Why is the premise that the conflict in Macedonia was initiated to prevent the construction of the Turkish Stream wrong?

This premise is completely wrong, and I see the propaganda is trying to place, and impose it as relevant, so it can serve as an excuse to transfer the guilt to somebody else for the conflict that is taking place in our country. While working at the Center for Resource Economy at the Russian Presidential Academy, my colleagues and I did the calculations for the economic profitability of the Turkish Stream project.

The Turkish Stream is a very unprofitable project. The NPV (Net Present Value) of the project is measured in negative of billion dollars, and by no economic logic should such a project take place. The only thing that keeps this project alive is the potential political gain, since Gazprom is not managed as a corporation, but it rather serves as a political tool of Russia.

Turkey does not want to participate with the percent that Gazprom requires for it from it, i.e. Turkey does not want to pay as much money as Gazprom requires, whereas in the case of Greece, even if the country wanted to take part, at the moment they do not have the money. The West knows this, and they are aware that the prospects for a failure of this project are quite high. An additional burden to the project implementation is the fact that Gazprom diversified its export towards China. Europe, as well, wants to become less dependent on the Russian gas, and each year they buy less Russian gas.

Due to this, Russia has no real need to construct new infrastructure for gas transmission towards Europe. Even the existing capacities of the North/Nord Stream Gas Pipeline are not fully utilised. The EU regulation of gas transportation is another difficult issue that the EU and Russia need to resolve, and a compromise is not likely in the near future. All efforts are directed to the Power of Siberia project, through which China will be purchasing gas from Russia. This project, for the most part is financed by China, so the country can buy cheaper gas from Russia in the future. With this project Russia enters the market of the biggest gas consumer in the world, which reduces its need to sell gas to Europe.

Additional reason that reduces Russia’s interest to invest in a foreign project, especially projects which are economically unprofitable, is the decline of the Russian Ruble. The conclusion is that the story of the Turkish Stream is very uncertain, and it is only a matter of time when will this be officially announced.

 

Nikola Kjurchiski

Center for Resource Economy
Russian Presidential Academy for National Economy and Public Administration

 

References:

  1. Stern, Jonathan, Simon Pirani, and Katja Yafimava, Does the Cancellation of South Stream Signal a Fundamental Reorientation of Russian Gas Export Policy?, Oxford Institute for Energy Studies (2015).
  2. Russia’s New Turkish Stream Gas Strategy More Bark Than Bite. The Moscow Times (2015)
  3. EU energy chief voices concern over Russia’s Turkish pipeline plan. Reuters (2015)

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