The Blue Stream project, which aims to deliver Russian gas to Turkish consumers, finished construction on October 20. But Turkish economics have made the project seem less alluring and less controversial than it was when the deal was struck.
The project's Russian sponsor, Gazprom, will end up selling less gas than forecasters promised when Blue Stream took shape in the fall of 1997. Despite shrunken sales prospects, the project still boasts ambitious engineering. It entails the world's deepest undersea gas pipeline, a 360-km conduit running 2,100 meters below the Black Sea. When Energy Minister Zeki Cakan ceremonially welded the two pipes in the Turkish city of Samsun on October 20, it marked the completion of a project that Russian officials had promised would melt hostility between the two countries, boost Russia's economy, and satisfy an energy-thirsty Turkish market.
Test deliveries are expected to be carried out in mid-December, after work is completed on the last two miles of pipeline in a mountainous area of Russia. The pipeline is projected to be capable of carrying 4 billion cubic meters of gas, according to Russia's Gazprom, and will deliver up to 16 billion cubic meters per year to Ankara by 2007. However, its prospects have shrunk. Turkey's economic troubles [for additional information see the EurasiaNet Business and Economics archive] have reduced its committed purchases for 2003 to 2 billion cubic meters, down from 4 billion cubic meters.
It is unclear how Blue Stream's reduced prospects will affect the controversies it has sparked. At the time the deal was announced, some Turkish officials and experts wondered if the pipeline would increase Russia's economic and diplomatic leverage over Turkey to unsettling levels. Turkey already receives nearly two-thirds of its gas from Russia, using Russian supplies to heat major cities, and the Blue Stream project will increase Turkish dependency on Moscow.
However, Turkey has worked in recent years to diversify, positioning itself as a distribution hub transporting oil and gas from the Caspian basin to Europe. It participates in an exploration project in Azerbaijan's Shah Deniz field and struck a deal on October 9 to resume purchasing gas from Iran via a pipeline dedicated in December 2001. (Purchases had stopped on June 24, with Iran accusing Turkey of squeezing it for a lower price and Turkey declaring the pipeline's supply subpar.)
Turkey is also buying gas from Algeria and Egypt, playing sellers against each other to ensure price reductions. Turkey reportedly obtained a 9 percent discount from Gazprom and negotiated firmly with Tehran, managing to freeze and reduce the amount of a "take-or-pay" clause in the deal that runs untill 2006. Given that Turkish demand did not grow as originally forecast, Blue Stream's presence has apparently caused regional suppliers to worry about a glut, leading them to become more flexible about pricing their gas.
Domestically, the project also sparked controversy that has faded without firm resolution. Mesut Yilmaz, currently deputy Prime Minister in a government due to dissolve after November 3 elections, signed the initial Blue Stream deal as Prime Minister in 1997 and touched off a series of accusations about favored contracting that eventually led Yilmaz's government to collapse. [For background see the EurasiaNet Business and Economics archives].
Unresolved charges claim that Yilmaz's Motherland Party (ANAP), supported by big business groups at the time, endorsed Blue Stream to shore up companies that had dealings with Russia and eagerly supported the deal. No tender was opened in Turkey on the project and no satisfactory answer was found to the question of why a shorter Georgian route was not selected. Now that Turkey has scaled back the project, questions about the deal's propriety may revive.
The project's controversies may have receded, but they have not necessarily been settled. Nevertheless, Turkey is continuing efforts to diversify its gas suppliers rather than depending entirely on Russia. The Turkish government that struck the deal is leaving, and Turkish-Russian relations are proceeding on other fronts.
Overall, Blue Stream will undoubtedly enhance Turkish-Russian relations. Yet, the project does not mark the new era in Ankara-Moscow collaboration that some had forecast. Physically speaking, the pipeline installation phase seems to have almost been completed without problems. However, whether the operational phase will witness the same tranquility remains to be seen.
Mevlut Katik is a London-based journalist and analyst.
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