Miffed with Europe, Gazprom has decided to teach its European partners a lesson by leaving them without gas pipeline (the company has recently turned the South Stream to Turkey) and gas (lobbying again and again an idea of selling the Yamal gas to China) at the
same time. However, it seems the Russian gas giant has forgotten one popular proverb: if you chase two rabbits, you will lose them both.
Gazprom’s top managers seem to be very resentful. They are ready to cast billions of dollars to the wind just because their European partners asked them to work properly. The EU has only explained that things don’t work in Europe the way they work in Russia. As a result Gazprom has refused to continue the South Stream project, which was supposed to bring 63 billion cubic meters to Europe per year and exclude Ukraine from the supply route.
The initial plan was faulted by the European Union, which only wanted to comply with the law. In response to that President Vladimir Putin called off the project and made public plans to start the so-called Turkish Stream. The idea is to run gas pipeline to Turkey and if Europe wants to buy this gas it will need to build pipelines from Turkey itself. By that time Russia also plans to give up on transit though Ukraine.
The news came as a big surprise for Ukraine and the EU. Turkey seemed also surprised to suddenly become Russia’s strategic partner in the region and bargained 10.25% price reduction for gas. However, there is no final decision concerning this issue as yet. Gazprom wants to apply this discount to contract price, while Botas (the Turkish gas company) suggests that it should be related to reference price. While the sides are trying to find common ground Turkey doesn’t give formal permission to start exploration and construction works in its territorial waters. Meanwhile, Gazprom pledges to finish construction by 2019, when its contract with Ukraine expires.
«When we speak about some big supplies for European customers, you cannot adopt such a decision without talking to them, without talking to the EU and without talking to the European Commission», Maros Sefcovic, the European Commission’s vice president in charge of energy policy said at a press briefing in Ankara on March 17, when yet another big project — the TANAP gas pipeline from Azerbaijan through Turkey to Europe — was launched. According to officials, the pipeline will bring 16 billion cubic meters to Turkey and Europe in 2020, and 31 billion cubic meters – starting from 2026. Europe and Turkey are close partners and Moscow shouldn’t expect Turkey to fully support Russian initiatives.
Keeping that in mind, Gazprom has casted a look of hope on China. According to Reuters, the Russian gas giant has got back to plans of building gas pipeline to China — the Altai project, which is expected to bring gas from Yamal to China through the Russian republic of Altai. This agreement means Power of Siberia pipe could be delayed. «Yamal gas needs new markets — that’s why Gazprom is pushing for the Altai route. That’s why neither Vladivostok nor the Power of Siberia are a priority – the last one even has no source to be connected to», said a banker close to Gazprom, according to Reuters.
No doubt, the Chinese market looks very attracting. BP Energy Outlooks forecasts the country will import around 250 billion cubic meters per year in 2035. Gazprom would be happy to cover at least half of this volume. The company’s head Alexey Miller has told President Putin Gazprom is ready to supply 100 billion cubic meters to China through the western route, and around 38 cubic meters trough the eastern one.
The only problem is that there is no certainty in China over the issue. Reuters quotes a Chinese CNPC advisor as saying that Beijing is interested in investing in building both gas pipelines. «But the truth is that there is shortage of gas in the east of the country and some proficit in the west», he added. The key issue is the price. If Gazprom manages to offer a better price than Turkmenistan, China will opt for Russia.
On the other hand, the Russian company wants this project to be beneficial. Taking into account the current oil and gas prices, pessimistic forecasts and anti-Russian sanctions, the Power of Siberia doesn’t look gainful. However, the Russian authorities may once again surprise everybody by starting selling the Yamal gas to China with a discount instead of building bridges with Europe. From time to time they cut off their nose to spite face.