Russian PJSC Gazprom has quietly postponed plans to create a new gas distribution hub in Turkey, a project publicly praised by Kremlin chief Vladimir Putin, closing the door on a potential opportunity to regain positions in European markets lost after the Russian invasion of Ukraine, Bloomberg reports, writes UNN.
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Against the backdrop of the Nord Stream pipelines in Germany breaking down and gas transit through Ukraine ending in 2024, Gazprom has been exploring Turkey – already connected to two major Russian pipelines – as a way back to Europe, which was previously its largest export market, the publication writes. But after months of considering options, “the company has concluded that it is impractical and has largely stopped work,” people familiar with the matter said.
The result closed the possibility for Gazprom to restore at least some of the gas supplies to Europe, which previously brought about $8 billion in revenue per month. However, some in the company were skeptical from the beginning that the Turkish plan would work, sources say.
“Despite Vladimir Putin publicly praising the proposal back in October, it has always faced significant challenges,” the publication writes. Turkey has no spare export pipeline capacity to Southern Europe, and Ankara was unwilling to allow Gazprom to jointly sell gas, limiting Russia’s influence on the hub, people say. The European Union is also promoting a proposal to ban imports of Russian gas by the end of 2027.
In October 2022, just weeks after the mysterious explosion of the Nord Stream pipelines, Putin first voiced the idea of creating a gas distribution hub in Turkey. As the Kremlin’s energy influence in the region shrinks rapidly, he outlined a plan that would see Turkey one day receive flows equal to the capacity of the damaged Nord Stream pipeline, about 55 billion cubic meters per year. The project would require expensive additional pipelines across the Black Sea, but would be “economically viable” and safer than other European routes, he said.
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The idea of a Turkish hub did not come from Gazprom and may have originated in political circles close to the Kremlin, people familiar with the matter said. Company managers were initially surprised to hear Putin publicly promote the concept, one person said. However, the gas giant’s export division began actively working on the plan.
For some employees of the state-owned Russian gas giant, especially those working in the Gazprom Export trading division, the idea of a Turkish hub seemed to offer a new start and a way to occupy themselves after losing such a large part of the company’s international market, one person said. The proposal also received support in Turkey, which is eager to become a regional gas trading center with its own price index.
However, despite Ankara’s interest and Moscow’s assurances in 2022 and 2023 that the negotiations would only take a few months, the project has not progressed, the publication writes.
As Gazprom explored the details of the proposal, it became increasingly uninterested. According to initial discussions, Turkey planned to sell the gas supplied to the hub itself, with Gazprom only acting as a supplier, people familiar with the negotiations said. According to them, the Russian company did not want to give Turkey such great control.
One person said that the capacity of Turkish pipelines to Greece and Bulgaria, which are EU members, is too limited to handle significant additional supplies. Such limited potential for cross-border flows undermines the prospect of a full-scale Turkish hub with its own price index, the person said.
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Last year, at a meeting with Turkish President Recep Tayyip Erdogan, Putin reiterated that the Turkish idea was still on the agenda and would help create “balanced pricing mechanisms” for Russian gas. However, there were already signs that ambitions were waning, as he had previously ruled out storing large volumes of Russian gas in Turkey, a prerequisite for a large hub, the publication writes.
Gazprom executives have long stopped discussing the Turkish hub both internally and at meetings with government officials, people said.
Turkey’s position on the gas hub plans has not changed, and it remains ready to cooperate with Russia within the framework of a joint venture for this initiative, according to a Turkish official familiar with the matter, who spoke on condition of anonymity because the discussions are private. However, as the official acknowledged, the process has been delayed for some time.
The postponement of the project does not affect Gazprom’s current business with Turkey, which remains one of the largest buyers of its gas. Nevertheless, it shows that Russia, once the largest supplier of pipeline gas to Europe, has little opportunity to regain influence in the region in the current political climate, Bloomberg notes.