Axing of South Stream cements Russia’s ties with Turkey

Axing of South Stream cements Russia’s ties with Turkey

Plans for a pipeline which many feared would increase Russian influence in Europe’s gas market have been abandoned. This appears to be a defeat for Russia’s President Vladimir Putin who, however, will be noting the divisions this decision will create within Europe.

Mr Putin announced Russia was shelving the multi-billion dollar South Stream pipeline project, aimed at taking Russian gas to the heart of Europe on Monday, December 1, writes Prince Michael of Liechtenstein.

South Stream was intended to circumvent Ukraine by carrying gas across the Black Sea through Bulgaria, Serbia and Hungary to Europe.

But the EU had a problem with South Stream which was backed by Russian state-controlled gas giant Gazprom. EU competition laws prevent one company having a monopoly – in this case Gazprom would own the pipelines and provide the gas.

As a consequence Bulgaria stopped construction a few months ago and Serbia followed. Hungary protested but EU rules were clear. What is unclear is why Brussels did not highlight the problem at the project’s planning stage, or if it did, why it was ignored?

The impression given in some European media and by some US politicians, such as Senator John McCain, was that it was a political move against Russia. The business of legal compliance with competition rules was far from their thinking.

The axing of South Stream is very unpopular in Bulgaria, Serbia and Hungary because construction and maintenance of the pipelines would have furthered business and job creation, as well as earning them money from transit fees from South Stream gas crossing their countries. They feel politically steamrollered by the EU.

President Putin announced he was shelving South Stream on a state visit to Turkey’s capital, Ankara. Cunningly, he blamed the EU, claimed it was anti-Russian policy which obstructed the pipeline and saying he was sorry for the damage inflicted to the countries involved.

To underscore his point, Mr Putin and Turkey’s President Recep Tayyip Erdogan announced building an alternative gas pipeline through Turkey to a hub at the Greek border. From there gas could be connected to the EU system – though Russia could find itself up against the same competition rules South Stream faced.

The additional projected pipeline is to Turkey’s advantage. Russia already provides the bulk of Turkey’s gas. And during the visit, Mr Putin offered Turkey – a major trading partner - a six per cent price discount on Russian gas.

In his announcement, President Putin, a blessed poker player, achieved the following objectives:

  • Stopping South Stream and blaming Brussels will sow seeds of discord inside the EU.
  • Those living in Bulgaria, Serbia and Hungary will blame an ‘EU anti-Russia policy’ for the loss of jobs and revenue which South Stream would have provided while other countries continue using Russian gas.
  • But more importantly, Russia’s influence in Turkey has been strengthened and economic ties will become closer.
  • It is a milestone for Russia to try to disturb Turkey’s long-standing alliance with the West, with Nato (of which Turkey is a member), and Turkey’s aspirations to EU membership. In this context it is important to remember that Turkey’s armed forces are the second largest in Nato after the US.

Presidents Putin and Erdogan agreed on a large number of issues. The only real disagreement was over President Bashar al-Assad’s regime in Syria, which is probably a minor issue in the Turkish-Russian relations.

President Putin can be satisfied.

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