Russia Update: Turkey to Sue Russia’s Gazprom Amid Growing Deterioration of Relations

Turkey announced that it was suing Russia’s state gas monopoly Gazprom, in the latest deterioration of relations between Moscow and Ankara following Russia’s air strikes in Syria, Russia’s encroachment on Turkish air space, and Turkey’s shooting down of a Russian drone, the Financial Times reported.

Turkish state-owned pipeline company Botas this week filed a case for international arbitration to seek a price discount for Russian gas supplies, Gazprom confirmed.

Last December the two companies signed a memorandum which envisaged a yet-to-be-defined price discount for gas supplies in 2015, according to a Botas statement quoted by Russian state news agency Tass. Since an agreement defining the price discount has yet to be signed, the Turkish company is entitled to seek arbitration, it said.

The move comes amid rising tensions between the two countries over Syria. Recep Tayyip Erdogan, Turkey’s president, earlier this month angrily criticised Russian incursions into Turkish airspace and warned that Turkey could find other suppliers for its gas.

Turkey is Gazprom’s second-largest export market after Germany, accounting for 27.3bn cubic metres of its gas sales last year, while Russia supplies more than half of Ankara’s gas imports.

TASS claimed that in fact the agreement on a 10.25% discount had already been reached.

Last year in connection with sanctions over the war in Ukraine, EU countries cancelled cooperation with South Stream, a Gazprom project long feared by Ukraine which had once begun to compete with the EU’s now abandoned Nabucco project.

But while slowed, cooperation on Nord Stream, a pipeline to bring Russian gas directly to Germany bypassing Ukraine and Poland, continued. An agreement was then signed in September between Royal Dutch Shell, EON AG and Engie to expand Nord Stream under the Baltic Sea, despite Poland’s objections that Russia was splitting the EU.

With strained relations with the EU, President Vladimir Putin turned to Turkey to launch Turkish Stream, a pipeline that would also deliver gas to the EU bypassing Europe which would involve Greece.

Relations had already been warming with Turkey for some time as trade increased and Moscow also agreed to build a nuclear power station for Ankara.

The West has also pursued Turkish cooperation regarding the war in Syria and on South Corridor energy projects.

Now the Turk Stream deal is stalled; Ankara insisted on a discount Russia would not give, and Moscow scaled down the project.

When Russian airstrikes began, President Erdogan also said Turkey might suspend purchases of gas, Trend.az reported. Gazprom retaliated by saying an existing request form Turkey to increase gas supply through Blue Stream would only be delivered through Turk Stream if Ankara agreed to the new pipeline, Turkey’s Daily Sabah reported.

The upcoming Turkish general election November 1 could have some effect on relations with Russia. President Erdogan, whose country has been beset by terrorist attacks and the Syrian refugee crisis, failed to obtain a ruling majority in June.

— Catherine A. Fitzpatrick