom agreed with the Hungarian government to  construct two nuclear power plants.

 1st, 2nd, 3rd, 4th Paragraphs

 An American nuclear engineering company and Bulgaria Friday reached a long-  sought deal paving the way for the European Union state to diversify its energy   generation and nuclear fuel sources away from Russian to Western technologies   while meeting the EU's strict carbon-emission reduction targets.

 Pennsylvania-based Westinghouse Electric Co. Ltd. said after seven months of   negotiations it signed an agreement with Bulgaria's state-owned nuclear power plant   operator Kozloduy Nuclear Power Plant PLC giving the American company a 30%   stake in a project company that aims to build a new 1,000 megawatt reactor worth   over $5 billion.

 Westinghouse will provide all of the plant equipment, design, engineering and fuel.   The project will be a major employment booster in the EU's poorest member state by   economic output per capita. The company said during the construction phase some   3,500 local workers will be employed on site with an additional 15,000 workers   involved in the associated supply chain. Once the reactor is complete, it will employ   up to 800 specialists.

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 This agreement comes as EU state Hungary earlier this year made a deal with   Russian nuclear company Rosatom in which the Russian side will fully finance the   development and construction of two new reactors at the PAKS nuclear power plant   in Hungary at a cost estimate to be in excess of €10 billion ($13.39 billion).

  http://www.wsj.com/articles/bulgaria-signs-deal-with-westinghouse-on-nuclear-   power-plant-1406890323

 Victor Orban, the President of Hungary, is very close to Russia and he  fights the European energy regulations and the European Energy Union  which is promoted by the EU, as you can read at the following article of  Euractiv, titled 'Orban says EU's Energy Union is a threat to Hungary',  February 2015.

 1st, 2nd and 3rd Paragraphs

 Hungarian Prime Minister Viktor Orbán said his country has a"major problem"   with Brussels because of the European Commission‘s plans to set up an Energy   Union, which in his words hinders national sovereignty.   Orbán, who two days ago hosted Russian President Vladimir Putin from whom he   obtained major gas price discounts, said his country does not agree that he   must inform the Commission of his gas supply agreements with Russia. One of the key   elements of the Energy Union is that member states‘ energy deals with non-EU   nations should be scrutinised by the European Commission before they are signed.   Russia has always insisted that those deals are confidential.

 http://www.euractiv.com/sections/eu-priorities-2020/orban-says-eus-  energy-union-threat-hungary-312290

 With the European Energy Union, all the energy deals of the individual  EU member states will be scrutinized by the relevant European authority.  Therefore the corrupt political systems of Eastern Europe and the Balkans  will not be able to agree higher prices with Russia, passing the higher  costs to consumers. This kind of indirect funding is one way that corrupt  politicians are financed by Russia, in order to promote Russia's foreign  policy and combat the European energy regulations. In other cases Putin  offers lower prices to friendly governments, and higher prices to pro—  European countries.

 I must say one more thing about Bulgaria's nuclear energy plants. Russia  tried to build in Bulgaria one more nuclear energy plant, in order to  prevent the construction of a plant by a western company. But as you can  read at the following Financial Times article, titled 'Bulgarians see  Russian hand in anti-shale protests', November 2014, even though the  Russian company Rosatom managed to agree on the construction of a  new nuclear plant, in the end the Bulgarian government backed out. I guess the Bulgarian government backed out due to pressures from the EU  and the US.

 At another part the Financial Times article mentions that many people in  Bulgaria believe that the anti-shale protests in Bulgaria were financed by  Tsvetan Tsvetanov, a Bulgarian oligarch who is very close to Russia. The  article also mentions Bulgaria's dependency on Russia for natural gas.

 1st, 2nd, 3rd, 4th Paragraphs

 It took barely a week of street protests by environmentalists in January 2012   beforeBoyko Borisov, Bulgaria‘s prime minister, relented and cancelled a licence for Chevron, the US energy company, to explore for shale gas in the Balkan country‘s prime wheat-growing region.

 When another wave of protests prompted by sharp rises in electricity and fuel   pricestoppled Mr Borisov‘s centre-right government 13 months later, it seemed as if civil society had finally come of age in the EU‘s poorest member state.

 Yet some in Sofia believe a Russian hand helped foment the protests for its own ends.   They point to Kremlin links to local groups that supplied demonstrators and funded   an anti-shale media campaign. The goal, they believe, was to punish the pro-  European Mr Borisov for pursuing policies that might reduce Bulgaria‘s dependence   on Russian energy.

"We must remember the anti-shale protests and the other organised actions against   the government of Boyko Borisov. This was a well-planned scenario developed by   local corporate, oligarch and economic interests connected with Russia," said Tsvetan Tsvetanov, a former interior minister who is a close Borisov confidant.

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 These days, energy has been at the centre of the relationship. Russia‘s Gazprom   supplies 90 per cent of Bulgaria‘s annual gas via a pipeline that runs through   Ukraine. Its dominance means that Bulgaria‘s state energy company" despite its   relative poverty" pays 30 per cent more for its gas than importers in Germany.

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 It was not Mr Borisov‘s only affront to Moscow. In January 2013, he called off a €7bn   project backed by previous governments to build a 2,000-megawatt nuclear plant at   Belene on the Danube river which was led by Russia‘s state-owned Rosatom group.   His government also awarded a concession to explore for gas off Bulgaria‘s Black   Sea coast to an international consortium headed by Total of France.

 Those who suspect Moscow‘s involvement in the unrest in Sofia point to a media   campaign" said to be worth €20m" backing the anti-shale protests. It was handled   by several local media and advertising companies with Russian connections.

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 The outgoing socialist-led government was a keen backer of South Stream. Even   though it suspended participation in June under pressure from Brussels it still   allowed on-the-ground preparations to continue.

  http://www.ft.com/intl/cms/s/0/e011d3f6-6507-11e4-ab2d-00144feabdc0.html

 Bulgaria has approximately 1 trillion cubic meters of shale gas reserves,  which is quite impressive if it is taken into account that the richest  countries in shale gas have approximately 30 trillion cubic meters of  shale gas reserves. At the following Reuters article, titled 'Bulgaria bans  shale oil and gas drilling', January 2012, you can read about the  Bulgarian shale gas reserves.

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 Initial estimates showed Bulgaria may have significant shale gas reserves, up to 1.0   trillion cubic metres.

 The centre-right government, initially a staunch supporter of shale gas on hopes it   may reduce the country's almost total dependence on gas imports from Russia's   Gazprom, has changed its position after growing opposition to fracking.

  http://www.reuters.com/article/2012/01/18/bulgaria-shalegas-ban-   idUSL6E8CI2ML20120118

 The Burgas (Bulgaria)" Alexandroupolis (Greece) oil pipeline was  another battlefield between the US and Russia in Bulgaria. The pipeline  was agreed in 2007 between Russia, Bulgaria and Greece, and it was  meant to shadow the Baku (Azerbaijan)- Ceyhan (Turkey) oil pipeline  that was promoted by the Americans. See red line for Burgas-Alexandroupolis oil pipeline, and brown line for the Baku-Ceyhan  pipeline.

 Picture 48

img49.jpg

The Bulgarian government once more backed out from the Burgas-Alexandroupolis pipeline, while the Baku-Ceyhan pipeline has been built,  and it is operating. At the following article of the Bulgarian site Novinite,  titled 'Russia, Turkey Fall Out over Samsun-Ceyhan Oil Pipeline  Project', September 2010, you can read that after the cancellation of the  Burgas-Alexandroupolis pipeline Russia tried to promote the Samsun-Ceyhan oil pipeline, but the plan was abandoned, because Russia claimed  that Turkey's economic demands were unacceptable.

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 Russia and Turkey will be starting their negotiations for the construction of   the Samsun-Ceyhan oil pipeline from scratch because of disagreements, announced   Russian company Transneft.

 '[Turkey's] offer is to sign an intergovernmental agreement in which they are trying   to get us to agree to economically unacceptable terms. Of course, we don't agree, and   we are starting the new round of talks practically from scratch,' declared the CEO   of Transneft, one of the Russian partners in the Samsun-Ceyhan project, Nikolai   Tokarev, as cited by RIA Novosti.

 The Samsun-Ceyhan oil pipeline is a project to transport Russian and Caspian oil   from the Black Sea to the Mediterranean by circumventing the Turkish Straits. It has   been described as the major competitor of the Burgas-Alexandroupolis oil pipeline, a   project of Russia, Bulgaria, and Greece, whose fate is uncertain over environmental   concerns of the Bulgarian government.

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 The agreement for the construction and operation of the Samsun-Ceyhan oil pipeline