On December 1, 2014 Vladimir Putin announced the cancellation of the South Stream pipeline, a seven years old, 63 billion cubic meter (bcm) per year and $19 billion project which aim was to provide natural gas to southern Europe while bypassing Ukraine.
The Russian President declared that another project would be developed through Turkey instead with a possible hub linking it to European networks at Greece’s border. Of a similar capacity, this pipeline would provide Turkey with 14 bcm of natural gas annually while 49 bcm would be exported to Europe. Additionally, Turkey would get a 6% discount on its gas purchase from Russia. The signature of a non-biding Memorandum of Understanding between BOTAS and Gazprom, Turkey and Russia’s respective petroleum companies, marks the first stone of this alternative project. And as a sign of its commitment Gazprom has bought out its European partners in the South Stream project. What do South Stream’s cancelation and the announcement of a new project signal about Russia’s gas geopolitics towards the European Union (EU) and Turkey? What could be the mid-term consequences on their respective energy policy and political relationship?
Cancelation of a primarily political project: an opportunity to develop the EU’s energy policy?
As numerous analysts have pointed out, South Stream was primarily a political project, not a sound investment. In other words it was “doomed from the start“.
Economically, South Stream’s weaknesses became apparent in light of 2014’s events. At the time of Putin’s announcement, oil prices had declined by 30% since the summer. Because of its reliance on oil exports Russia’s economy has been, and is, s...