“If the Turkish project goes ahead, Gazprom can pick up on a lot of the expenditure [that] would otherwise be wasted,” Pirani says. The routes are still under review, but if Turkish Stream makes landfall in the country’s European territory, it would not be far to tap into the Trans-Balkan line or to the Greek border for a new delivery point there. The play could complete the maneuver to outflank Ukraine.
A Realistic Goal?
“This project won’t fly,” says Mikhail Korchemkin, founder and director of East European Gas Analysis, arguing that Gazprom is going to find it very difficult to find the financing it needs for its ambitious engineering plans (the firm’s menu also includes building new pipelines to China over the Altai mountains). “It’s very unlikely to happen in Turkey. There are no more partners—Gazprom is alone in this project.” Oxford’s Pirani started by allowing that Turkish Stream would be a feasible workaround to South Stream; but in a longer commentary with colleagues, he later also questioned the financing.
In an analysis for the London School of Economics, Marco Siddi, senior researcher at the Finnish Institute of International Affairs, picks Ukraine as getting ahead in the wake of South Stream (the country will remain the transit point for Russian exports and generate fees, even though Kiev wants to remain independent from Moscow gas) and Eni as well as Italian and Austrian concerns as odd men out (Eni loses potential revenue, even though it was paid off).
Ukraine will invest at least in its existing pipe: the European Bank of Reconstruction and Development recently signed off on a $150-million, 15-year loan with a three-year grace period at about 1.6% interest (Libor +1) for repairs and upgrades to sections of the Trans-Siberian; the European Investment Bank will provide the balance of funding for the $300-million project. The project also includes reform and corporate governance conditions to energy provider Naftogaz for financing, says EBRD banker Paul Shapiro. Fixes will be applied to corroded stretches of pipe from Romny to Grebinky, Grebinky to Sovlivka, Bar to Gusiatyn, and Gusiatyn to Bogorodchany. Two compressor units in Romny will be modernized; German company Ferrostaal was the last to work on the modernization of Naftogaz's compressor units. Project bidding is expected for fall of this year.
Ukraine may continue to be a transit hub because its big gas lines are north of the current conflict zone, but conditions in the war zone are grim, and everyday utility supplies are getting sketchy. Dmitriy, a 32-year-old doctor who lives in the city center of Donetsk, says power and water outages are now part of living there. “We pay utility bills regularly, except for the times when artillery damages gas pipes and wires,” he says. “But this is in the central districts. The situation in the suburbs is different: There is no electricity, water, gas. There’s constant gunfire, destroyed houses and victims.”