Turkish Gambit: Ankara Signs Agreement with Russia on Gas Pipeline and Achieves Gas Discount

Russia and Turkey, following talks between the two leaders on October 10, were able to make substantial progress in the settlement of all disputes and unsolved issues in the gas sphere. In particular, the energy ministers signed an intergovernmental agreement on the project Turkish Stream, thus continuing the work started nearly two years ago.

The signatures under the agreement in the presence of President Vladimir Putin and President Recep Tayyip Erdogan were put by the Russian Energy Minister Alexander Novak and the Minister of Energy and Natural Resources of Turkey, Berat Albayrak.

According to Putin, in the framework of discussions on the draft Moscow and Ankara also agreed to provide Turkey a discount on gas prices. Erdogan, in turn, noted that the work on the Turkish Stream will be accelerated.

The agreement provides for the construction of two lines of the pipeline under the Black Sea, the power of each line 15.75 bcm of gas. One of them is provided for gas supply directly to the Turkish market, and the other thread is for gas supplies transit through Turkey to Europe.

According to the document, the marine threads are to be built before December 2019.

The Russian Energy Minister Alexander Novak said the land segment of the Turkish Stream will be owned by a Turkish company, and the sea segment – by a company from Russia. “The Russian company will build and own the sea segment, while the land segment for the Turkish consumers will belong directly to the Turkish company, most likely Botas,” TASS quotes the Minister. According to him, for the second line there will be a joint venture.

Speaking of the second line, the Minister noted that the exact parameters of creating a joint company are not spelled out in the document. He explained that it will be determined by Gazprom and Botas, and maybe some subsidiaries will be created. Novak said the joint venture will be able to work as a building operator and to operate its part of the pipeline.

Novak said that during the Russian-Turkish talks in Istanbul the construction of the third and fourth threads of the Turkish Stream pipeline was not discussed.

In total, according to Putin, all the agreements achieved in the gas sector will enable Ankara to realize its desire to establish a major energy hub in Turkey. “Note that in this way we are moving towards the realization of the President of Turkey plans to establish a major energy hub in the country,” Putin said.

At the same time Turkey in the realization of its aspirations does not intend to rely only on Russian gas. Earlier on Monday, Prime Minister Binali Yildirim said Turkey is going as soon as possible to implement another project for the construction of gas transportation facilities on Turkish territory - TANAP, which provides for the transportation of gas from the Azerbaijani field Shah Deniz to the Turkish market and the European markets. Turkey has imported gas from Shah Deniz since July 2007. However, from the second half of 2018 it will also start to buy gas in the framework of Shahdeniz-2. After the completion of the European gas pipeline TAP Azerbaijani gas will go to Europe in 2020.

* The Turkish Stream project involves the construction of a gas pipeline from Russia to Turkey from the compressor station Russian in the area of ​​Anapa on the Black Sea to the village Kiyikoy in the European part of Turkey, and then through the town Luleburgaz to the Ipsala area on the Turkish-Greek border. The sea section of the pipeline will pass 660 kilometers in the old corridor South Stream, which was canceled in December 2014, and 250 km in the new corridor in the direction of the European part of Turkey. The land section of the pipeline will stretch 180 km from the Black Sea coast of Turkey to the Turkish-Greek border. The cost of the two threads of the pipeline is estimated more than 6 billion euros.  --12B--