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South Stream pipeline takes a different direction

Precise takes a look at the South Stream pipeline that now has a new route through Turkey.

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In a move that’s taken most of the world by surprise, it appears President Putin wasn’t bluffing when he took his football off the pitch last year and announced the much talked about South Stream pipeline would not be going through Bulgaria after all – but Turkey instead.

“Turkish Stream is now the only pipeline. There are no other variants possible,” Aleksei B. Miller, Gazprom’s chief executive, told reporters. “Our European partners’ task now is to establish the necessary gas-transporting infrastructure from the borders of Turkey and Greece.”

It was widely thought that it was the European partner’s opposition to the project that lay behind the change of plans. There were concerns that South Stream would not only reinforce Russia’s position as European gas boss but also, by allowing Moscow to develop a pipeline through Ukraine, Kiev would be handicapped in its political conflict with it.

But was that the main reason? The new plan should make Gazprom’s accountants a lot happier – South Stream was estimated to cost anywhere between $20bn and $65bn; Turkish Stream has industry analysts estimating figures of $10bn. And why not cosy up to your second largest market, conveniently also the only European market projected to grow strongly?

“This makes far more sense than South Stream,” Jonathan Stern, chairman of the gas program at the Oxford Institute for Energy Studies told the NY Times. “What Russia needs to do is nail this market down; everything else is not growing.”

That fact might be making life a little trickier for Moscow. Turkey, all too aware of the need for a successful alternative to South Stream for Russia, is reportedly playing hard ball and attempting to negotiate lower prices for Russian gas. It pays more than Germany does for Russian gas and is keen to get a better deal than the 6% drop that Putin publicly offered.
However just this week the EU piped up (ED: Hardehar pun) and accused Russia’s take two of being in breach of legally binding contracts. The energy chief Maros Sefcovic questioned the economic viability of delivering huge volumes of gas to a different destination and asked “how this could be in accordance with long-term contracts which EU companies have.” It ain’t over yet folks..