Wednesday

20th Nov 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 20 year's of archives. 30-day 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?

Magazine

EU diplomacy 2.0

MEPs on the foreign affairs committee ought to be like second-tier EU diplomats on the Western Balkans and Russia, according to its German chairman, but foreign policy splits could bedevil its work.

Stakeholders' Highlights

  1. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  2. Nordic Council of MinistersNordic Climate Action Weeks in December
  3. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  4. Nordic Council of MinistersBrussels welcomes Nordic culture
  5. UNESDAUNESDA appoints Nicholas Hodac as Director General
  6. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  7. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  8. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  9. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  10. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  11. Nordic Council of MinistersNo evidence that social media are harmful to young people
  12. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Join EUobserver

Support quality EU news

Join us