Construction of the long-heralded pipeline the “Turkish Stream” has been postponed because the Russian “Gasprom” and the Turkish state-owned company “Botas” cannot achieve the final agreement.
This pipeline was supposed to be a replacement for the “South Stream” but, as experts say, this project is abandoned because of the economic reasons, but also due to the cooling of relations between Ankara and Moscow after Putin’s recent speech in Yerevan, where he condemned the Armenian genocide committed by the Turkish army.
The news about the pipeline project, announced on Tuesday by Russian media, took many people by surprise because both companies previously gave optimistic statements. Allegedly, negotiations were near the end and near the compromise about gas discount prices that Russian company would approve to its Turkish partner. However, after moth and a half of negotiating, companies couldn’t achieve final agreement on how they will apply the discount formula.
Russian media claim that “Gasprom” has already faced some losses. Ships that were supposed to set pipes down to the bottom of the Black Sea now are anchored in Russian ports. Turks have losses as well – instead of buying gas with discount, they are paying the price that is hundred dollars higher than the average European price. They are now paying 370 dollars per thousand cubic meters.
Instead of agreement with Moscow, Turkey is increasingly buying liquefied gas. In April, Turkey bought from “Gasprom” 38% of gas less than the same period last year.
On Tuesday, the news published in Moscow informed that “Gasprom” approved discount price for private Turkish companies, which buy around ten billion cubic meters of gas per year. Their price from the second trimester will be 260 dollars per thousand cubic meters of gas. “Gasprom” intends to repay about 300 million dollars to those who have already paid for the gas at a higher price.
Interesting fact is that “Gasprom” increased salaries to its managers by 50%, despite their profits drastically dropped last year.
The most recent report by “Rostehnadzor”, published on Tuesday, confirms that “Gasprom” is facing some difficulties. During the building of the “South Stream” on the Russian side, Russian inspection body found more than 200 examples of construction rules violations. Contractor “Strojtransgas” violated the rules 139 times, while “Gasprom transgas Krasnodar” is responsible for 86 irregularities.
Therefore, companies are penalized financially, as well as their general directors. In many cases the execution documentation didn’t match the project documentation, furthermore, companies didn’t obey technical norms defined by Russian laws.
Russia abandoned executing the “South Stream” project because of the decisions of EU. This doesn’t mean that everything that has already been built on Russian side won’t get its new purpose. As soon as relations between Russia and Turkey get better, which will be beneficial for both countries, everything built for the “South Stream” will become integral part of the “Turkish Stream”.