aaaGeorgian Foundation for Strategic and International Studies | Articles | 2015 No:39

Liana Jervalidze

During his visit to Turkey on 1 December 2014, President Putin announced Russia’s decision to discontinue the South Stream project since
the initiative failed to gain the support of the European Union. Moreover, Mr Putin declared Russia and Turkey’s joint willingness to construct
a new interconnecting 63 bln m3 capacity pipeline which would replace the South Stream as a project by-passing the Ukrainian gas transportation
infrastructure and realise Turkey’s long-standing dream of becoming an energy hub.
President Putin’s statement came as a complete surprise and gave rise to numerous queries regarding the feasibility of redirecting the South Stream
to Turkey and what this would mean for Russia and Turkey as well as other stakeholders.

The position of Russian gas exports to the EU markets: In 2013, Gazprom supplied the EU with 161 bln m3 of gas which amounted to approximately 30% of EU consumption. Of the total, 86 bln m3 was imported via Ukrainian infrastructure. Russia has three more pipelines supplying Europe: the Nord Stream – 55 bln m3 (passing along the Baltic Sea bed), Yamal – 32 bln m3 (passing by Belarus and Poland) and the Blue Stream – 16 bln m31 (entering Turkey via the Black Sea). The Russian and Turkish sides agreed to increase Turkey’s annual capacity to 19 bln m3 by 2020. In the case of a maximum load on these pipelines, Gazprom will be able to transport approximately 100 bln m3 of gas to Europe, by-passing Ukraine. If Russia maintains the gas market in Europe (161 bln m3 in 2013), prior to the construction of the new Turkish pipeline (Turkish Stream, 63 bln m3 of gas will still have to be transported using Ukrainian infrastructure. According to official information, the “Turkish Stream’s” capacity should amount to 63 bln m3 which means that Gazprom intends to fully by-pass Ukraine.

Thus, over 50% (87 bln m3) of Russian gas exports to the EU will be transported via Turkey.

A significant number of experts agree that the European Union will be unable to substitute 50%, not to mention 100%, of Russian gas with that from other suppliers by 2020 (and even 2025) and at a lower price than Russian gas.

Conflict of interest over the South Stream EU versus Russia: The South Stream was a project of geostrategic magnitude which would not only by-pass Ukraine, “a difficult transit partner” for Russia, but also ensure Russia’s energy and economic expansion in Southeast and Central Europe. Along the projected South Stream route, Gazprom set up several joint ventures with local gas transportation companies securing the support of governments
and a monopoly position for its gas in transit countries.

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