Gazprom Seeks to Strengthen its Role in Turkey and Greece

Gazprom is seeking to take advantage of Turkey’s precarious energy situation and Greece’s financial woes to strengthen its influence in southeastern Europe. Although fears will undoubtedly surface over Moscow’s role in the region, for both Ankara and Athens the financial power of the Russian energy giant are very welcome.

On 20 March Gazprom officials said that the company was conducting feasibility studies on a gas storage facility somewhere in Turkey. No details on capacity or location were provided, but the officials said that the country was a promising market given its perennial energy woes.

Over the winter a combination of soaring demand and sporadic supply cut-offs from Azerbaijan and Iran forced Ankara to boost imports from Russia. With Tehran and Ankara now disputing their gas contract in an international arbitration court, and Azerbaijan unable to sate Turkey’s growing hunger for gas, the lesson was clear – you can count on Russia.

This reliability may help to take some of the edge off political concerns about overdependence on Russian energy. Gazprom is also alleviating direct fears by moving beyond the upstream sector and investing in the mid- and downstream sectors. In August 2009 it became a majority shareholder in the Bosphorus Gas Corporation, a middleman and has expressed interest in buying Turkish electricity grids and gas distribution networks – Istanbul’s gas grid would be the biggest prize of all.

Gas storage is one of the weak links of Turkey’s energy network. Existing facilities, even with the addition of a new World Bank project to add another 1.3bcm at Tuz Golu in southern Turkey, are insufficient to give Turkey the capacity it requires.

So a substantial new storage facility would give Gazprom extra commercial clout. It may raise concerns about Moscow’s influence, paralleling European fears about Russia using shady means to seize control of Europe’s energy infrastructure. However the political utility of storage facilities is limited, and could actually strengthen the EU’s Southern Corridor project, Russia’s rival, by giving Ankara more flexibility on storing and re-exporting Caspian gas.

The potential ramifications of Gazprom buying Greece’s DEPA, announced on 19 March, are more serious. The Greek financial meltdown has prompted the government to look at assets which it can sell off: DEPA was an obvious choice. The invitation was made at the end of February, and will give successful bidders a 34% stake in the company (half of the Greek government’s current stake).

The privatisation bid was launched just after the Interconnector Turkey-Greece-Italy (ITGI), one of the contenders to take Azerbaijan’s gas to the EU, was kicked out of the race by the Shah Deniz consortium in Baku. The financial crisis was at least partly responsible for ITGI losing out as a nominee for the ‘southern branch: that role is now filled by the Trans-Adriatic Pipeline (TAP), in which DEPA is not a stakeholder.

DEPA has nevertheless put a brave face on proceedings, insisting that the Southern Corridor still needs ITGI, but it is clear that ITGI is out of the running. Given Greek political backing for the project, it would have been difficult for Gazprom to buy into DEPA whilst ITGI was still in the race. It would have forced the Russian giant to acquiesce in a project which Moscow did not support and views as competition.

But with ITGI gone and TAP likely to be beaten by central European routes, Greece’s main role is as a transit state for Gazprom’s giant South Stream pipeline. A successful bid by Gazprom would buttress South Stream by ensuring that Russian money and commercial influence was brought to bear on Athens.

This is hardly the only problem that South Stream faces, of course, but having extra leverage in Greece will ensure that the southern branch of South Stream, across to Italy, is secure. A recent confirmation has also locked in Slovenia, further ensuring that the northern route to Austria is guaranteed.

Neither Gazprom’s bid for DEPA, nor its plans for gas storage in Turkey, will necessarily come to fruition. However if they are successful, it will strengthen Gazprom’s hand in the Southern Corridor. For Turkey this is undoubtedly a good thing, and may actually give more weight to its ambitions to be a hub for European gas supplies.

For Greece the picture is more mixed: it would increase Greek dependency on Russia and confirm its commitment to South Stream, which is widely viewed as a threat to EU energy security. But Gazprom has deep pockets: this, for both Athens and Ankara, is what counts.

Alex Jackson is a political risk analyst at Menas Associates in London, focusing on the Caspian region. He also writes independently on politics, security and energy in the wider Caspian region. This article does not necessarily reflect the views of his employers.