TurkStream as Russia's Last Step in Diversification: A Win-Win Approach.

• Author: Erdag, Ramazan
• Position: ARITICAL

Introduction

Russia is Europe's largest natural gas and crude oil supplier. Russia's gas exports to Europe began to increase after the Second World War, starting with Poland in the 1940s, and Russia mostly met Europe's gas needs -notably with pipelines passing through Ukraine. The Urengoy-Pomary-Uzhgorod Pipeline, also known as the Brotherhood Pipeline, has been operational since 1967 and pumps 100 billion cubic meters (bcm) per year across a 4,500 km-long distance. It passes through Ukraine, Slovakia, then flows in two directions to Germany and several former Yugoslavian countries. Almost 40 percent of the European Union's (EU) total gas import comes from Russia. (1) Nearly three-quarters of that gas transmission is carried out via pipelines to Europe running through Ukraine. (2) Russia's dependence on the European market is also very high. As of 2015, the European market accounted for 60 percent of Russia's total gas exports. (3) Although Ukraine had been a reliable transit country for Russia's European natural gas transmission for a long time, conflicts of interest arose between the two countries in the 2000s, endangering this secure line of natural gas transmission. As a result of the political crisis in 2006, Russia cut off the flow of gas to Ukraine, which negatively affected Europe. (4)

As the Ukraine crisis deepened, Russia began to look for new routes that would allow it to transmit natural gas to Europe and bypass Ukraine. Russia's natural gas export diversification strategy was based on bypassing Ukraine via three new routes: northern, central, and southern lines. One of these steps would bypass Ukraine via the southern corridor. The South Stream project was first announced in 2007 and planned to transport gas to Europe via Bulgaria and Romania under the Black Sea. The project aimed to establish a new route to bypass Ukraine and compete with projects such as the Trans-Anatolia Natural Gas Pipeline (TANAP), which supplies gas from Central Asia to Europe. Nonetheless, Russia surprisingly decided to change the project's route along with its name and transfer the gas to Europe via Turkey under a new name: TurkStream.

Russia started to use the TurkStream pipeline project to export its natural gas to Europe through Turkey in 2019, thus clearly intending to bypass Ukraine. Although Turkey is a critical partner in the TANAP project--the southern energy corridor (5)--it has also taken a prominent position on the North-South line in energy transport to Europe as a part of the the TurkStream project, passing under the Black Sea. The TurkStream project's initial route was planned through the Black Sea to Bulgaria and then Serbia, Hungary, and Slovenia, and further to Austria. However, in the following period, Russia gave up this route and decided to include Turkey in the project and transfer natural gas to Europe via Turkey by renaming the project TurkStream.

A Brief Literature Review

In his study measuring the negotiating powers of Russia and Turkey in the emergence of the TurkStream project, Dastan claims that Turkey had superior negotiating power compared to Russia and obtained a price reduction as a result of negotiation. (6) Noting the surprise emergence of TurkStream project, Hafner and Tagliapietra draw attention to the lack of sufficient studies that address the project's economic and geographical aspects and analyze its long-term results. Their study argues that the TurkStream project needs a grand strategy covering its vast geography, which includes the Caspian, Middle Eastern, and Eastern Mediterranean regions, in terms of reliable and flexible gas supply (7) In their analysis, Karagol and Kizilkaya assert that the project can play an essential role in strengthening Turkey's relations with the EU. (8)

Examining the Blue Stream project and the TurkStream project, a similar project partnership of Turkey with Russia, Kaynak claims that the TurkStream project differs in terms of Turkey's dependence on Russian natural gas compared to the Blue Stream project. He points out that the TurkStream is different from the Blue Stream and that only one of the two strings is intended to meet Turkey's needs, while the second string is aimed at the European market. (9) Roberts, on the other hand, analyzes the impact of the project on the southern corridor and explains that it has the potential to threaten the southern corridor, but that the two projects together would contribute significantly to Europe's energy security if Russia were to establish a connection link to the South Stream. (10) In this regard, Winrow states that although Turkey is involved in the TurkStream project, it must take utmost care not to disturb Europe and Azerbaijan so that the project will not harm its role in the southern corridor. (11) Shlapentokh also expresses that the future of the second string of the project, shipping the gas to Europe, has remained ambiguous due to Russia and Turkey's problems and differences of opinion on regional issues, especially in Syria, and the uncertainty of Europe's position. (12) Interestingly, Cohen, supporting this argument, also claims that TANAP and the Trans-Adriatic Pipeline (TAP), the two significant projects that constitute the southern corridor, are a better alternative to the TurkStream in terms of bringing gas to Europe. (13)

An in-depth analysis by Vygon et al. addresses the potential risks of the Turk-Stream project for Turkey and Russia and explores different scenarios for the project's future. (14) Gustafson states that the project received support primarily from the countries through which it passed and to which provided gas supplies, although some were already supplied by the Nord Stream 2. However, he also alleges that Russia would continue to need Ukraine's transit since the two projects are insufficient to meet Europe's daily needs. (15) Although Raszewski claims that the project has had beneficial effects on Turkish-Russian relations, (16) Varol expects no improvement in Turkish-Russian relations with the signing of the project, and notes that Russia's visa exemption export sanctions were not fully lifted. (17)

Despite the significant studies in the literature that analyze the TurkStream in different aspects, none directly address the following crucial questions: Why did Russia need to change the route and the name of the project? Which determinants of Russia's preferences led to the inclusion of Turkey in the project and the decision to make the European connection through Turkey? Why did Turkey, already heavily dependent on Russia in natural gas and trying to reduce this dependence with projects like TANAR become involved in the project? To date, these questions remain unanswered when examining the existing literature on the new Russia-Turkey energy partnership, the TurkStream project.

In order to fill this gap, this article aims to reveal the background of both countries' decisions to establish new energy cooperation, and to tally their gains. The article consists of four sections. The first discusses the Russia-Ukraine natural gas crisis, which caused Russia to bypass the European gas pipeline through Ukraine from the Soviet Union. The second outlines the Russian South Stream project's historical background by focusing primarily on its detail and capacity. The third section explicates Russia's strategic step of abandoning the previously scheduled route and renaming the project in order to re-route the gas to Europe via Turkey, and explores the factors that contributed to Turkey's involvement in the project as a European junction. The fourth section explains the ways in which the project is win-win for both countries, and offer a strategic approach to better understanding their new energy cooperation in terms of the TurkStream project. The article argues that both countries benefited from the new energy cooperation, identifying it as win-win, with Russia gaining significant tariff advantages by operating outside of EU rules and establishing a sustainable natural gas transmitting line through Turkey, and with Turkey achieving strategic superiority over European countries in gas transfer and ensuring continued gas supply from Russia.

The Russia-Ukraine Natural Gas Crisis

Russia and Ukraine have a lengthy and sustained historical background of cooperation in the transport of Russian natural gas to Europe, yet their longstanding cooperation did not prevent them from becoming embroiled in severe conflict and dispute over gas supply, tax, and price issues at the beginning of the 21st century. The first crisis erupted in 2005 when Russia accused Ukraine of failing to pay for natural gas, and on January 1, 2006, Russia cut all gas supply to Ukraine for the first time. Three days later, on January 4, the gas flow was restored after an agreement was reached. (18) In the 2006 crisis, Russia accused Ukraine of "siphoning off transit gas intended for Europe." (19) After a quiet 2007, Russia cut off the gas again in early 2009, reducing the gas flow due to rising tensions in 2008 between Naftohaz, the Ukrainian Gas Company, and Russia's Gazprom. While the short-lived crisis in the two countries in 2006 did not affect the European market, the gas shortage in 2009 deeply affected Europe. Romania, Bulgaria, and Greece were the countries most affected by the three-week cut-off crisis.

The issue of price lies in the background of the crisis. Russia and Ukraine, both members of the former Soviet Union, had set lower prices in their gas supply agreement than were paid by the European countries. Although Ukraine enjoyed lower gas prices--and received transition fees from Russia accounting for between 1.4 and 3.9 percent of the country's total GDP and between 8 to 10 percent of the country's budget--the gradual increase in the price of gas from Russia reached a crisis point in the 2000s. Following the 2009 cut-off, then Russian President Dmitry Medvedev and Ukrainian President Viktor...