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Aug 6, 2009 | 20:15 GMT

5 mins read

Russia, Turkey: Moving Forward on South Stream

Summary
Russian Prime Minister Vladimir Putin and Turkish Prime Minister Recep Tayyip Erdogan reached an agreement on Aug. 6 that will let Turkish territory be part of the South Stream natural gas project. Russia's ability to get strategic players like Turkey and Italy to sign onto South Stream plans speaks volumes during a critical time in the region and gives the project a major boost — a message that is unlikely to go unnoticed by Europe.
An agreement was reached Aug. 6 at a meeting held in Turkey between Russian Prime Minister Vladimir Putin and Turkish Prime Minister Recep Tayyip Erdogan to allow Turkish territory to be used for an ambitious Russian-led natural gas project known as South Stream. The highly anticipated meeting was widely recognized to have energy items at the top of its agenda, so the deal to move forward with the prospective project was expected. But the last-minute attendance of Italian Prime Minister Silvio Berlusconi — which came as quite a surprise in a meeting that had long been planned — has given the agreement an extra boost of significance. Both Turkey and Italy's support of the South Stream project speaks volumes about Russia's ability to recruit strategic partners while Europe formulates its own energy plans. South Stream has been a hot topic of discussion ever since Moscow announced it in 2007 as a counter to the European-led Nabucco energy project. The point of Nabucco was to streamline the Europeans' efforts in diversifying energy supplies away from Russia, which has frequently cut off supplies that run through the unstable transit state of Ukraine — where 80 percent of European-bound Russian exports traverse. The Nabucco project envisions Europe obtaining natural gas supplies from Caspian and Central Asian producers via a prospective pipeline running through the Caucasus and Turkey — thereby avoiding Russia completely. The Russians, of course, are not eager to see such a plan materialize, and instead drafted their own project, South Stream, to make sure their primary market for energy resources (and in turn geopolitical influence) remained intact. The cornerstone of this plan rested on the most important state in Nabucco's design: Turkey. Without Turkey serving as a transit state, Europe would be unable to tap the energy wealth of its slated Caspian-area producers. While Turkey has voiced its support for Nabucco, there are still numerous obstacles to the plan, many of which come from the Europeans' lack of consensus and hard-hit pocketbooks due to the economic recession. Turkey officially signing onto South Stream, however, is an important move which signals the willingness of the Turks to work with the Russians, and the addition of European heavyweight Italy only strengthens the deal. (click image to enlarge) But on a technical level, the South Stream project faces its own set of roadblocks. It is an extremely complex and expensive pipeline system to construct. The plan envisions the pipeline, which would begin in the Russian coastal city of Novorossiysk, to cross the depths of the Black Sea in order to reach Bulgaria. From there, it would split into two trunks that would carry natural gas supplies through Greece to Italy, as well as through Serbia and Hungary to reach Austria. It is projected to carry up to 63 billion cubic meters (bcm) per year of natural gas along a 560-mile underwater pipeline, and that is not even considering the overland routes, which would need to be even longer to reach Italy and Austria. As a point of comparison, the Trans-Mediterranean pipeline that runs from Algeria to Italy along the Mediterranean Sea carries around 30 bcm per year across the 100-mile (and much shallower) underwater portion of the pipeline. Also, besides the mind-numbing logistics of constructing the pipeline, there is the question of who would foot the bill. The cost of constructing South Stream has been estimated at a whopping $10-30 billion. The Russians have never spent that kind of money for an energy project, and its energy industry has been badly hurt by the financial crisis. Another possible financier could be Italian energy major Eni, but Rome has not been spared by the recession either, and the price of building South Stream is equivalent to a few years of Eni's entire investment budget. Even in good economic times, $30 billion is tough to scrape together. And it could cost even more, as estimates for a similar prospective Russian project known as Nord Stream, have quickly jumped from $4 to $40 billion to build. Nord Stream is also designed to bypass Ukraine, only in this case from Russia straight to Germany across the Baltic Sea, which has numerous countries with maritime claims — like Poland and Finland — that are not exactly Russia's best friends. Politically, however, South Stream is not as unfeasible as Nord Stream. The states that border the Black Sea are fewer in number, and Turkey represented the only major obstacle as far as challenging its maritime territory of the Black Sea. South Stream would bypass the maritime territory held by Ukraine and Romania, and Bulgaria's approval simply requires that this project be paid for by anyone other than Bulgaria. At the end of the day, logistical and economic realities make South Stream just as unlikely to materialize in the near term as Nabucco. But in the world of geopolitics, agreements on energy deals and the players involved can be significant in and of themselves, even if the projects never get off the ground. In this particular case, the South Stream agreement sends a message of who is and who is not willing to engage meaningfully with the Russians. And with Moscow able to pull strategic players like Turkey and Italy into their plans, it speaks volumes during a critical time in the region when the Europeans are laying out their energy plans. This particular message is not likely to go unnoticed by the Europeans.

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