[LINK] "Putin's Gas Deal With Turkey Is a Defeat"

[rfmcdonald]

Bloomberg View's Leonid Bershidsky notes that the new Russian-Turkish pipeline, a modification of the South Stream pipeline that the European Union has blocked, represents something of a defeat for Russia geopolitically.

South Stream's purpose was to ship gas to Europe, bypassing Ukraine. This would have allowed Russia to wring political concessions from its rebellious southwestern neighbor by choking off its energy supply, without endangering lucrative contracts with European customers. Russia's state-controlled gas giant Gazprom currently has to pump gas across Ukrainian territory to meet those obligations, making it possible for Ukraine to siphon off Europe's gas whenever its own supplies are shut off.

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The EU has warned countries that signed bilateral deals with Russia to build the pipeline -- Austria, Bulgaria, Croatia, Greece, Hungary and Slovenia -- that they would face fines if they went ahead with the project. It also told Serbia that letting South Stream cross its territory when it didn't comply with EU rules would hurt the country's efforts to join the bloc.


[. . .]

The pipeline to Turkey will use the infrastructure already built for South Stream and still deliver gas to Europe, only by a more circuitous route. According to Gazprom chief executive Alexei Miller, the pipeline's capacity will be 63 billion cubic meters of gas per year, the same as South Stream's target capacity. Turkey will buy 14 billion cubic meters of that, and send the rest to the Balkans.

On the face of it, Putin is demonstrating Russia's resilience in the face of a stinging diplomatic defeat at the hands of Brussels. Announcing a deal with Turkish Prime Minister Recep Tayyip Erdogan, whose methods of governing and deeply conservative views are similar to Putin's, is a way of telling Europe and the U.S. that their attempts to isolate Russia are futile. In terms of geopolitical optics, strengthening that relationship is similar to sidling closer to China, with which Russia also signed a major gas deal this year.

Turkey, however, doesn't have any freebies for Putin. Russia agreed to give the country a 6 percent discount on current natural gas supplies, which will cost Gazprom $700 million a year.