Saturday

19th Jan 2019

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?

News in Brief

  1. EU trade commissioner asks for green light for US talks
  2. Slovakia's commissioner takes unpaid leave to run for presidency
  3. Minority elects Lofven as prime minister of Sweden
  4. Putin opposes EU prospects of Serbia and Kosovo
  5. Tsipras launches campaign to ratify Macedonia deal
  6. US-EU meeting in doubt after Trump cancels plane
  7. Germany and China to sign pact on finance cooperation
  8. Labour divided on second Brexit vote plan

Analysis

China's 2019 growth outlook

As China's growth seems to be slowing, some observers see the country amid what the New York Times called a "severe downturn". As they mistake China's secular deceleration with cyclical fluctuations, they miss the rapid increase in Chinese living standards.

Opinion

The Azov crisis will backfire

Vladimir Putin's nightmare of Petro Poroshenko's re-election will be even certain as Ukrainians rally around the flag. Next March's election is not just to elect a new president but also a commander-in-chief to deal with five more years of Putin.

Stakeholders' Highlights

  1. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  2. Nordic Council of MinistersSeminar on disability and user involvement
  3. Nordic Council of MinistersInternational appetite for Nordic food policies
  4. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  5. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  6. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  7. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  8. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  9. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  10. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  11. Nordic Council of MinistersThe Nordic gender effect goes international
  12. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General

Latest News

  1. Aachen treaty and Brexit endgame This WEEK
  2. Germany led way on EU human rights protection
  3. How to troll the European Parliament elections
  4. MEPs in Strasbourg: everywhere but the plenary
  5. Brexit delay 'reasonable', as May tries cross-party talks
  6. MEPs allow Draghi's membership of secretive bank group
  7. EU parliament backs Morocco deal despite row
  8. Barnier open to 'future relations' talks if UK red lines shift

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic design sets the stage at COP24, running a competition for sustainable chairs
  2. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  3. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  4. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  5. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  6. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  7. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  8. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  9. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  10. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  11. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  12. Mission of China to the EUChina: Work Together for a Better Globalisation

Join EUobserver

Support quality EU news

Join us