Wednesday

19th Sep 2018

Interview

Turkish Stream more credible than critics say

  • Birol (r) and Sefcovic at Globsec (Photo: globsec.org)

Russia’s plan to build Turkish Stream, a strategic gas pipeline, is more credible than its critics say, the head of the International Energy Agency (IEA), has told EUobserver.

The project is designed to harm Ukraine, Russia’s adversary, by bypassing its gas transit network, and to reward Greece and Hungary, Moscow’s EU friends and Turkish Stream’s would-be hosts.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

It has prompted ridicule by EU officials and by diplomats.

The EU energy commissioner, Maros Sefcovic, says it doesn’t make economic sense. “A first assessment is that this wouldn’t work”, he told the Wall Street Journal in January.

A Polish diplomat told EUobserver the EU will source supplies from liquid gas (LNG) markets or from Tap, a new pipeline being built to Azerbaijan, instead.

A Turkish source said Russia doesn’t have the money to build it.

“Nobody in Turkey is taking it very seriously”, he noted.

“The Russians feel isolated. They have the same reflex as the Iranians used to have: to announce some kind of new project with Turkey, and the whole idea is to show they still have international partners”.

But for Fatih Birol, a Turkish economist who heads the Paris-based IEA, the project merits closer analysis.

Money

He told EUobserver at Globsec, a security congress in Bratislava, on Saturday (20 June), it depends on three factors: Can Russia afford it? Does the EU need it? And does Russia have the gas?

“It’s too early to make a judgement … but governments and analysts are waiting to see how these questions will be answered”, he said.

On affordability, Russia, which gets most of its income from oil and gas exports, has been hit by a double whammy.

Global oversupply has seen oil prices slump from more than $100/barrel to $60 over the past year and Russian gas prices are indexed to oil prices on a slight lag.

But the slump won't last forever, Birol said.

He noted that global investment in oil production, mainly in the US, has fallen to a level “never before seen in the history of the industry”.

“We’re seeing production growth slow down and at the same time we’re seeing demand becoming stronger in the US, in Europe, and in China … So, I think, in the medium term, we may see upward pressure on prices”.

Demand

He said EU gas imports are on the up because its internal gas production is “in decline”.

He added that many EU nuclear reactors, which produce 30 percent of its electricity, are reaching “retirement age”, with few plans to build replacements.

LNG is an alternative to Russia, and Australian and US liquid gas exports are growing. But LNG, which requires liquification, shipment, and regasification, is more expensive.

Meanwhile, the Tap pipeline has a capacity of just 10 billion cubic metres a year compared to Turkish Stream’s 63.

The EU hopes that, in future, Tap could add gas from Iran, Iraq, and Turkmenistan. It has also shown interest in East Med, an Israeli-Cypriot pipeline project.

But Birol said political problems, such as Iran sanctions or the Cypriot-Turkish conflict, are likely to hold things back.

“In the long term, Iran can play an important role in global gas markets. But I doubt that, in the short term, its gas exports will be of substantial quantity”, he said.

“There are options which look very attractive from a theoretical point of view, but when it comes to the realities of life, they face many challenges”.

Supply

The IEA chief did warn that EU and US sanctions will restrict Russian supplies.

They ban its energy companies from buying debt on international markets and from buying high-end technology from Western firms.

“Russia’s energy sector is going through very difficult times”, Birol said.

“It will face more and more difficulties in accessing capital and in accessing sophisticated technology, which will impact … oil and gas production trends”.

He also noted that China is likely to buy more Russian gas in future in order to reduce dependence on coal.

“I wouldn’t be surprised if Russia-China energy trade increases significantly in the years to come”, he said.

But he added: “The gas which is going to go from Russia to China isn’t necessarily an alternative to the gas which is going to Europe, as they come from different fields, different basins”.

Opinion

Nord Stream: The Sequel

Film studios like to back sequels as safe options, but why's Gazprom doing a follow-up to its German gas pipeline story?

EU wants continental free-trade deal with Africa

Earlier this week, European Commission president Jean-Claude Juncker in his state of the union announced a new relationship with Africa. On Friday, his subordinates outlined the vision, promising jobs and growth by leveraging public funds for investments.

News in Brief

  1. EU investigating BMW, Daimler and VW 'collusion'
  2. Spain wants special Gibraltar chapter in Brexit deal
  3. Italy cancels Vienna talks over South Tyrol 'dual citizenship'
  4. Britain will not accept Brexit deal with Irish Sea border
  5. Slovakia seeks witness to journalist killing
  6. Finland's Stubb considers running for EU commission job
  7. Romania ponders anti same-sex marriage referendum
  8. EU lawyers back Slovenia in Croatia border dispute

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  2. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  3. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  4. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  5. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  6. IPHRCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  7. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  8. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  9. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  10. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  11. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  12. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want

Latest News

  1. EU promotes 'Egypt model' to reduce migrant numbers
  2. Tensions mount over Kosovo-Serbia deal
  3. New book: Why war is coming
  4. EU parliament will not budge on office expenses
  5. Why Orban's project to reshape EU politics will be unsuccessful
  6. 10 years after Lehman Brothers what has changed for EU consumers?
  7. Sefcovic launches bid to be EU Commission president
  8. Is Russia blackmailing the Council of Europe?

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  2. Mission of China to the EUChina: Work Together for a Better Globalisation
  3. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  4. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  5. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  6. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  7. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  8. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs
  9. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  10. FIFAGreen Stadiums at the 2018 Fifa World Cup
  11. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  12. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank

Join EUobserver

Support quality EU news

Join us