The big news from the World Energy Congress in Istanbul in October was the chummy relationship between Turkish president Recep Tayyip Erdoğan of Turkey and Russian President Vladimir Putin, who stood in front of the cameras in the ornate salon. joking with each other like old friends. A perfect media moment leading to Putin’s endorsing a freeze on oil production that spiked the price to a 12-month high.
Word of the informal talks between Russia and OPEC members Saudi Arabia and Venezuela only contributed to its impact.

However, there was other important news; the signing of a new agreement on the Russian-Turkish gas pipeline TurkStream. It is a project that will fundamentally alter the European gas market in the years to come. Russia increases its influence and manages to circumvent Ukraine, while Turkey strengthens its role as a gas-hub for Europe.

Delivering Russian gas to the European part of Turkey via the Black Sea, the pipeline is also a strong signal of the rapprochement between Turkey and Russia. Relations had been severely damaged when a Russian Sukhoi fighter jet was shot down in November 2015 by a Turkish F-16 and cooperation seemed impossible. Erdogan’s apology the following June merely meant a return to the usual rivalry between Russia and NATO member Turkey. Tensions over Syria persisted as well, especially when it became apparent that Bashar Al-Assad would remain in office. All this made even economic cooperation unlikely. A common mega-project was therefore all but expected.

TurkStream’s impact will be considerable: The pipeline‘s total capacity is planned at 31.5 billion cubic- meters, divided between Turkish and European end users and implying a significantly larger market-share for Russia. According to Ged Davis, Executive Chair of the World Energy Council‘s Scenarios study, this also “reinforces Turkey as the gas hub at the entrance to Europe,” which will by implication give Turkey a stronger position in geopolitical negotiations.

In the political realm, the consequences are even more important. TurkStream has to be seen in the context of the Ukraine conflict and Russia’s wider interests. This is not so much about gas for Ukraine, as the country has diversified its suppliers and recently increased its own production. What is threatened is its role as a transit country. Similar to Nord Stream (2) which connects Russia to Germany un-der the North Sea, TurkStream would allow the Kremlin to bypass Ukraine when delivering gas to the European Union. This would deprive Kiev of roughly 2bn USD in transit fees each year and also decrease Ukraine‘s relevance for EU states.

Once its current gas deals end in 2019, the year TurkStream is to be completed, Ukraine will be in a difficult situation, according to Amos J Hochstein of the U.S. department of State, and may take ye-ars, if not decades, to recover. Speaking in Brussels last November, Hochstein said Nord Stream 2 and TurkStream would “extend the dependency and eliminate all options of diversification (in Europe) for 25 years,” potentially leading to economic and political instabi lity across the continent.

For the EU, other potential sources such as Liquefied Natural Gas will have trouble competing with russian gas prices. This puts EU member states in the difficult situation to either accept Russian influ ence and cooperate with moscow, or pay higher prices. Gas-depen-dent countries like the Czech republic or Hungary, as well as coun

tries importing large quantities of gas like Italy or Germany might be tempted to choose the first option. This could in return endanger the European sanctions‘ regime, making a unified European Council more unlikely as the dependency on russian supplies differs between member states. In the near future, governments may be temp-ted to sacrifice Ukraine to secure national gains, thwarting efforts to collectively counter Moscow‘s influence. For Turkey, cooperation with russia makes sense as diverging interests in Syria are more than compensated for by economic gains. Erdogan‘s focus is on his internal powerbase and the fight against the Islamic State and the PKK, where russia has proven to be a reliable partner. Unlike the EU, Putin was amongst the first to express his support for Erdogan after the attempted coup in July 2016. In addition, a lifting of Russi an agricultural sanctions and of the ban on tourism in Turkey, as well as the construction of a Turkish nuclear plant by a russian company will help Erdogan to stabilize the country.

Russia and Turkey may be unlikely partners, but right now they are partners nonetheless. Their interests are likely to collide in the years to come, but TurkStream shows how common economic objectives foster cooperation. Europe will have to monitor this closely to avoid being caught off-guard.

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