Azerbaijani Economy 13 september — 11:13

Will Russian gas go through Azerbaijani pipeline? (In the wake of Çavuşoğlu's statement)

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BY MAMMAD EFENDIYEV, ECONOMICS SECTION

The warming of relations between Moscow and Ankara again actualised the problem of the Turkish Stream gas pipeline. The project proposed by Russian President Vladimir Putin at the end of 2014 in the course of his visit to Turkey was frozen last autumn after the incident with the Russian fighter jet shot down by the Turkish Air Force. But during the August visit of Turkish President Recep Tayyip Erdoğan to Russia all the problems between the two countries, including the Turkish Stream project, have been resolved. The parties have agreed on a joint project in Turkey, where 50% of the construction will fall on Turkey and 50% on Russia, although previously Gazprom did not accept such conditions.

Erdoğan marked another important detail: Turkish Stream will have two lines, one for the gas to be supplied to Turkey's domestic consumption, and the other to be used to supply gas to Europe.

Previously it was about four lines 16 billion cubic metres per year each, two of which were intended solely for Turkey. But Turkish Foreign Minister Mevlut Çavuşoğlu during a live broadcast on Turkish television said that through the Turkish stream Ankara would buy for their own needs only 16 billion cubic metres of Russian gas per year, the remaining volumes (another 16 billion cubic metres) through the territory of Turkey could be exported through the TANAP pipeline due to its technical connection to the Turkish Stream. Turkey expects by 2018 to complete the integration of the Turkish Stream and the Trans-Anatolian gas pipeline (TANAP), the minister said.

This statement could not be ignored. If 16 billion cubic metres intended for Europe still have to be agreed with the EU, joining of the Russian pipeline to the Azerbaijani pipe is already a challenge. Yes, for Çavuşoğlu both projects can be equally interesting, as they have great geopolitical and even greater economic significance for Turkey. And in a fit of generosity, considering both projects dear, he really would have thought: why not join two pipelines together. Moreover, it soon became clear that Çavuşoğlu did not coordinate his statement with anyone.

In the EU and the TANAP consortium they diplomatically said that they were not ready to comment on the matter. Even the foreign ministries of Turkey and Russia declined to comment because of the lack of details. And the Azerbaijani side simply remained silent.

So, what to can be linked such a scandalous statement of the Turkish FM. Çavuşoğlu is a very experienced diplomat to allow such an oversight by accident. Indeed, such proposals were heard even before the incident with the downed aircraft. But it was the experts' opinions related to possible solutions to problems with the export of Russian gas to south-western Europe, to which there was still no European Commission's approval. In addition, TANAP, and the entire Southern Gas Corridor project have their own shareholders, who determine their policies, but are not owned by Ankara to single-handedly solve the problems of these projects.

This statement, at best, could be perceived as a proposal, and not a very promising one. Hard to say, will this proposal be accepted at all, as it determines the fate of many projects to supply energy to Europe. In fact, more than a month has passed, but no concrete response to this proposal from the TANAP participants exists. True, they voiced some vague opinions, but in general they have several other plans for development and use of tehir pipeline, and they have not changed. In addition, TANAP is built precisely to offer at least some competition to Russian gas supplies, whereas Çavuşoğlu’s proposal can change a lot.

But in any case, Gazprom has already agreed with the Ministry of Energy of Turkey in the shortest time to complete the procedure for issuing all the permits for the Turkish Stream. Parties within 1-2 months should reach the stage of signing the intergovernmental agreement on the project, so by the end of 2019 the first pipeline to supply Turkish consumers would be built. If all goes further without hindrance, believes Russian Energy Minister Alexander Novak, the first string of the gas pipeline will be built by the end of 2019, after TANAP.

In fact, Gazprom has already received the first approval from Turkey for the project. Thus, the construction of the pipeline passes to the practical implementation. And the Russian side is in a hurry, Moscow is waiting for the signing of the remaining permits for the project in the coming days; in particular, it is necessary to obtain a building permit. However, this time it is acting with caution, and only intends to build the first branch of the gas pipeline, for Turkey. The second branch, for Europe, will be build upon solving all the issues with the EU.

But in Europe, they are well aware that Russia after the implementation of this project will be able to diversify its supplies to Europe, and this will not only reduce dependence on gas transit through Ukraine, but will widen its presence in Southern Europe. At the same time, Gazprom itself, in addition to the Turkish stream, plans today to build such large pipelines as Nord Stream 2 and Power of Siberia in the Chinese direction. And if we take into account the devaluation of the rouble, the Russian economic crisis and the fall in gas prices, then all these projects will be difficult to implement.

But Moscow does not want to lose the European market. Everything comes back to Europe, the final recipient of gas. Will it give its consent to a new pipeline or its connection to TANAP, is hard to say. True, Gazprom today is not so pushy, and reduced the planned volumes of gas by half. Therefore, it is worth considering the updated Turkish Stream project. Apparently, the statement of Çavuşoğlu was directed toward that goal. Though it did not cause a big scandal, it was taken by the parties into account.

After all, if earlier it was necessary to build two separate pipelines to Europe, one for the Azerbaijani gas and another for the Russian gas, now they can be merged into one. And the problem with the diversification of sources of energy (getting rid of Russian gas) so worrying for the EU can be hidden in a pipe, which is officially intended for Azerbaijani gas.

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