Russia-Turkey gas pipeline delayed, halved in size

Russia's gas pipeline to Turkey will be built later than planned and will be half its original size, state firm Gazprom has said.

Alexander Medvedev, its deputy CEO, told Russian media on Wednesday (7 October), "As there is no inter-governmental [IGA] agreement [between Russia and Turkey], the deadline is changing".

"How long it's postponed for depends on when the agreement gets signed. If the deadline’s pushed back by a year, that won't be a tragedy".

Medvedev voiced a similar warning in mid-September.

For his part, Russian energy minister Alexander Novak, last Friday, blamed the delays on Turkish politics.

"I think it’s unlikely they'll be able to do this [sign the IGA] before the election [on 1 November] and the formation of a new government", he said.

Gazprom CEO, Alexei Miller, also said on Tuesday the pipeline's original capacity, of 63 billion cubic metres (bcm) of gas a year, is no longer "realistic".

"Speaking about designed capacity ... we can say that it’ll be created at volumes of up to 32 bcm", he noted.

He said the lower capacity is due to Gazprom's plan to double the size of its Germany pipeline, Nord Stream.

But TurkStream’s future could also be affected by Russia’s actions in Syria.

Moscow has angered Ankara by bombing Turkey-friendly rebels in northern Syria. It caused more anger when its jets, last weekend, violated Turkish airspace.

It says the violations were accidental. But Turkey and Nato says they were deliberate "provocations".

The Turkish president, Recep Tayyip Erdogan i, on his European tour this week, noted: "The steps Russia is taking … are quite unacceptable".

"Our positive relationship with Russia is known. But if Russia loses a friend like Turkey, with whom it has been cooperating on many issues, it will lose a lot, and it should know that".

Strategy, betrayal

TurkStream, is to run from Anapa, Russia, under the Black Sea, to the Turkish coast and on to Ipsala, on the Greek-Turkish border.

The 900-km, $15-billion project was due to be ready by 2016.

It replaces SouthStream, a project to ship gas under the Black Sea to Bulgaria, which fell foul of EU energy market laws.

Both projects are designed to bypass Ukraine’s EU transit pipelines, undermining the pro-Western government in Kiev.

The European Commission has criticised TurkStream, saying there's no way EU states will rebuild their transit networks to go from Ukraine to Turkey.

But it's been less hard on the Nord Stream project, prompting complaints by eastern EU states.

"They [Germany and the Commission] have betrayed an EU member state - Slovakia - and are going against political discussions with Ukraine", Slovak PM Robert Fico said last month.

Gazprom HQ

Meanwhile, low oil prices, low gas demand, sanctions, and rouble volatility have diminished Gazprom's war chest.

Its profits fell 86 percent last year. They bounced back with a 71 percent increase, year-on-year, in the first quarter of 2015, and by 29 percent in the second quarter.

But the bounce-back is linked to the fact it sells gas for US dollars, while denominating profits in roubles, with rouble weakness making the profits look big.

The firm is also pressing ahead with construction of a new HQ in St. Petersburg, Russia.

The so-called Lakhta Center, which is to cost $3 billion, includes a 462-metre tower, which will be Europe's tallest building when completed in 2018.