Tuesday, December 6, 2016

Russia Closing In On 'Alt-Ukraine' Pipeline In Turkey - FORBES

Gazprom CEO Alexei Miller (L) speaks with Turkish Energy Minister
 Berat Albayrak (R) (Photo by OZAN KOSE/AFP/Getty Images)
DEC 6, 2016 @ 11:25 AM
Kenneth Rapoza

Call it the anti-Ukraine pipeline, but after some fits and starts the alternative Russian gas route into the E.U. via Turkey is about to be made official on Tuesday in Moscow.

Turkey's Prime Minister Binali Yildirim arrived in the city today for a two-day visit at the invitation of his Russian counterpart Dimitry Medvedev. According Turkey's Daily Sabah newspaper, Yildirim is also scheduled to discuss the Turkish Stream pipeline deal with Vladimir Putin. The Gazprom-Botas Petroleum pipeline was proposed last year by both governments but fell apart after the Turkish military shot down a Russian fighter plane over Syria. Relations were put on ice and have since thawed. The pipeline deal is the manifestation of cooler heads prevailing between the two old allies.


Turkey's leader Recep Tayyip Erdogan ratified the agreement this week. The deal was published in the official government paper Resmi Gazete and removes all legal restrictions to building the pipeline. The Russian side has not yet ratified the agreement, but that is expected this week. The most obvious stumbling block is Russia failing to remove sanctions on Turkey agribusiness, which could hinder the deal if Turkey is left to felt the relationship is not yet fully mended.

Medvedev said back in November that the government would indeed ratify the accord before the end of the year.

The Turkish Stream was launched as a project after a failed attempt by Gazprom to build another pipeline with European energy companies like Italy's Eni Spa. That deal fell through in 2014 when Ukraine and Russia began battling over territories following the ouster of a pro-Russian leader named Viktor Yanukovych in February 2014. Sanctions were imposed shortly after and remain in place ever since. As a result of the bitter divorce between Moscow and Kiev, Gazprom has been left scrambling for alternative routes into Europe, its biggest trading partner. Russian gas accounts for nearly a third of all Europe's foreign gas supplies.

Many politicians in Brussels are against the pipeline, arguing that it will take a vital source of income away from Ukraine, which is the key transit route for Russian gas into Europe. Russia also tried to build a secondary pipeline through the Baltics called Nord Stream II, but that was shut down by Poland's anti-trust agency. The project remains on paper only.

But Turkish Stream seems the most likely pipeline that Gazprom will get built to supply European markets.

Gazprom will likely fund the Turkish Stream by issuing euro bonds.

Turkish Stream connects large Russian natural gas reserves to Turkey's transportation networks. The offshore component of the system, which will go through the Black Sea, will be built by Gazprom. The offshore pipeline will consist of two parallel pipelines, called Blue Stream and New Blue Stream with 15.7 billion square cubic meters capacity. On December 1, 2014, Gazprom and Botas signed a memorandum of understanding to built the line. And in September 2016, Gazprom received its first permits to build. Both companies signed the deal on October 10 and were only waiting for official sanctioning of the pipeline. Erdogan did so on Tuesday and Medvedev is expected to seal the deal this week.

SOURCE