Gazprom announces deal with Ankara to build Black Sea pipeline

Gazprom says it has reached agreement with Ankara to build a "Turkish Stream" pipeline across the Black Sea, bringing the politically charged project one step nearer reality.

The project was hurriedly conceived after Vladimir Putin, Russia's president, met his Turkish counterpart Recep Tayyip Erdogan in December and abruptly announced the cancellation of the flagship South Stream pipeline project amid objections from the European Commission.

The commission objected to Gazprom's plans for South Stream, a pipeline that would have transported Russian gas to southeastern Europe via Bulgaria, because of the group's planned control of the pipeline infrastructure.

Energy supplies to Europe from Russia have become politically sensitive since the outbreak of war in Ukraine, a key transit route for Russian energy. State-controlled Gazprom supplies the EU with 30 per cent of its gas needs.

Gazprom has been negotiating with the Turkish government and state energy company Botas to build the alternative Turkish Stream pipeline since talks between the EU and Russia collapsed.

Alexei Miller, chief executive of Gazprom, said, during a visit to Ankara on Thursday, that the two sides had reached an agreement that gas would start flowing by the end of next year.

"It was agreed to bring on stream Turkish Stream and to start gas supplies in December 2016," he said.

A person close to Gazprom said the first Turkish Stream pipeline would deliver nearly 16bn cu metres of gas a year for the domestic Turkish market.

Under plans sketched out by the Russian state-owned company during the past few months, additional pipelines would deliver another 47bn cu metres per year - almost equivalent to the volume of gas that transits Ukraine - to the Greek-Turkish border.

However, the project faces scepticism from the US and EU, who are wary of Russia's clout in the European gas market as well as its tactics of using deals to win political influence.

Mr Putin said, in a phone call with Greek prime minister Alexis Tsipras on Thursday, that Moscow "confirmed its readiness to consider providing financing to Greek state and private companies" participating in the construction of gas pipelines to transport Russian gas from Turkey through Greece.

However, analysts have questioned the feasibility of the plan given the lack of an obvious buyer at the Turkish-Greek border and uncertainty over who would finance and build a pipeline from there into the rest of Europe.

Maros Sefc?ovic?, the EU's energy commissioner, has said Turkish Stream will not work, questioning the project's viability and calling for more consultation with the EU.

"Since the Americans and the Europeans have expressed reservations, this is an indication that Turkey wants to do things its own way, especially when it comes to energy policy," said Soli Ozel at Kadir Has University in Istanbul.

The Turkish government has dragged out the negotiations in hopes of securing a hefty price discount on Russian gas, according to people close to Gazprom.

David Tonge at IBS, a consultancy specialising in energy, said the Turkish and Russian sides had been working on an intergovernmental deal and a host government agreement to cover issues such as taxation and that environmental study work also needed to be finalised.

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