Warming Russia-Turkey relations send a chill through Ukraine

A joint natural gas pipeline, announced Monday, would help Turkey become an energy hub and give Russia a way to cut out Ukraine from gas exports to the EU.

Leaders of Turkey and Russia signed a long-delayed deal Monday to build the TurkStream gas pipeline under the Black Sea to deliver Russian gas to Europe's doorstep within three years.

The rapid warming trend in Russo-Turkish relations holds deep implications for Syria's immediate crisis, which dominated the talks and the subsequent headlines, but the fallout from that pipeline deal is a potentially crushing blow to struggling pro-Western Ukraine and may be rearranging strategic realities around the region for many years to come.

Acrimony is surging between Russia and the West over the situation in Syria. On Tuesday, Russian President Vladimir Putin angrily canceled a planned state visit to France later this month after French President François Hollande suggested Russia may be guilty of "war crimes," and wondered aloud whether meeting Mr. Putin at this time would be "useful."

But there was little sign of tension as Putin met Turkish President Recep Tayyip Erdoğan on the sidelines of the World Energy Congress in Istanbul Monday. Though they back opposing sides in Syria, the two presidents amiably discussed ways to get humanitarian supplies into war-stricken Aleppo, then stood by smiling as the TurkStream deal was signed.

"I have full confidence that the normalization of Turkish-Russian ties will continue at a fast pace," Mr. Erdoğan said.

Analysts say that if TurkStream goes ahead it will enable Moscow to cut its former main gas transit partner, Ukraine, completely out of the loop when current contracts expire in 2019. For Ukraine, it spells the loss of about $2 billion in annual transit fees paid by Russian gas monopoly Gazprom, which will make a huge hole in the struggling country's state revenues. More importantly, it will also upend Ukraine's strategic dream of integrating with the European Union (EU) as the key energy hub that mediates Russian energy to the continent's thirsty markets.

Turkey a key distributor

Instead, the profits and geopolitical clout will pass to two countries that are otherwise friends of Ukraine. With TurkStream, Turkey will stand to become the chief distributor for Gazprom on the EU's southern flank. And Germany, whose leading companies are backing the controversial NordStream II pipeline that will double Russian gas flow to the EU under the Baltic Sea, will become the undisputed main gas hub for northern Europe.

"The main idea of these pipelines is to circumvent Ukraine and punish it for its supposed unreliability," says Mikhail Krutikhin, a partner at RusEnergy, a Moscow-based consultancy. "Though neither of these pipelines is a completely done deal yet, the odds seem to be in their favor. It is a very big blow to Ukraine."

Gazprom's grand plan to abandon the Soviet-era infrastructure running to Europe from Ukraine first took shape in the form of NordStream I, which began channeling about 60 billion cubic meters (2.1 trillion cubic feet) of gas under the Baltic Sea to Germany in quieter times five years ago. That's 40 percent of Russia's total exports to the EU.

But the companion project, South Stream, which was meant to bypass Ukraine by carrying Russian gas under the Black Sea to Bulgaria, ran afoul of the geopolitical storms following Russia's annexation of Crimea, and was canceled in late 2014.

In a surprise move, Putin announced in early 2015 that a new pipeline designed to carry 60 billion cubic meters of gas, named TurkStream, would follow much the same route planned for South Stream but make landfall near Turkey's border with the EU instead of Bulgaria. That project appeared to go up in smoke when political and economic relations between Turkey and Russia were ruptured after Turkey shot down a Russian bomber over Syria 10 months ago.

But in a stunning turnaround, Erdogan apologized for shooting down the plane and sought to make up with Moscow. The resurrection of TurkStream has been in the wind for some time.

Half a deal

One fly in Moscow's ointment: The new deal with Turkey calls for only half of the four-pipeline project to be completed, postponing completion of the other half until the EU's appetite for more Russian gas has been clarified.

"There is huge alarm in Ukraine's gas industry, and wider circles, too, over this decision. Ukraine has almost no cards to play in this game," says Vadim Karasyov, director of the independent Institute of Global Strategies in Kiev. "While we Ukrainians are waging 'total war' against Russia with loud declarations, other countries are solving their problems at our expense."

Turkstream is not a done deal. Even if the Russia-to-Turkey segment is built, Moscow still needs to build a pipeline in Greece to bring the gas into southern Europe. Political shifts could kill the deal.

But a Russo-Greek pipeline deal was signed last year. And business interests are pushing for the pipeline projects, while political objections are waning, says Mr. Krutikhin. Turkey hopes to benefit as a transit route for gas from several sources besides Russia, including the Caspian and central Asia. When NordStream II comes online, Germany will be the dominant gateway for gas deliveries to most of northern and central Europe.

"Germany and Turkey will become key gas hubs for Europe, and traders all over the continent hope to get new contracts from Gazprom. It's not political, it's all about profit," Krutikhin says. "Opposition to these deals comes only in political or emotional form. People say, 'Let's not harm Ukraine.' Under these circumstances, I'm afraid the forces are aligning in favor of both these pipeline projects and we can fully expect them to go ahead."