Orkhan Sattarov, the head of the European Bureau of Vestnik Kavkaza
The state visit to Turkey by Vladimir Putin, during which he announced Moscow’s decision to reject the South Stream project, was not expected by European society. It is interesting that after Putin’s statement in Ankara, an advisor to the Bulgarian Minister of the Economy stated that Bulgaria still hoped that the decision on South Stream wasn’t final. “The project is not completed, and we haven’t received an official Russian position on the issue,” he said. A similar message was sent from Belgrade. However, what can be more official than a statement by the Russian president?
At the same time, Serbia and Bulgaria are two countries which lose significant revenues from Russia’s rejection of the South Stream’s construction. Probably the “ostrich policy” of Sofia, which doesn’t want to face the truth, is connected with the unreadiness of the Bulgarian government to admit its guilt in shutting down the project. In spring 2014 Russia expressed readiness to invest 12.5 billion euros in the re-industrialization of Bulgaria, noting that the offer would apply only in connection with construction of South Stream. Bulgaria could gain about 500 million euros annually in transit benefits. It seems the Bulgarians won’t see the Russian money. “That’s all, the project is shut down,” Alexei Miller, the head of Gazprom, made clear.
Has Russia benefited from the decision? It is still early to speak about the economic aspect of the issue. We only know that Turkey will get at least a 6% discount on Russian gas in 2015. By the way, this is not the final amount, as the Premier of Turkey Ahmet Davutoglu has stated that Ankara has a right to demand a bigger discount. The Turks feel masters of the situation and won’t miss an opportunity to gain the greatest benefits from it. Anyone would do the same in their place.
At the same time, Russia will have less infrastructural expenditures in the new project to actually increase the capacity of the current Blue Stream pipeline. In comparison with South Stream, the length of construction of the sea part of the pipeline will be reduced for several hundred km. It will enable Moscow to save about 3 billion euros. Nevertheless, the 10 billion euros which has already been invested by Russia into South Stream won’t be lost. The work done will be used in the new energy situation which is being established by Moscow and Ankara.
As for politics, Moscow is losing for sure. It's no accident that the Russian side has been lobbying for South Stream for 10 years. It loses a powerful mechanism of an economic tie with its historic Slavic allies in Europe – Bulgaria and Serbia. The Serbian government, which is being pressured by Brussels to join the anti-Russian sanctions, misses an important trump in favor of cooperation with Russia. Of course, through no fault of their own. Moreover, in rejecting South Stream, Russia missed an opportunity to lead its gas capacities to the European market and decrease the transit role of Ukraine. Finally, in the current conditions Russia cannot confirm its gas monopoly in the European market, which would mean an inevitable increase of Russia’s political influence in the EU.
Turkey seems to be the only absolute winner in the situation. Its strategic goal – to become the biggest regional energy hub – will be fulfilled to some extent, after the extension of Blue Stream’s capacities. And Ankara gets the eighth gas argument in negotiations with the EU. The independent game of Turkey, which is building relations with Russia and other regional players on a pragmatic base, turns out to be reasonable, despite all the criticism from Europe. It enabled the Turks to get the biggest benefits from the current situation.
As for the Europeans, of course they will get Russian gas from Turkey for a higher price in comparison with gas imported directly. However, politics has its own demands, which are often unfavorable for economics. And the situation is another example that the confrontation between Russia and Europe damages both sides, but sometimes is beneficial for third countries.
