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, ...