TurkStream! Not Turkish Stream!
Russia has completed another big pipeline project which has given them leverage over future gas competition and also in negotiation with mid-stream countries. TurkStream (not Turkish Stream as some misinterpret) has been active more than a month now, has worked well probably in negotiations with Ukraine and also for keeping Turkey’s demand in the basket for some more time.
Many years from now the barbell strategy of Russia and diversifying its customer base as it was openly stated (Gazprom’s magazine Blue Fuel of 2010s), has led to increasing market share of Russian gas in Europe. Although it did not happen as planned with oil prices losing its importance as a reference and take-or-pay conditions being eased, if not removed, in the contracts, Russia has strengthened its position having seen the threat of mainly renewables and shale gas across the Atlantic. As the Russians did not want to play the game with European rules, some doors were shut, some roads were blocked. The barbell strategy took some of the weight from Europe and put it either in Russia (Western investors in Russian projects) and far east (diversification by finding customers and allies in the east). In 2018 Russian gas’ market share reached nearly %40 in European imports and Russia’s natural gas export volumes reached around 260 bcm, 26 bcm as LNG.
As part of the barbell strategy, Russia has started many pipelines namely, NorthStream 1, NorthStream 2, SouthStream, Power of Siberia etc. and before objections or albeit them, NS1, Power of Siberia, and SouthStream as TurkStream were realized.
NorthStream and TurkStream look more like the result of a sub-strategy, a “Hoop” strategy rather than barbell, or hurdles, and it has softly and fluidly swept the way for Russian gas into Europe through new routes, besides creating a loop and options for Russia to play the game as they want like it did in Turkey. Turkish gas importers trying to negotiate with Gazprom with the destination clause change card failed as the Russians had already gained a position for transiting the gas through TS2 to Bulgaria and delivering at the current contractual delivery point of Malkoclar. This kind of work arounds have been applied before for exporting gas and electricity out of state/distribution zone at one point and importing at another, etc. to bypass regulations or competition in before and this was a planned chess move of Russians much before anyone thought about it. This looks very simple after it was realized but as in the saying associated with Clausewitz: “The strength of any strategy lies in its simplicity.”
The loops will be strengthened by NS2 and the extension of TS2 to all Balkan countries even though there are attempts to stop them or slow them down. The Russian chess expertise has shown its effect also in the recent Ukraine deal. While TurkStream, yet another bridge over Turkey is celebrated with cheers and thought to be Turkish stream, and Ukraine celebrating a 5 year deal for playing the gatekeeper role gives the VIP entry ticket to Russians to the club, Russians are ready to fight another war against any long-term gas that wants to travel to Europe. Another quote from Clausewitz: “The talent of the strategist is to identify the decisive point and to concentrate everything on it, removing forces from secondary fronts and ignoring lesser objectives.”. One should understand that these projects block not only new investments, but also decrease the capacity usage of existing competing projects.
Until today Turkey has not benefited from the TurkStream permissions. The market is suffering stability both due to local market issues and arbitration issues with Gazprom. If the issues are not solved, TurkStream will probably be underutilized for some more time. Russians are probably not that unhappy about it. They decide to do something, they do it, and they do not regret. On the other hand, Turkey and Turkish market should somehow benefit from this pipeline, by getting better prices and more flexible contractual conditions, but more importantly, more transparency and better market structure. This requires both internal and external hard work, and frankly speaking both looks hard at the moment until the Botas’ so called 4 bcm Western Line (now supplied via TurkStream) contract expires in the end of 2021. The other 4 bcm part of the private parties is partly dysfunctional at the moment and requires attention before the end of 2021 as well. We will wait and see, if TurkStream, at least partially, becomes a Turkish stream or not.