Vladimir Putin got a big step closer toward what he’s been doggedly pursuing these past few years: a gas transit route into Europe that bypasses Ukraine. The Russian President signed an agreement with Turkish president Recep Tayyip Erdogan in Istanbul earlier this week that would send more than 30 billion cubic meters of gas Turkey’s way every year. These supplies would transit two parallel pipelines on the seabed of the Black Sea, both operated by Gazprom. One would supply Turkey with discount gas while the other would supply other European customers.Let’s take these two proposed pipelines one at a time. The first, the one that ends in Turkey, is the product of rapprochement between Putin and Erdogan after a period of heightened tensions following the shooting down of a Russian warplane along Turkey’s border with Syria nearly one year ago. The fact that the two leaders were able to put aside their differences and agree on this project is, according to the FT, “stoking fears in the west that Moscow is exploiting tensions between Turkey, a NATO member with hopes of EU accession, and its traditional allies.” As it well should: the fact is that the TurkStream deal was stalled at the time of the Turkish shoot-down. That the deal was signed represents a real breakthrough.But that’s not the big story here. What the Kremlin is really after is greater access to its most important market: Europe. This need is so great that Russia has been pursuing not one but two alternatives to its pipes that transit Ukraine, one in the north (Nord Stream 2, that reaches Germany via the Baltic Sea) and TurkStream, the southern option. TurkStream itself was conjured up after Putin abruptly killed the South Stream pipeline project after Brussels made things difficult over concerns that it would leave Europe too dependent on Russian supplies.The FT expounds on what exactly Putin is getting with TurkStream:
The strategic arguments for TurkStream are clear enough. For Russia, the ultimate aim is not so much to increase its export capacity as to bypass Ukraine, depriving Kiev on one of its key sources of diplomatic leverage.There are also practical advantages for Moscow. Since the pipeline could follow part of the route intended for South Stream, it may be possible for Russia to limit its losses on the abandoned project. Since TurkStream will take gas only as far as the EU border, there should be no similar obstacle of EU competition law.
Part of the reason Russia is so aggressively pursuing these alternative routes into Europe has to do with the increased pressure it feels from globally abundant liquified natural gas (LNG) supplies coming online. With Australia, Qatar, and as of this year the United States all contributing to an oversupplied global LNG market, prices for the super-chilled hydrocarbon have dropped significantly. Europe in particular would like to increase its imports of LNG as a way to diversify away from Russian supplies and the strings that too often come attached with its cargoes.Gazprom knows all this, and this summer began working on offering cushier contracts to its European customers in an attempt to retain its market share on the continent. And indeed, sweeter deals and a robust pipeline deliver system could make the difference in the short to medium term: the politics of pipelines are not going away quite yet. But in the longer term, the deck could end up stacked against Russia, no matter what massive infrastructure investments they take on now.[This post has been updated for clarity.]