Upset by Turkish procrastination over the offshore section of the South Stream pipeline, Russia is warning that it may give up on the project altogether. But experts said Moscow could not afford to lose face over what is seen as the biggest political pipeline project of modern times.
Russia is considering the possibility of abandoning the South Stream gas pipeline project, which is designed to bring Russian gas to Europe by bypassing Ukraine, the Russian press writes today (17 March), quoting top officials in Moscow.
Talks held in Moscow yesterday (16 March) between Russian President Dmitry Medvedev and Turkish Prime Minister Recep Tayyip Erdo?an ended with no agreement on building a crucial offshore section of South Stream in Turkish territorial waters (see map).
Russian Deputy Prime Minister Igor Sechin said the Turkish authorities had been expected to approve the construction on 31 October 2010.
In the absence an agreement, Gazprom and the Russian government are currently studying various options for a "cheaper version" of South Stream, Sechin said, including replacing the pipeline with a project based on liquefied natural gas (LNG), to be transported by ship across the Black Sea.
Last week, Russian Prime Minister Vladimir Putin demanded an investigation into the possibility of building an LNG plant on the Black Sea coast. According to Russian daily Kommersant, this latest development represents proof that the LNG project is not only seen as an additional option to South Stream, but could in fact replace it.
Turkey's delay in granting approval to the laying of pipes in its Black Sea territorial waters appears to represent a major obstacle to South Stream's construction. Turkey claims that it cannot give the go-ahead before receiving additional documentation from Gazprom, but Russia suspects that Ankara has other reasons for procrastinating.
Indeed, Moscow suspects Ankara is trying to trade its consent for a rebate on the price of gas imported from Russia.
In theory, Russia could alternatively lay the pipes through Ukrainian waters, but Kyiv is a staunch opponent of the project.
Russia 'bluffing'
Mikhail Korchemkin, founder and executive director of East European Gas Analysis, is quoted as saying that talk of giving up on South Stream is no more than "bluffing" by the Russian authorities.
Korchemkin also claims that Ankara understands perfectly well Russia's game.
"Russia cannot give up South Steam […] because this would be too big a blow for the prime minister [Vladimir Putin]," he is quoted by Kommersant as saying.
"Most likely, the Turks will try to obtain concessions from Moscow in terms of lower gas prices and better conditions for the take-or-pay deal. But in any case, those would be protracted talks, so we should reach for our buckets of popcorn," Korchemkin added.
Christian Dolezal, head of communications for the Nabucco pipeline, the EU-favoured rival to South Stream (see 'Background'), told EURACTIV that no matter what the fate of South Steam, Nabucco would not rule out allowing access to Russian gas if Moscow so desired.
Recent observers have dwelled upon hypothetical supplies of Russian gas through Turkmenistan and across the Caspian Sea via the Nabucco pipe.
"We are not an anti-Russian project," Dolezal said.
Nabucco will also have to negotiate a deal to lay its pipes across Turkey.