Shortly after President Aliev inaugurated the first phase of the Southern Gas Corridor and announced the opening of the TANAP pipeline on June 12th, Russia beefed up its wartime machine to block competition to its gas supplies in Turkey, Greece and Bulgaria. The timing of the agreement between the Turkish government and Gazprom on the onshore segment of Turkish Stream matched to the day the news from Azerbaijan. Ostensibly, this a legitimate defense of Gazprom’s market shares, having already lost substantial chunks in the diversified market of Turkey and Greece – where it accounts for 50-60% of the gas imports.
When the periscope moves on to Bulgaria – the bounty is a complete and seemingly durable monopoly. Yet, even in this small market, the Russian state company has fresh reasons to worry – its market share and revenues from gas sales are due to tumble. In the event Bulgaria opens its transit infrastructure to alternative gas streams from the Southern Gas Corridor, which then reach CEE markets further north –
Gazprom will be in real trouble.
Building new transit infrastructure is costly and time consuming – hence the Kremlin’s strategy of playing on its incumbent status, booking the capacity of the key Trans-Balkan Pipeline to disallow Romanian offshore gas reaching Turkey, Bulgaria and Greece, while denying SGC-sourced gas from reaching Ukraine, Hungary, Austria and Slovakia via the TBP.
The Bulgarian Gas Hub so far has had only one pivot – Russian gas. Neither the Bulgarian government, nor the state companies – BEH, Bulgargas or the operator Bulgartransgas – have publicly voiced any interest, nor have they taken steps to invite gas producers or traders operating in Ukraine, Romania, Turkey, Greece or elsewhere to use the free capacities on the Bulgarian part of the TBP. The politicians and corporate managers have excelled in the art of liberalization and diversification of the gas market with one player – Gazprom, subjugating their policies and behavior to its interests in the region.
Bulgaria and the Bulgarian energy companies are not alone, nor the pioneers in such endeavors.
Gazprom successfully navigated its Hungarian partners in blocking the competition in Central Europe of gas produced by Exxon and OMV in the Neptune block after 2020.
Late in 2017 – the Hungarian gas transmission system operator FGSZ shocked the EC and other operators in the region by declaring that it is not interested in transiting gas via BRUA, but rather trading it via the interconnector Romania-Hungary. Mr. Orban’s move dealt a lethal blow to the EC-sponsored BRUA project and to the whole EU concept of interconnecting transmission systems, generating free flows and greater competition.
This was Act One of the gas play of Gazprom – block Black Sea gas. Although the potentially traded quantities could hardly impress the markets – up to 6-7 billion cubic years annually,- they could potentially make the difference when added to the rest of alternative gas supplies against a relatively small consumption base.
Time for Act Two – block competitors using Russia’s leverage in Bulgaria…
by denying fair and free access to Bulgaria’s gas transmission system, which is key for alternative gas flows from the Southern Gas corridor to reach Central and Eastern Europe.
The Bulgarian government seems unable to use its trump cards against Gazprom and the latter’s fear of losing shares and revenues. In spite of all the hype of the Russian company releasing transit capacities and denying Sofia transit revenues, it is highly unlikely that it will facilitate the entry of competitors to the region via Bulgaria. Moscow will not give up easily or voluntarily capacity use in regional infrastructure. Currently the Russian company is contemplating a more complex game – formal compliance with EU directives, using proxies and strategic partners as fronts.
The key contention point is the Trans-Balkan pipeline,
which is the gate to the gas markets in CEE as the cheapest and easiest access route for alternative north bound gas flows.
When it comes to the Kremlin’s interest it is always geopolitics. Moscow’s has been working to circumvent EC directives, as it is clear that Gazprom is unable to trade or transit gas in Europe unless it allows others to buy its gas at EU borders. That is easier said than done – as what is permissible for Jove (the German, Dutch, French traders in Nord Stream) – to broker Russian gas to other importers in the EU, is not permissible to the bull (the regional players in the CEE and SEE region). In spite of hopes and promises, neither Turkish, nor Bulgarian or Greek companies have been allowed so far to trade Russian gas above standard contracted volumes and beyond national borders. This might change but will not come soon as amendments have to be made in the supply and transit contracts. Moscow faces a choice – either to invite its EU strategic partners and use proxies in the SEE region for joint action – including those in Nord Stream-2, or find a regional replacement among its closest and largest partners.
Most of the ”strategic” bypass moves by Gazprom to ward off competitors failed.
The Blue Stream did not manage to crowd out Azeri gas. Moreover,
Baku was keen to engage in a head-on collision as it benchmarked its sales prices to Gazprom minus 12%
(this is the latest price formula for Botas). Blue Stream – 2 never materialized for economic reasons.
The gameplan to flood the Turkish market with Russian gas via many entry points – via the TBP, the Turkish and Blue Stream, show Moscow’s resolve and frustration in securing preponderence and in preempting competition beyond Greece and Bulgaria.
With the imminent alternative gas supplies and swap deals, even before the TAP becomes operational, importers in Greece and Bulgaria could benefit from the excess gas in the Turkish market, following the launch of the TANAP. This is exactly what Gazprom is scared of – customers buying gas at gas exchanges and from traders, instead of visiting Moscow, talking to the Kremlin and buying Russian gas at new delivery points at the Turkish-Bulgarian and Turkish-Greek borders – essentially what the onshore segment of Turkish stream will provide.
No need to roll out new grand infrastructure at the moment – all the Kremlin needs is to secure an entry for its gas via Turkish stream to the Trans-Balkan Pipeline. The TBP already has a direct and reverse mode capacity above 15 billion cubic meters that could be used to ship Russian or alternative gas northward (the so-called Northern Route to Ukraine, Serbia and Romania) or southward to Turkey and via the TANAP and the TAP to Greece and Italy.
End of Part One