First comments from Russia

First comments from Russia

Turkey has replaced Ukraine since Russia declared the suspension of the long-planned South Stream project in early December 2014. In other words: Russia is going to build a new pipeline via Turkey, called the “Turkish Stream,” which will transport Russian gas to Europe via Turkey instead of Ukraine.
Will this new pipeline make Turkey more dependent on Russia? How will it affect Turkey’s relations with the U.S. and Russia?

Last week, I tried to learn the answers to these questions from the American side, having a conversation with retired Ambassador Richard Morningstar, who served as Special Advisor for Caspian Basin Energy Diplomacy for President Bill Clinton and afterward as Special Envoy for Eurasian Energy for President Barack Obama.

Now it’s Russia’s turn. In order to learn Moscow’s perspective, I had an in-depth conversation with Russia’s Consul General to Istanbul Alexey Erkhov.

My first question was: Why did Russia cancel the South Stream? “We wanted to build the pipeline, but the conditions set by the European Commission made it impossible to implement it” he says.

So are they not trying to give a political message to Europe because of the Ukraine crisis and the sanctions? “This is purely a commercial decision. The message is clear: we have gas. If you want it, you get it. You don’t want it? Then we have some other ideas in mind. We will cooperate with Turkey.”

After saying that “some people” overestimate the political importance of gas trade, Erkhov quotes the following statement by Morningstar: “It doesn’t make sense for Turkey to become more dependent on Russia.” Saying that “this is akin to advice,” Erkhov continues: “Turkey wants to buy Russian gas and Russia wants to sell gas to Turkey. This is very simple, very commercial.”

He adds: “There is a general trend of equating buying Russian gas to being dependent on Russia. But it is not a matter of dependence. It is a matter of interdependence. If I sell you gas, of course you are dependent on my gas, but I am also dependent on your capacity to receive it, to consume it and pay for it.”

Erkhov argues the Turkish Stream will be profitable for Turkey from all points of view, since, he says, it will increase the chances of Turkey becoming an energy hub and Turkey will get an additional amount of gas.

He continues by quoting another statement by Morningstar: “If Russia sells gas to Turkey through ordinary market mechanisms, being fair, transparent and competitive, then they should be entitled to sell gas as anybody else.” Erkhov says Russia has been selling gas to Turkey since the 1980s and has proven to be a reliable, honest partner. “There has never been any problem. So we have no reasons to expect our behavior to be un-transparent, unfair.”

How will canceling South Stream affect Russia’s relations with Europe? “We will not shut the door. We are ready to consider all options and are very flexible. We would be very happy to work together with all our partners,” he replies.

Have they received any direct reaction from Europe? “They are studying it very thoroughly. There is something of a thinking process in Brussels. I don’t think they have formulated their definite reaction yet,” he says.

Erkhov also underlines that nothing is certain yet. “The devil is in the details. All of the details are being discussed now between Russia and Turkey.” He underlines that it is not certain yet if the gas will be transported to the Turkey-Greece border and what the routing and amounts will be.

Erkhov says the sanctions have seriously influenced the Russian economy. “The value of the ruble decreased in December 2014. The dropping oil prices have also influenced the economy. The macroeconomic outcome of 2014 was lower than we expected.”

Erkhov raises an interesting claim: “We have already been approached by some people from the European Community and states belonging to the European Union. They are trying to analyze the terms and conditions of going outside of their sanctions. But we are not going to discuss any conditions. It’s their business. We are not begging them to stop the sanctions. We have some partners and friends who want to help us anyway.”

He argues that the U.S. is behind the European sanctions and adds: “But the paradox is that our trade with the U.S. has grown. It looks like the Americans influenced the Europeans to introduce sanctions and the U.S. has its hands free.”

Then in what shape are Russia’s relations with the U.S. in now? “I would not say ‘business as usual.’ Many projects were canceled by the American side. It was their decision, not ours. But the dialogue is still there. We have many things to do together including Syria and Libya. We are ready. But the ball is on the American side.”