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Home / Sectors / Coal, Oil & Natural Gas / Turkey and Russia sign $12.7bn TurkStream deal

The two countries’ pragmatic leaders have put aside their differences to conclude Russia’s biggest ever greenfield investment into Turkey.

In a move underlined by pragmatism and geopolitics, Turkey and Russia have finally agreed to construct the TurkStream gas pipeline despite their sharp differences over, for one, the Syrian conflict.

Vladimir Putin and Recep Erdogan recently met in Istanbul to sign the TurkStream deal that will cost $12.7bn and deliver 30 billion cubic metres of gas a year by December 2019. It is the largest ever Russian greenfield investment into Turkey, according to figures from the fDi Markets database.

The venture is being undertaken by two state-owned gas monopolies, Russia’s Gazprom and Turkey’s Botas. It will dramatically redraw Europe’s energy map by allowing Russia to bypass troubled Ukraine, the previous route, and thereby penetrate the European market.

Additionally, TurkStream will help realise Mr Erdogan’s long-held goal of turning Turkey into a major energy hub, and will directly provide Turkey with discounted Russian gas. Thus, in many ways, the pipeline is a thoroughly pragmatic economic manoeuvre from two highly pragmatic leaders.

However, it comes at a time of frosty relations between Turkey and the west, namely due to the attempted coup in Turkey that drew little western support for Mr Erdogan and the ensuing heavy-handed state crackdown. Russia is also increasingly isolated due to its support for Syrian president Bashar al-Assad.

Thus, geopolitically speaking, TurkStream somewhat undermines the EU’s efforts to reduce its historic dependency on Russian energy through the ‘anti-Moscow’ Southern Gas Corridor. Considering Mr Putin’s recent economic activity in Iran and Saudi Arabia, TurkStream seems part of Russia’s attempt to lure undecided countries to its side.

However, Ayse Usluer, head of Turkey’s foreign relations department, said:“Neither Turkey’s alliance with the West [or] NATO is up for debate.” Indeed, it will take more than TurkStream to help Russia and Turkey overcome their historic antagonisms and fierce disagreements over Syria’s president. Only last year Turkey shot down a Russian jet, leading to the abandonment of TurkStream until Mr Erdogan’s recent apology.

Whatever the motivations behind it, TurkStream will create thousands of jobs, reduce gas costs and increase Europe’s access to energy.

This article is sourced from fDi Magazine
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