On Monday, Russia president Vladimir Putin and Turkish leader Recep Tayyip Erdoğan signed a long delayed agreement to build a gas pipeline under the Black Sea that will reportedly cut off Ukraine from an important source of revenue.
Ukraine is historically Russia’s main gas transit partner for Europe. But Moscow latest moves suggest it seeks to leave its partner on the sidelines. The transit contract with Ukraine is set to expire on Dec. 31, 2019.
In the meantime, Russia’s energy giant, Gazprom, significantly reduced the amount of gas it transits through the Ukrainian pipeline. Russians announced that the volumes will drop even further when other pipelines including the Nord Stream and Turkish Stream, will go online.
On Monday, Russia and Turkey struck the deal for the Turkish Stream also known as the TurkStream. President Erdoğan expressed his “full confidence” that the recent deal was a sign the Russo-Turkish relationships are moving towards normalization.
Analysts believe the new gas pipeline will deprive Ukraine of $2 billion worth of transit fees every year when its contract expires at the end of 2019. This could have a huge impact on the country’s already struggling economy.
Additionally, it could shatter the former communist country’s dreams of joining the European Union, as it would no longer be the continent’s main gas hub, analysts think.
As a result, the cash and geopolitical benefits will migrate to a duo of countries, Turkey and Germany. With TurkStream, Turkey will help Russia distribute gas to Europe through the south, while Nord Stream II pipeline will make Germany a key distributor in the north. Nord Stream will ferry Russian gas under the Baltic Sea.
Analysts believe the two pipelines are especially tailored to punish Ukraine and get it out of the game. Even though both pipelines are in project phase now, the odds to become reality are rather high.
“It is a very big blow to Ukraine,”
one analyst noted.
Nord Stream, South Stream, and TurkStream
Nevertheless, analysts pointed out Moscow’s dream of ditching the gas infrastructure crossing Ukraine dates back to Nord Stream I, in the late 1990s. Five years ago, Gazprom used the pipeline to carry 2.1 trillion cubic feet of gas to Europe under the Baltic Sea. This accounts for 40 percent of Russian gas to Europe.
There was also a project called South Stream, which circumvented Ukraine by transporting gas under the Black Sea to Bulgarians. But after the Crimean crisis in 2014, both parties abandoned the plan.
In 2015, Putin unveiled TurkStream, which is supposed to ferry 2.1 trillion cubic feet from Russia to Turkey through the same route as South Stream. TurkStream deal, however, fell when Turkey took down a Russian warplane over Syria in November 2015.
But now, Ukraine analysts said the deal triggered “huge alarm” in the country’s energy industry. Strategists noted that while Ukraine is busy waging “total war” against Moscow, other countries thrive at its expense.
Nevertheless, TurkStream deal is not final. Russia needs a separate agreement with Greece before it can completely detach from Ukraine. TurkStream only eyes the Russia-to-Turkey portion of the gas pipeline for southern Europe.