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According to the information on the energy sector, which leaked yesterday from government members, it was agreed during the meeting between Alexis Tsipras and Vladimir Putin in Moscow to explore the possibility of building a gas pipeline to carry Russian gas from the Greek-Turkish border and on Greek territory, states Harris Floudopoulos in his analysis for capital.gr.

Putin's words made it clear that the pipeline "with the new route will provide for Europeans’ fuel needs and will allow Greece to become one of the main power distribution centres." The Russian President mentioned the prospect of Moscow funding the project, stressing that the Russian side was ready "not only to credit some joint projects that are discussed today", but also "to solve the problems in the financial and credit relations." Putin added that "the possibility of an immediate advance payment in return for future profits and repayment of the loan still at the start of operation of the pipeline" was also explored.

The advance payment against future profits that would be received after 2019 is part of the package agreement that might accompany the pipeline.

According to sources, the agreement on the pipeline construction would include the issue of cancelling the take or pay clause (i.e. the fine imposed on Greece in 2014 because of reduced consumption of natural gas, below the minimum agreed quantities), and the prospect of reducing natural gas prices from 2019 onwards, i.e. when the pipeline begins to operate, or even earlier.

What are the conditions for the project to be launched? Firstly, the details of the Greek-Russian agreement should be discussed, as stressed at yesterday's meeting. This means that negotiations would begin between the Russian Gazprom and probably the Greek gas company DEPA on the establishment of the company that would implement the construction of the pipeline, but also on the means of financing the project, which Greece believes would cost about 2 billion euro. According to sources, the Russian proposal for the sale of shares of DEPA was rejected, and a joint entity would eventually be created which would also direct the Russian private capital to finance the project.

Now, however, the whole discussion about the pipeline is complicated by the assurance of the Greek Prime Minister that the rules and laws of both Greece and the European Union will be fully respected. "We respect our commitments to all organizations we are part of," said Alexis Tsipras, allowing for many possible interpretations of the scope of the agreement with Russia on the pipeline, which would be a continuation of Turkish Stream on Greek territory.

What does European law mean? 

Why is the statement of the Greek Prime Minister about the respect of European law important? The Turkish Stream pipeline or its continuation through Greece to Europe is an alternative route chosen by Russia and Gazprom after the failure of South Stream - a project in a more advanced stage, the construction of which had already started and which was intended to pass through Bulgaria. However, when Bulgaria requested from the relevant authorities in Brussels (the Directorate "Energy" and Directorate "Competition") a construction permit for the pipeline, the European Commission did not give the green light, as the Russian side did not agree to comply with the European framework that mainly provides for two things. One is the separation of production companies from the companies that manage the energy infrastructure, such as pipelines (i.e. the framework prohibits a company to be both a natural gas producer and an operator of the pipeline) and the other is to secure free access of third parties to the pipeline, so that other companies or gas other than Russian gas passes through the pipeline. In the case of South Stream, Russia did not comply with these conditions in European law. Now, if in the case of the Greek part of Turkish Stream Moscow and Gazprom adopt these rules, the pipeline will be realized.

Why does Brussels react and what is the position of Russia?

An interesting question is why are there reactions from Brussels? The truth is that if there is no compliance with the European law in the field of energy, then a country’s own pipelines become an instrument of the monopolistic or oligopolistic dependence of the customer on the supplier - the construction of gas pipelines is accompanied by long-term contracts that usually involve onerous covenants for the customer. An example of this is the case of Greece that in the recent past was buying natural gas at much higher prices compared to the countries where there was competition and a free market. On the other hand, with regard to the construction of Gazprom’s own pipelines, the Russian side is overcoming the recent efforts by European countries to differentiate the sources of energy supply. Experts note that while the project for the Nabucco pipeline existed (which would connect the Caspian Sea and Central Europe passing through Bulgaria and the Balkans), South Stream that had a similar route was kept alive too. When the Nabucco project was terminated and TAP that passes through Greek territory was eventually selected, Russia chose the pipeline Turkish Stream that has a similar route as well. For some it is not at all accidental, since both projects are considered to be directly competing. The Russian side and the Greek government have publicly stated that they disagree with this approach. Brussels and Washington (which closely follows the developments in the energy field in the region of Eurasia, stimulating energy security policy and differentiation of energy suppliers) have a completely different position. Therefore, the European Commission but also the US State Department has expressed a clear position against all parties involved, including Turkey and Greece. It is indicated, however, that if there is a different approach and compliance with European law in terms of energy and competition, then the case totally changes as well as the parameters of the equation.

The German Nord Stream

Yesterday the Greek Prime Minister however stressed in a statement that Greece would respect the European law and treaties that "are impossible to allow some countries, and not to allow others, to have agreements in the field of energy." This statement is a clear criticism of the Russian gas pipeline that involves Gazprom and other European companies, and that ends in Germany, namely Nord Stream. Indeed, this pipeline is permitted by the European Union and has been given an exclusive licence to transport Russian gas.

The difference, however, is that the construction of Nord Stream and the issuance of its licence was followed by the voting and enacting (with the support of Greece at that) of the notorious Third Energy Package, i.e. the currently effective energy treaty of the European Union, which no longer permits the construction of such projects with exclusive access of only one producer-supplier.

Turkish Stream project

One of the main routes for the export of Russian gas to Europe and the Balkans passes through the Ukrainian pipeline network. Due to the continuous crises between Moscow and Kiev, Russia decided ten years ago to bypass Ukraine with the help of two pipelines, namely Nord Stream that stretches from the North Sea to Germany, and South Stream that, by crossing the Black Sea, would have reached Bulgaria and thence, by crossing a number of countries in South East Europe, would have reached central Europe. However, the plans changed after the refusal of Brussels to issue a licence for South Stream but also after the developments associated with the TAP pipeline, which will be the first pipeline carrying 10 billion cubic metres of non-Russian gas to the Balkans (Greece , Bulgaria, Albania and possibly other countries such as Montenegro and Croatia). It has been decided to use the existing infrastructure and the pipes that have already been bought for South Stream in the Black Sea by moving the endpoint of the gas pipeline in eastern Thrace. From there, the pipeline will continue and will carry natural gas to the Greek-Turkish border. The Greek section will cross Macedonia, supplying gas to Skopje and from there, to Serbia, Hungary and to the ultimate goal, i.e. Austria and the distribution unit Baumbarden. The capacity of Turkish Stream will be 47 billion cubic metres or almost five times greater than that of the TAP pipeline. The precondition for the construction of Turkish Stream is to find buyers and, of course, to be approved by the relevant authorities in Greece and Europe.