Valery Nesterov: "Turkish Stream will strengthen Russia in Turkish market"

Yesterday, Russia and Turkey signed an intergovernmental agreement on the Turkish Stream gas pipeline. Sberbank CIB analyst Valery Nesterov told Vestnik Kavkaza about the benefits of the project and its possible 'pitfalls'.

- What benefits will the pipeline bring to Russia and Turkey, considering the final terms of the implementation of the Turkish Stream project?

- It is very important that we reserves the Turkish market - one of the few gas markets with high growth and competition between those who want to sell gas: Iran, the United States and other countries. For Russia, it will be the second-largest market after Germany. Of course, we cannot forget about the payback of the project, which will depend on the volume of deliveries and on the gas prices.

On the other hand, an unfreezing of the project is an extremely happy occasion for Gazprom, because it has already been at an advanced stage, gas pipelines were built on the territory of Russia - the so-called Southern Corridor - the pipelines to supply gas to the compressor stations on the coast the Black Sea, not far from Anapa. That is, the entire infrastructure to export to Turkey in this direction was ready. Now, when the intergovernmental agreement was signed, we can be sure that, at least partially this infrastructure will be used and spent money will be recaptured. In addition, gas supplies to Turkey will become more stable and will not depend on the vicissitudes of our relations with Ukraine.
Of course, some analysts believe that the Turkish Stream project refers to those which are carried out in order to achieve energy and political goals, and is connected with Russia's unwillingness to pump gas through Ukraine. But, on the other hand, it is also linked with a healthy desire to improve energy security and reliability of Russian gas supplies, in this case, to Turkey.

- What 'pitfalls' in the implementation of the Turkish stream are still not resolved?

- First of all, this is a issue if the project financing. It remains unresolved, the negotiations will continue, but it is important that Turkey and Turkish banks will be involved in the financing of the pipeline's seabed section. In this case, Gazprom's risks will be minimal. Accordingly, interest rates will be lower than if the construction is carried out at the expense of Gazprom.
In addition, the issue of gas prices still remain unresolved. In my opinion, yesterday Russia made concessions to Turkey, promising to reduce the price. However, all the prices are low now. The final agreement, however, is yet to come.

But the main factor is the second line. Unfortunately, we see a reluctance of Brussels to contribute to this project, and there are fears that this reluctance will increase and connect with the prerequisites for strengthening of European sanctions. It is possible that the Nord Stream-2 and this line can be subjected to these additional sanctions and will be postponed indefinitely.

- How will the commissioning of the Turkish stream affect the region?

- Of course, it will have a positive impact on the region's economy: there will be new jobs and investments. Now underwater pipelines exist around the world and the Black Sea should not be an exception. In general, the Turkish stream will have a multiplier effect on the southern regions of Russia and Turkey. Whenever the capital-intensive projects are carried out, there is a need in the service industry development, electricity supplies and the construction of roads and infrastructure. In addition, the development of cooperation in this project will be an essential element of cooperation in other areas, giving impetus to economic and trade ties.

- How will the Turkish Stream change the situation with gas flows in the macro-region?

- With regard to the Turkish side, it is unlikely that Ankara intends to increase deliveries of Russian gas. The Turkish Stream will simply replace the Trans-Balkan pipeline [through which Russian gas is supplied to Turkey via Ukraine, Moldavia, Romania and Bulgaria - VK]. We have the potential to increase deliveries to Turkey, but anyway, our share exceeds half, and the Turkish authorities, of course, will prefer to limit the presence of the Russian gas in its market. Although due to technical measures it would be possible to pump more gas by the Blue Stream, they can use the second string for it.

But the resistance will be high, since now many potential suppliers, from Israel and even Kurdistan in the future to Iran and the United States, are eyeing the Turkish market. There is a lot of gas, especially LNG. Perhaps, Turkey will increase the supply of LNG and try to control Russia's share, like all the countries, that is, they will not allow us to take a 70% market share.