Russia's Gazprom has refused to participate in the gas distribution hub project in Turkey, despite the fact that it opened up new opportunities for increasing imports of blue fuel to European consumers in the absence of available alternative routes.

Ukrainian Energy has figured out how the Kremlin corporation's withdrawal from the partnership could affect Turkey's strategic plans to create a powerful logistics center in the country for transporting gas to Europe.

Reasons for Russia's withdrawal

According to Bloomberg, Gazprom's top management has stopped any discussions about participating in the development of the Turkish gas hub at both the corporate and government levels. On the other hand, Ankara's official position on the hub has not changed, and it seems to remain open to cooperation with Moscow. But a Turkish official, speaking on condition of anonymity, admitted that "the process has been dragging on for quite some time."

Experts believe that Gazprom’s rejection of the hub in Turkey means its final decision to close “any potential chances” of regaining its lost positions in the European market. Although this was obviously not easy to admit due to the negative financial consequences: before Russia’s full-scale invasion of Ukraine, consumers in the EU provided the company with about $8 billion in revenue every month.

With the Nord Stream shutdown due to sabotage in the fall of 2022 and the completion of transit through Ukraine on December 31, 2024, Gazprom considered Turkey – already connected to Russia by two major gas pipelines – as a bridge to return to Europe. But after several years of studying various options, the company concluded that this project was no longer viable.

“Despite the fact that Russian President Vladimir Putin has been publicly promoting the idea of a Russian-Turkish hub since October 2022 at a high political level, it immediately faced serious challenges. Turkey does not have free export pipeline capacities towards Southern Europe, and it also did not want to grant Gazprom the rights to jointly market its gas, and with them, broad influence over the project. In addition, the European Union began to actively promote a complete ban on Russian gas imports by the end of 2027,” Bloomberg explains the reasons that have reduced the attractiveness of broad cooperation with Turkey for Moscow.

The agency’s sources also claim that the idea of a Turkish hub did not originate from Gazprom, but arose in political circles close to the Kremlin. When Putin expressed his support, many managers of the corporation were surprised, but its export division set about “actively implementing it.” For some workers, it seemed like a chance for a “fresh start” after losing a significant part of the most profitable - European - market.

According to Putin’s plans, Turkey was to receive from Russia volumes of gas equivalent to the capacity of the destroyed Nord Stream 1 pipeline - about 55 billion cubic meters per year. The development of the hub also required the construction of new pipelines across the Black Sea in addition to the existing threads of the Turkish Stream and Blue Stream, which connect the two countries. But as the details were studied, Gazprom gradually lost interest. Turkey insisted that it should independently sell the gas delivered to the hub, and Gazprom’s role should be limited to supplying the resource. The Kremlin did not agree to such limited conditions.

How the Turkish Hub Came About

Although the idea of creating a gas center in Turkey was most actively promoted in the public sphere by Russia, it is a mistake to present it as the initiator and author of this project. Turkey has been striving to become a regional energy hub since the early 2000s. For about two decades, until 2022, Moscow did not actually participate in this process. Therefore, the main factors that made the hub promising were not related to mandatory access to Russian gas, but to Turkey's geographical location next to the EU and its interest in deepening ties with European energy markets.

For its part, the European Union supports the creation of gas hubs as a tool for transparent pricing and competitive trading, designed to reduce the impact of political risks on the energy market. This is provided for in the Third Energy Package, which entered into force in September 2009. Ideally, a gas hub is not just an infrastructure facility, but a market with high liquidity, modern regulatory mechanisms and the ability to trade gas regardless of its geographical origin through an electronic exchange platform.

After the start of full-scale aggression against Ukraine, Turkey became Russia's largest consumer of its gas and a potential "big window" to Europe. This prompted the Kremlin to intensify rhetoric around the hub - with the expectation that Russian gas would be able to find new ways to reach European consumers. But Washington's pressure actually blocked Turkey's opportunities to implement commercial schemes that could contribute to the growth of Russian gas exports to Europe.

As Ukrainian Energy reported, at the end of last year, the US Treasury Department imposed sanctions on Russia's Gazprombank, an institution closely linked to the state monopoly Gazprom. This made it impossible to deepen cooperation between Turkey and Russia in the gas market, despite the great temptation for such a development. Existing gas contracts were also at risk.

After the Ukrainian transit route for the supply of Russian gas to the EU was stopped, Turkey became a key transport intermediary partner for Gazprom. The combined capacity of the pipelines from Russia to Turkey reaches almost 50 billion cubic meters per year - and today it is the last artery connecting Russian gas and the European market.

Special restrictions

In early May, the European Commission presented a Roadmap on how EU countries can completely eliminate their dependence on gas from Russia by the end of 2027. But still, the Russian resource will not be able to completely disappear from Europe's energy balance. Laszlo Fritsch, the commercial director of the Hungarian gas trading company MVM CEEnergy, is sure of this. "In the end, money is the key, and Russian gas is still relatively cheap compared to other sources, including liquefied natural gas (LNG). The market situation is such that it is increasingly necessary to take into account the issue of availability at a price in order to ensure demand," he noted.

In total, in 2024, the EU received 52 billion cubic meters of blue fuel from Russia, of which 32 billion cubic meters were delivered by pipelines and 20 billion cubic meters by sea tankers in the form of LNG.

Laszlo Fritsch also noted that gas trade has peculiarities that make it impossible to accurately determine how much Russian gas may be contained in the so-called "Turkish Blend", which is transported to the EU and includes blue fuel from various sources - not only from Russia, but also from Azerbaijan and Kazakhstan.

The same mixture, he reminded, is supplied to Hungary, which has a current agreement with Gazprom until 2036 for an annual volume of 4.5 billion cubic meters of gas, of which 3.5 billion should come through the "Turkish Stream". The geographical location does not provide the country with direct access to the sea for the organization of economically profitable alternative supplies, so its authorities are wary of the complete termination of gas contracts with Russia, which is promoted by the European Commission.

Extraordinary plans

The course of the ongoing discussion around gas exports to the EU market via the Turkish route may be further affected by changes in the structure of pipeline owners.

Boyko Borisov, the former prime minister of Bulgaria and now the leader of the largest populist political party GERB, announced last month that the country is in talks with the American hedge fund Elliot Management about the acquisition and possible modernization of the Bulgarian part of the Turkish Stream, which will increase its capacity by several billion cubic meters.

The upcoming deal, according to market sources at Montel, may involve the financial structure Bulgarian Energy Holding, which includes the state supplier Bulgargaz and the operator of the main gas pipelines Bulgartransgaz. Two Bulgarian lawmakers said that any sale of gas assets to a foreign entity must be approved in advance by the local parliament, and all details must be public and transparent.

“If such agreements are concluded, it will help perpetuate Europe’s dependence on Russian gas,” said Martin Vladimirov, an energy security expert at the Center for the Study of Democracy, a think tank based in Bulgaria.

Turkish ambitions

Although Russia has refused to participate in the development of a gas hub in Turkey, this does not affect Gazprom’s exports to the country. Ankara, for its part, has not rejected plans to create a gas hub, which could become its diplomatic trump card in future negotiations on cooperation with Brussels. Developing a domestic gas market can also strengthen its geopolitical influence in the Black Sea and Mediterranean regions.

To achieve this ambitious goal, Turkey is gradually reducing its dependence on Russia by developing LNG imports and diversifying pipeline exports. The strategy has already yielded some results. While in 2020 Russian gas accounted for over 50% of the Turkish market, in 2024 its share will have decreased to 40%.

Instead of Gazprom, the Turkish state-owned company BOTAS is considering the Azerbaijani corporation SOCAR as a priority partner (according to the results of 2024, it accounted for 20% of gas imports to Turkey). In addition, BOTAS is seeking to buy more gas from Qatar, Algeria and the United States through its own LNG terminals (their total capacity reaches 25 billion cubic meters of gas per year).

Ankara is also making efforts to open the way to the EU for domestically produced gas. In particular, it is about the large-scale development of deposits on the Black Sea shelf, which began in April 2023. But its drilling activity in the Mediterranean Sea is unlikely to bring benefits in relations with Brussels.

The reason is territorial disputes with EU member state Cyprus. It was because of them that high-level talks on energy trade between Turkey and the European Union were suspended in 2019. In a statement, EU leaders noted that such meetings “will not be held temporarily” due to the conflict over the rights to drill gas wells in the Mediterranean Sea.

“Despite the existing potential, the energy dialogue between the EU and Turkey is effectively blocked due to decisions taken in 2019. We consider this a situation in which everyone loses. Turkey is one of the key energy arteries. Whether to use it or not is up to the European Union,” concluded Faruk Kaymakci, Turkey’s ambassador to Brussels.

Svitlana Dolinchuk, specially for “Ukrainian Energy”