At the beginning of discovering gas as a natural resource that could bring more money on the account of a state, who would ever thought this could also open the doors for great international affairs? That gas exploitation means money, and reinvestment of capital opens a circuit for the accumulation of more money and power. In the years of the ’70s, ’80s, when the Soviet Union discovered the potential of this natural resource during the Cold War, its exploitation was still envisioned as a national affair. Not after the ’90s, when gas transactions no longer concerned only domestic affairs by being transformed into international affairs. Those who have discovered then that the equation of power puts the equal sign between gas transactions and money, that gas deals could also finance wars, nuclear affairs, will be the titans, future masters of the world.
Background of the issue. The early history of gas deals
The ’70s were the very first years of Russian gas deliveries. Austria was the first country from Western Europe which became an importer of Russian gas through the gas pipeline ‘Bratstvo’. Even earlier than Austria, Poland was an importer of Russian gas in small quantities, later Germany and Turkey.
In April 1973, when the importance of gas deals grew all together with the modernization of industry, an organization was founded under the protection of the USSR Ministry of Foreign Trade, the All-Union Association Soyuzgazexport, a predecessor of today’s Gazexport. This was the beginning of changes in Russian rule. In August 1989, the Ministry of Gas Industry was renamed and transformed into the first state corporation, Gas Concern Gazprom. From autumn 1991, Soyuzgazexport was included as a foreign enterprise in State Gas Concern Gazprom’s structure, and in 1993 became its economic subsidiary. Thus begins the history of gas trade in Russia. And so do the very first deals between Moscow and Ankara.
In February 1986, the Turkish company Botaș and Russian Soyuzgazexport arrived at an Agreement on gas deals (‘Natural Gas Purchase-Sale’), which was signed at Ankara. But the negotiations on deliveries started two years before, when an Intergovernmental Agreement is signed by the Republic of Turkey and Soviet Union on 18 September 1984.
The above-mentioned situation arises many questions, which cannot be easily answered: Do any incompatibles of statuses between Soyuzgazexport and USSR Ministry of Foreign Trade exist? If there are, how could it be still incorporated in a governmental structure? Where do the profits go or, better said, how transparent is the circuit of money in these circumstances? Why the Ministry of Gas Industry was quickly transformed into a state corporation? What were the relations in the ’70s, ’80s, between Soyuzgazexport and the old Ministry of Gas Industry, soon renamed State Gas Concern Gazprom?
The relations between OOO Gazexport and OAO Gazprom from the first years of the foundation lies in a shadow. We know few things about them, although the key of understanding how the giant Gazprom developed, could be found in this early history.
Does gas exportation go “hand-in-hand” with the political influence?
The development of national affairs with gases – which later will become international – needs firstly the creation of an institutional framework. As a mere association or office how it was at the beginning, Soyuzgazexport did not fulfill such conditions. Precisely for this reason, the Gas Trading Office from the USSR Ministry of Foreign Trade will be transformed into the All-Union Association Soyuzgazexport, and the Ministry of Gas Industry will soon become a state corporation.
“Since the mid-seventies, the German-Russian gas relationship solidified through the establishment of the so-called Orenburg pipeline deal, backed largely by the German government” remarks Boon von Ochssée and Timothy Alexander in ‘The dynamics of natural gas supply coordination in a New World’.
One of the most important elements that pursue the institutionalization of gas projects like Nord Stream, for example, is the use of vertical energy diplomacy after the two authors. In other words, since from the very beginning of developing gas projects, Russia made use of foreign policy tools in order to give support for Gazprom’s investment initiatives. The Orenburg agreement shows how Russia exercised its political influence in Germany by establishing a relation “win-to-win”. Along with Yamburg agreement, signed in the mid of ’80s, remain in the history of gas deals as “key intergovernmental documents regulating Russian gas deliveries to Central Europe”.
Orenburg pipeline was built “on the basis of a multilateral intergovernmental agreement” with the support of Central European organizations. As a result, Russia was able to create relations with states from Western Europe and transfer its political power. To be more precise, Russia was able to do so by creating multilateral intergovernmental agreements, which were signed for a long period of time and institutionalized gas projects.
Gas projects transform Turkey into a major energy center
By trying to acquire pipelines and exploration rights in Iran and Afghanistan, later in Turkey, Russia was building since the ’70s a land bridge to Europe through the Middle East. Today is almost an accomplished fact. With the expansion of its political influence in Iraq, Lebanon, and Syria, Russia “will cement its role as Europe’s primary gas supplier (…), posing serious risks to U.S. and European interests”.
Despite the efforts of the European Commission to diversify energy offers and the change of the old Gas legislation, Russia grew in percentage as a gas supplier from the beginning of 2019. As well as gas consumption. Still, if there is something of which we should be concerned about, it is not the obvious growing consumption. But the, even more, accentuated tendency of the falling production of gas in Europe.
According to the analyst on natural gas issues at the SKOLKOVO Energy Center in Moscow, Sergei Kapitonov, this tendency is emphasized by the permanent shutdown of the Groningen gas field in 2022, and by the continuous gas production decline in Norway and in the North Sea (the UK, the Netherlands, Denmark, Germany). Europe is actually nothing more than a consumer, instead of a gas producer. In the absence of its own resources of gas and in front of the reality of a growing need for it, what remains behind is the very good question of Kapitonov: “Where Europe will get this gas from: Russia or global markets?”
After Sergei Kapitonov, the days when Europe was fully dependent on Russian gas are passed away. Today can be replaced with natural liquefied gas (LNG) from global markets. EastMed pipeline and the Croatia LNG project, recently approved by the European Green Deal, are two of the gas projects aimed to be a strategic alternative to the import of Russian gas. With all of this, the ceremony of inauguration of TurkStream pipeline which took place at Istanbul on January 8, this year, in the presence of Presidents Vladimir Putin and Recep Tayyip Erdoğan, and with the participation of leaders from Serbia and Bulgaria, it has shown that the dependent ties were not yet cut off.
The TurkStream pipeline project – which practically replaces the South Stream project by following the same route that crosses the Black Sea until it stops to the north-west of Istanbul, in Kıyıköy – will reinforce strong ties between Moscow and Ankara, but also with Europe. As well as the Yamal Peninsula from Northwest of Siberia, Turkey is planned to become another major center for gas transactions, maybe the most important one, “a regional energy hub”, “Gazprom’s second-largest export market”.
Rauf Mammadov sustains in an article published by the Jamestown Foundation that “along with Nord Stream Two, Turk Stream is vital to Gazprom’s strategy of delivering as much gas to Europe as possible through pipelines that circumvent Ukraine, with which Russia has a number of energy and geopolitical disputes”.
An opinion that completes very well the one of Kemal Kirisci, director of the Turkey project at the Brookings Institute, which recently declared to Euronews that Putin has an interest in “making sure that there is a Turkey that can continue to import natural gas and pay for it. And secondly, it has to maintain a relationship with Turkey that allows Putin the possibility, as much as possible, of peeling Turkey away from NATO and the European Union. NATO especially, not so much the EU”.
Both opinions relieve that the gas projects were not just economically driven projects, but most of all political. An assessment which is strengthened by the fact that has also increased the defense cooperation, after what “Turkey bought advanced Russian missile defenses last year”. A strategic alliance between Russia and Turkey, founded on economic and political grounds, would be an interesting question to be asked for the future.
Perhaps this is the key part of Russia’s plan, its political strategy, to encircling the continent with gas pipelines in the North and South, Mammadov observes, thing that will leave for Russia a free hand in using the energy infrastructure as a political weapon against Ukraine, and not only.
Ukraine’s armed conflicts with Russia change the energy route
After the annexation of the Crimean Peninsula in February-March 2014, Russia was quite eager to establish a new energy route through its gas pipeline projects. One of these energy routes was planned to pass through the TurkStream gas pipeline, which extends from the Russian port in Black Sea, Anapa, until the European side of Turkey, Kıyıköy, and the Greek border, Ipsala. The pipeline, which replaces the old South Stream, will supply gas for the Turkish market, as well as for South and South-East European countries. A project that, together with the Blue Stream pipeline, will consolidate Turkey’s position “as a center of important energy projects in the region”.
And just like in any gas transactions and big energy projects, there are some expected winners and inevitable losers. The expected winners are, of course, Russia and Turkey, who will pick its fruits by taking the benefits most of all in this gas project. But we have also and a ‘surprising winner’ too.
Starting from January 1, Bulgaria will take the gas delivery via TurkStream, in a move that replaces the old route by avoiding transit through Ukraine and Romania, and that will make economy up to tens of millions of dollars per year for the country after the public statements made by the Bulgarian energy minister, Tememoujka Petkova. The result of this route change will be “better conditions for Bulgarian consumers” at lower gas prices. Not the same thing it will be for the other countries left behind. A five-year agreement signed at the end of last year between Russia and Ukraine shows that gas volumes will face a gradual decrease from 65 bcm in 2020 to 40 bcm annually up to 2024.
“Russia has been seeking to cut gas transit through Ukraine since the mid-2000s, and the $7.8 billion TurkStream pipeline project is a big part of that strategic goal”. More than that, TurkStream “directly undermines Ukraine as a gas transit country and directly undermines Ukrainian security” said Margarita Assenova for RFE/RL, an energy analyst at the Center for European Policy Analysis in Washington.
The continuation of the even more ambitious gas project South Stream, at which the European Union has opposed in the past, TurkStream will deliver annual natural gas to Turkey’s western province by the first pipeline, and the second will export to the Balkans and Central Europe, including Bulgaria, Serbia, and Hungary. In this scenario of ‘route change’, the role of Romania will be diminished, observes Aura Sabadus, a senior journalist at the ICIS.
Positioned in the middle of conflicts, Turkey is playing both cards with the East and West. Turkey is also, becoming the second country, after Germany, in importance of gas deliveries, “a bridge” between gas-producing and gas-consuming countries. In this scheme, Ukraine gets out from the political game as a transit country being replaced by Turkey, changing thus the energy route.
According to ngv.ru Russian Gas Export: Background, Status and Outlook, published on Internet Archive on 2007, November 11, “Soyuzgazexport was created on the basis of the Gas Trading Office, Soyuznefteexport’s business Unit.”, so of an office which functioned within USSR Ministry of Foreign Trade. In this direction, to be seen „https://web.archive.org/web/20071111214446/http:/www.ngv.ru/article_en.aspx?articleID=22687” https://web.archive.org/web/20071111214446/http://www.ngv.ru/article_en.aspx?articleID=22687.
Boon von Ochssée, Timothy Alexander (2010). The dynamics of natural gas supply coordination in a New World: cooperation or competition between gas-exporting countries from a Russian perspective (pp. 319-320). University of Groningen, The Hague: Clingendael International Energy Programme, „https://www.rug.nl/research/portal/files/10431154/09_c9.pdf” https://www.rug.nl/research/portal/files/10431154/09_c9.pdf.
Internet Archive, art. cit.
About the first attempts to acquire pipelines and exploration rights in Iran and Afghanistan, see the Internet Archive, art. cit.
To be seen the statistic published on the Gazprom export website, which shows that the company has recorded an increase in gas production volumes on the internal and external markets, with 3.7% more than 2018, in the period of 1 to 15 January 2019. In this direction, see „http://www.gazpromexport.ru/en/presscenter/news/2200/” http://www.gazpromexport.ru/en/presscenter/news/2200/ and „http://www.gazpromexport.ru/en/presscenter/news/2341/” http://www.gazpromexport.ru/en/presscenter/news/2341/. About the recorded gas increases in Hungary, see „http://www.gazpromexport.ru/en/presscenter/news/2269/” http://www.gazpromexport.ru/en/presscenter/news/2269/.
In this direction, see „https://www.offshoreenergytoday.com/gallery-first-line-of-turkstream-pipeline-reaches-turkey/” https://www.offshoreenergytoday.com/gallery-first-line-of-turkstream-pipeline-reaches-turkey/ and HYPERLINK „https://www.dailysabah.com/op-ed/2019/04/08/turkish-russian-energy-dependence-vs-independence” https://www.dailysabah.com/op-ed/2019/04/08/turkish-russian-energy-dependence-vs-independence.
Rauf Mammadov (2018, April 11). Russia Putting the Pieces Together to Maintain Its Gas Stranglehold on Europe. Eurasia Daily Monitor Volume: 15 Issue: 55. The Jamestown Foundation, Washington DC, HYPERLINK „https://jamestown.org/program/russia-putting-the-pieces-together-to-maintain-its-gas-stranglehold-on-europe/” https://jamestown.org/program/russia-putting-the-pieces-together-to-maintain-its-gas-stranglehold-on-europe/. With refer to this, see also „https://foreignpolicy.com/2019/04/17/russias-gas-web-ensnares-europe/” https://foreignpolicy.com/2019/04/17/russias-gas-web-ensnares-europe/.
In this direction, see the published article of „https://twitter.com/jasminbauomy” \t „_blank” Jasmin Bauomy on „https://www.euronews.com/2020/01/08/turkstream-europe-needs-gas-and-russia-has-it-the-story-behind-that-new-pipeline” https://www.euronews.com/2020/01/08/turkstream-europe-needs-gas-and-russia-has-it-the-story-behind-that-new-pipeline.
Correspondent in Romania, for NASUL TV Canada. Also, was an external correspondent of Vocal Europe, from Brussels.