The Russian Pipeline Waltz

Tyler Durden's picture

Submitted by Simone Tagliapietra and Georg Zachmann via,

This is an eventful period for EU-Russia gas relations. Six months ago Russian President Vladimir Putin surprised the energy world by dismissing the long-prepared South Stream project in favour of Turkish Stream. Like South Stream, Turkish Stream is intended to deliver 63 billion cubic metres (bcm) of gas per year through the Black Sea to Turkey and Europe by completely bypassing Ukraine from 2019.

Yesterday, during the St. Petersburg International Economic Forum 2015, Gazprom unexpectedly signed a set of Memorandums of Intent with the European gas companies E.ON, Shell and OMV. These plan for the construction of two additional gas pipeline strings along the Nord Stream pipeline system that connects Russia and Germany through the Baltic Sea. This project would double the current capacity of Nord Stream from 55 bcm per year to 110 bcm per year.

Both Turkish Stream and an expanded Nord Stream indicate that Russia does not intend to abandon its position in the European market (by for example shifting attention to Asia).

As illustrated in the figure below, current EU-Russia gas trade is based on three key axes: the Nord Stream pipeline, the Yamal-Europe pipeline through Belarus and the pipeline system crossing Ukraine. Of these three routes, only the Ukrainian gas transportation system is not controlled by Gazprom.

EU-Russia existing gas connections

Source: Bruegel based on BP Statistical Review of World Energy 2015, IEA Gas Trade Flows in Europe, Nord Stream website.

Gazprom has asserted several times that it will cut off gas transits through Ukraine by the end of the decade. The current alternative routes (Nord Stream + Belarus), however, only present a capacity of 86.5 bcm per year. To maintain the current level of Russia’s exports (119 bcm in 2014) at least 35 bcm of additional pipeline capacity would be needed.

In fact, current capacities are not being fully exploited due to disputes over the access regime to the OPAL pipeline in Germany which connects Nord Stream to European markets. Gazprom would like to make full use of the pipeline, but the European Commission, the German regulator and Gazprom have not yet reached a decision on the conditions for an exception from the EU's Third Energy Package that would allow Gazprom to control more than 50% of the capacities.

Either Turkish Stream (with its 49 bcm per year devoted to the European market) or an expansion of Nord Stream (55 bcm per year) alone wouldallow Russia to circumvent Ukraine. Both lines together would result in significant over-capacity. So there seems to be a trade-off between Turkish Stream and an expanded Nord Stream.

So, how should the most recent evolutions of the Russian waltz of pipelines be interpreted? There are three possible scenarios:

i) Turkish Stream for Turkey only & Nord Stream for the EU. In this scenario Russia would target the construction of the first string of Turkish Stream to divert the 14 bcm per year currently supplied to Turkey via the Trans-Balkan pipeline (crossing Ukraine, Moldova, Romania and Bulgaria) by 2016, as recently agreed in Ankara. This would allow Russia to capitalize on the massive investments already made in the "Russian Southern Corridor" and to make use of the South Stream pipes already delivered at the Varna harbor and of the pipe-laying ships already placed in the Black Sea. Considering the regulatory and financial barriers to the development of new infrastructure to deliver Turkish Stream gas to EU destination markets, Russia would abandon its plan to supply the EU market via Turkish Stream and rather invest in the expansion of Nord Stream to cover this market. 


ii) Nord Stream expansion as a bargaining chip to advance Turkish Stream. In this scenario Russia would propose the expansion of Nord Stream, in order to have another bargaining chip in the negotiations with Turkey (and Greece), and to quickly advance the full Turkish Stream project and ensure better commercial conditions. This would allow Gazprom to avoid further controversies around the OPAL pipeline and to deliver gas directly to southern European markets. This way Gazprom’s ability to sell gas to southern Europe would not depend on additional north-south pipelines under EU rules, and some price-differentiation between the northern and southern market for Gazprom gas could be maintained.


iii) No pipelines, just politics. In this scenario Russia does not intend to develop either the full Turkish Stream (but at most the first string for the Turkish market) or the expansion of Nord Stream. The proposals are thus intended to create political cleavages within the EU, at a moment when the EU is toughening its stance against Russia due to the Ukraine crisis. They create cleavages between northern and southern EU countries (Germany favoured by Nord Stream; Italy and Greece favoured by Turkish Stream); between the EU and Member States (for example Member states’ actions that counteract the Brussels strategy to diversify away fro m Russia); and within EU countries (by causing the interests of governments and energy companies to diverge). In such a scenario, this waltz of pipelines thus represents a new chapter in Russia’s enduring divide and rule strategy vis-à-vis the EU energy market.

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Latina Lover's picture

Everything was working out OK between Russia and the EU, until the USSA decided to " fuck the EU" for profit, domination, shit and giggles.

The Europeans need to boot out compromised puppets like Merkel, NOW, and focus on securing cheap,reliable and long term supplies of Nat Gas from Russia, instead of paying 3x for a USSA LNG pipe dream.

DeliciousSteak's picture

Everything is working out OK between EU and Russia when it comes to energy. It doesn't matter whether they are on bad terms, rivals or even enemies. The gas will keep flowing. Russia will diversify delivery and Europe will seek to diversify supply. The gas will keep flowing.

Lumberjack's picture

And since Russia will be phasing out the Ukraine pipeline by 2019, why would they invade? They don't have to now and it would be a moot point after 2019.




Tsipras spoke with Putin hour and a half and came out happy and smiling


Note: I bet Vladimir was on time for this meeting.

0b1knob's picture

Russia is not a real country.

bid the soldiers shoot's picture

and Earth is not a real planet

but until something better comes along, we're stuck inside of Mobile with the Negroid blues again

philipat's picture

And without subsidised energy, Ukraine will become the new Greece and a perpetual drain on US taxpayers to the tune of Billions pa. As I'm sure Putin is saying privately "You want it? It's yours"......

basho's picture

but you are a real knob

0b1knob's picture

Putin's paid propaganda pushers have been spamming the meme the "Ukraine is not a real country" all over the internet for months.   I'm just throwing this meaningless nonsense back in their faces.

Notice the number of down votes seems to always settle around 30.   I suspect this is the number of Russian paid spammers currently active on ZH.   Most people (like you) would not understand or respond to such a post.

iClaudius's picture

Thank you for clearing that up for me. I'll point out for starters that I did respond to your post. I haven't read any article that claims that Ukraine is not a country, none, not anywhere. I seriously doubt there are any propagandists paid personally by Putin to do that sort of thing, and that is what you are stating. I would think he has much better things to do with his time and money. I didn't up or down vote you, just so you know, and no I'm not a paid propagandist for anyone in Russia, I live in Scotland. On the matter of the 30 (at time of writing) down votes you have received. How much do you think 'they' are being paid, one kopec a click, or a potato per click perhaps.

I have however read statements from the current Ukrainian government propagandists that, for example, Russian isn't a language, it's a degenerate offshoot of Ukrainian. In fact most of the propaganda from the western side has been ludicrous whilst that from the Russian side has been more level headed, though not much.

There are propagandist on both sides; which are worse?

All in all your comment that 'I'm just throwing this meaningless nonsense back in their faces.' sums up both your post perfectly, meaningless.

The Rolling Thunder's picture
The Rolling Thunder (not verified) Latina Lover Jun 20, 2015 10:00 PM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

The Delicate Genius's picture
The Delicate Genius (not verified) Latina Lover Jun 21, 2015 7:57 AM

But on "The Grand Chessboard" - if you're doing ok, I must be losing.


Sudden Debt's picture

Why would you invest billions if they’re talking about war???

This is all such a joke... 

kowalli's picture

gas will flow until it doesn't.

war can't stop it. New normal

basho's picture

the ussa is talking about war.

but then what else do they have to talk about

Lurk Skywatcher's picture

Norwegian backed whale coup under the Baltic Sea in 3...2...1...

kowalli's picture

Russia will have 3 main gas roots - EU, ME and China. We will have one big gas system in Eurasia

mb we will have one more to Japan.
It's pretty good from all points of  view, except of USA point.


Freddie's picture

The pipelines and connections that Russia-Gazprom has throughout EurAsia is incredible.    They are not going away.   I admire Putin and the Russians.

The USSA and EU-SSR leaders are gangster evil scum.

Russia and Europe had great free trade growing that was clossic comparative advantage economics/Adam Smith stuff.   It drove the z-oligarchs and z-State Department insance.  So they had to F**k the EU!

Europe needs to wake the f**k up.

Americans are too stupid to wake up.  Too many are like the Jonathan Pollard Zio-Con conservaives over at Free Republic and dumb liberal scum. Easily manipulated by TV and Zollywood.


geno-econ's picture

"Divide and rule" by whom ?  Seems Russia is exploring all options since Ukraine gas supply pipeline  has become unreliable because Ukraine has been been divided politically and financially---so what is new ?

WTFUD's picture


Fuck the EU & Turkey and Just pump to China for the next 10 years and let nature take it's course.

It's total BS that you supply Energy Products to Folks who are in cahoots with your ENEMY ( Vichy DC ) and Intent on Destroying You.

HenryHall's picture

Next up are pipelines to India, from Russia, via China. Paid for by each nation, the part on their own soil.

Unprecedented huge civil engineering.

trader1's picture

Will burning cheap gas just make us use more energy and delay the rise of renewables?


Putin must think global warming / climate change is all some big hoax for creating a one world government...



tired1's picture

When the warming hoax was getting steam (20 yrs ago?) Putin said that warmiing would be good for Sibera. Then he went along with the game.

HenryHall's picture

If you lived in Siberia you would welcome global warming too.

Volkodav's picture

Was warm winter

Siberians are good people

trader1's picture

So, when it works out in your favor, it's not a hoax then?


Moccasin's picture

The Russian geo-political shell game with pipelines and the US is the mark. Russia is in the drivers seat and that fact is not going to change. Russia will soon have the capacity to ignore the American puppet states of Europe and do business strictly with Eurasia. FU to the EU is the Russian motto going forward.

Freddie's picture


Europe will have a choice to be in the EurAsian Trade Zone and Silk road or be part of Englandistan run by the Red Shield and USSA aka Travonville/ObamaLand aka shithole USSA.

Element's picture

Yeah, until the neighbors in Eurasia also don't pay the gas bill in the building economic malaise. Russia is building a clientele of future debtors and defaulters, like everyone else.

q99x2's picture

Looks like a natural for a squid.

Wild E Coyote's picture

There is a 4th scenario.
Russia has learned after all those communist years, that protecting your own assets, building more wealth, are key to being a great country.
And Russians are simply building trust in all directions by providing the assets that so many covert.
From some point of view it is jus survival.
No need to think too hard about hidden reasons.
They are Russians not the Arab Jewish.

Freddie's picture

I hope Putin and all Russian remember that 25 million Christian Russians were murdered by NYC Bolsheviks starting in 1917.  Then 30 million more were murdered by Nazis which were really bankster/industrialists from USA/Germany/LOndon.  Nazism is really facist corporatism because Henry Ford, Rockefellers, IBM (Watson), Rothschilds, and endless others back Hitler and both sides.  War is a profit making entity.

After 70+ years of communist shit - the Russian people get looted yet again by the same Z-Nudelman-ZSoros type of people.   Then finally after 100 years of misery - they had a real savior of the nation in Putin.

I hope all Russians and the Orthdox Church remember who murdered and enslaved the Russian people in the past.  The Russians should never forget.  It is the same scum murdering people in the Ukriane - while looting the country.

The Delicate Genius's picture
The Delicate Genius (not verified) Freddie Jun 21, 2015 7:56 AM

no one can rob you like an economist with a plan to help you.

Anunnaki's picture

Cutting deals with European gas companies to bring pressure to bear when the unbelievably stupid Eurotards slit their throats on command when Peace Prize orders them to sanction Russian oil and gas

mijev's picture

Slightly OT: China is extending its high speed rail lines outside the country and from 2017 will complete the Hong Kong to Singapore link, via Thailand and Malaysia. You can already take the high speed train all the way from Harbin in the north east of China to HK and soon down to Hainan, which is the closest point to the new sand islands. IMO the US should have done the same thing for a fraction of the cost of invading Iraq and Afghanistan. 

I went to 70+ cities acrss China on the fast train. Imagine going from LA to Denver in five hours. Or taking a fast train down to Mexico or Belize, or North to Alaska and Canada.

delacroix's picture

they call it a high speed rail line, to justify the engineering. the trains using that track will be higher speed freight trains mainly, not passenger transport. oil, ore, equipment , grain, finished goods.  the silk road is a trade zone.

Lumberjack's picture
Belgium Unfreezes Russian Assets Seized In Yukos Legal Fight


Belgium has unfrozen the bank accounts of several Russian state entities operating in the country, which had been seized as part of an ongoing legal battle over the demise of the Yukos oil company.


beaglebog's picture



Mr Putin needs "us" to believe that there will be alternative routes to supply Europe ... to believe that the Russsians will continue to trade with their enemies.


The art of war is "deception".   I think that he is buying time, whilst his alternatives are being engineered.

samjam7's picture

I am sure Russia is more than happy to supply Europe with Gas because this means extra cash. But in case Europe does not behave he will have more leverage on it in the future when he does not depend as much on Europe as he does now. Europe receiving its gas from the middle east or the US as America wishes would not make it less dependant and is in my opinion no better than dependency on Russia. 

The Delicate Genius's picture
The Delicate Genius (not verified) Jun 21, 2015 7:55 AM

Europe can easily make up an impending shortfall of gas from Russia from Israel's Leviathan, don't you know?

Israel Proposes Natural Gas Pipeline to Southern Europe ...

Aw, but I'm sure they'll be cool with Washington helping Qatar to build a pipeline through war-torn Syria, and pay to keep rebuilding it - because Syria is all about Qatari gas pipelines - I've read.