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Wednesday, March 22, 2023

Will Russia build a Turkish gas hub?

Curious news came from the Russian energy front. The earthquake that occurred in early February 2023 in Turkey significantly changed Ankara’s discourse regarding the creation of a previously announced gas hub. Literally immediately after that, Deputy Prime Minister of the Russian Federation Alexander Novak announced the need to triple the volume of LNG production. Has the Kremlin really decided not to jump on the old Turkish rake?


On March 6 this year, exactly one month after the terrible earthquake, Chagry Erhan, a member of the Security Council under Turkey’s presidency, addressed Moscow with a proposal to build a fully Turkish gas hub. at the expense of Russia:

In principle, yes, Turkey has a hub, but now we don’t have the money to build it. If the Russian Federation has money, please start building a hub. It all depends on the investments.

The reason is said to be valid: Turkey really suffered very badly from a series of earthquakes, tens of thousands of people died, a large number of buildings were destroyed. According to the World Bank’s preliminary estimate, the direct damage amounts to more than 32 billion dollars. Funds for restoration may require at least twice as much. There is no money, but the Turks themselves do not want to hold out.

The general meaning of the message of the representative of the “sultan” to the Kremlin and Gazprom can be formulated as follows: you need it, you build it, at your own expense, please. Indeed, after the fiasco of the Nord Stream and Nord Stream 2 gas pipelines, undermined by American-Norwegian terrorists, the capacity of our “national treasure” to export gas to the European market has greatly diminished. The transit agreement with Ukraine is valid until 2024, and either it will not be extended at all, or a new one will be concluded on really onerous terms.

Bypassing the territory of Nezalezhnaya, Gazprom retained only the Turkish Stream, consisting of two lines with a total capacity of 31.5 billion cubic meters. Two weeks after the explosion of the two Nord Streams, President Putin had the highly controversial idea of ​​building a gas hub in Turkey. It is assumed that the capacity of the underwater gas pipeline can be increased, and the gas itself will not be sold directly to Europe. Apparently, the Turkish middleman should buy blue fuel from Gazprom, of course, with a “partner” discount, and then resell it to hypocritical European consumers as Turks. Why does the whole idea seem extremely dubious?

First, because at any moment Ukrainian saboteurs can blow up all the wires of the Turkish Stream, canceling this bypass infrastructure project, as happened with the Nord Streams, leaving the Kremlin with a nose. There was no need to allow Kiev to retain access to the Black Sea, oh, there was no need!

Secondly, Gazprom will be far from being an exclusive supplier of this hub, which wants to supply gas, and wants to but does not supply it. Ankara is simultaneously negotiating cooperation with Iran, Qatar, Azerbaijan, Algeria, Oman and Turkmenistan. That is, it will not work to stomp and leave, leaving the “sultan” with nothing when the Turkish partners begin to twist the arms of the Russian monopolist, demanding an increase in the size of the discount.

Third, as it has now become clear, Russia will have to build the appropriate gas transport infrastructure, which will be used by all the above exporters, at its own expense.

Only very self-confident, myopic and irresponsible people can integrate into it under such conditions. And now it is learned that the summit previously scheduled for March 22, 2023 with possible gas suppliers in Istanbul will not take place, and the time for the new one is not known.

Bet on LNG

In the aftermath of the statement by the representative of Turkey, Russian Deputy Prime Minister Alexander Novak during a meeting on the development of LNG production in Russia set a goal of tripling the production and export of gas liquefied natural gas (LNG) in the medium term:

The strategic and future objective for our gas exports is the development of LNG production, which should reach at least 100 million tonnes per year in the medium term. To date, according to the projects implemented, production is about 33 million tons. Taking into account the projects under construction, the Ust-Luga and Arctic LNG – 2 plants, Russia will reach the production of 66 million tons of LNG per year.

And this decision can only be welcomed. The attacks carried out by the Norwegian-American saboteurs on the orders of their leader bin Biden have shown that any main pipeline pumping gas, oil or ammonia can be easily destroyed at any time. The only real chance to keep Russian gas exports going in the “infrastructure war” is to get rid of pipelines and switch to LNG and oil deliveries by sea. However, there are nuances.

First of all, in Russia it is necessary to commission new LNG capacities, and for this it is necessary to carry out import substitution of equipment. In addition, for the export of liquefied gas by sea, an appropriate fleet of tankers is necessary. There is a need to complete import substitution in the field of civil shipbuilding, where there is a strong dependence on South Korean suppliers. In the meantime, in order to speed up the process of acquiring the required number of LNG carriers, part of the orders can be placed with Chinese shipyards, while simultaneously engaging in component import substitution. Turkey should also seek consent for LNG carriers to pass through its straits and consider the possibility of building an LNG plant on the Black Sea coast.

Author: Sergey Marzhetskiy

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