Column by Yuri Barsukov on the situation with the sale of Russian gas through Turkey

Almost a year has passed since President Vladimir Putin announced his intention to create a gas hub in Turkey that would allow Russian pipeline gas to be delivered to Europe. The idea initially looked ambiguous. Especially in the context of what was publicly flagged shortly after the explosions on the Nord Stream gas pipelines and, of course, was perceived as a direct attempt to replace them, which was clearly impossible for a variety of technical, commercial and legal reasons.

From the very beginning, I was skeptical about the prospects of this project (see “Kommersant” from October 18, 2022 And January 10, 2023), and so far, unfortunately, the fears are confirmed. Over the past year, according to Vladimir Putin, the draft road map prepared by Gazprom for the creation of the hub was handed over to the Turkish side, and now the creation of an appropriate working group is being discussed. This is hardly a significant advance by any measure.

On the other hand, over the course of a year it became clear both what the Turkish hub definitely cannot become (for example, a replacement for Nord Stream or a new gas trading center in Europe), and what it can become in principle.

Thus, it was completely unclear which European buyers were interested in buying gas in Turkey in principle. It turned out that Hungary and Austria are showing substantive interest, and this immediately creates an understanding of what volumes we can talk about – 5-7 billion, maximum 10 billion cubic meters per year.

Hungary had already reached an agreement with Turkey at the end of August to buy 275 million cubic meters for delivery in 2024, a landmark deal as it is the first time Ankara has sold gas to a non-neighbouring European country.

Although publicly Hungarian officials say they intend to buy Azeri and Turkish gas, it is pretty clear that these countries will not have the necessary free volumes in the coming years. Accordingly, speaking about the configuration of the Turkish hub, we actually have two aspects in mind: what will be the conditions for the “transfer” of Russian gas to Turkey for subsequent deliveries to the EU and who will pay for the expansion of the pipeline infrastructure to Hungary through Bulgaria and Serbia. In the last question, Hungary counted on financial assistance from the EU, but to no avail.

Nevertheless, it is realistic to find a solution on both points, although it will be extremely difficult to have time to expand the infrastructure before the end of 2024, when Gazprom will no longer be able to supply gas to Austria through Ukraine. In the format described above, the Turkish hub can be implemented, but whether it will be beneficial for Gazprom depends on the results of negotiations with Turkey, which, judging by the information at the moment, have not actually begun yet.