Turkey, Russia Sign Retroactive Deal Granting 10.25 Pct Discount, End Gas Dispute
Turkey has also purchased S-400 air defense missile systems from Russia, a deal that has raised concern among Turkey’s NATO partners
May 27, 2018 (BE2C2) — Russian state gas giant Gazprom said on Saturday it had signed a protocol with the Turkish government on a planned gas pipeline and agreed with Turkish firm Botas to end an arbitration dispute over the terms of gas supplies.
The protocol concerned the land-based part of the transit leg of the TurkStream gas pipeline, which Gazprom said meant that work to implement it could now begin.
Turkey had delayed issuing a permit for the Russian company to start building the land-based parts of the pipeline which, if completed, would allow Moscow to reduce its reliance on Ukraine as a transit route for its gas supplies to Europe, according to Reuters, VOA News and Tass.
A source said in February the permit problem was related to talks between Gazprom and Botas about a possible discount for Russian gas.
Turkish President Tayyip Erdogan said earlier on Saturday Turkey and Russia had reached a retroactive agreement for a 10.25 percent discount on the natural gas Ankara buys from Moscow.
Gazprom said in the Saturday statement, without elaborating, that the dispute with Botas would be settled out of court.
Speaking at an election rally in eastern Turkey’s Erzurum, Erdoğan said a $1 billion payment will be made to Turkey under the deal, which followed a Turkish request for a discount on gas first made in 2015.
Turkey had gone to arbitration after its request was not met, Erdoğan said.
“After long talks, we reached agreement on a 10.25 percent price discount on the natural gas we receive from Russia, covering the years 2015 and 2016,” he said.
“With the agreement which we have reached, a payment of $1 billion will be made to our country to cover the discount for the natural gas we received in those two years,” he added.
Turkey is the biggest consumer of Russian gas after Germany.
Russia’s Gazprom, which has a de facto monopoly on Russian gas exports by pipeline, supplies gas to Turkey’s Black Sea coast via an underwater pipeline called Blue Stream with a capacity of 16 bcm per year.
Moscow froze talks on the $12 billion TurkStream project when Turkish-Russian relations plummeted after the downing of a Russian fighter jet on the Syrian border by Turkish forces in 2015.
At the time, Moscow imposed trade and travel sanctions against Turkey.
But a letter of regret from Erdogan on the death of the plane’s pilot led to normalization of ties, and the two countries have attempted to improve relations in recent months.
The 910-kilometer TurkStream project is one of several major undersea pipeline projects the Kremlin has pushed in recent years in an effort to bypass older pipeline networks that transit through bitter rival Ukraine.
NordStream sends gas directly from Russia, under the Baltic Sea, to Germany, while a proposed South Stream was supposed to send Russian gas under the Black Sea to Bulgaria.
South Stream was shelved in 2014 after EU opposition and the crisis over Russia’s annexation of the Ukraine’s Crimea Peninsula.
Turkey has also purchased S-400 air defense missile systems from Russia, a deal that has raised concern among Turkey’s NATO partners specially the US over questions about it integration with Western defense systems and of Ankara’s tightening of relations with Russia.
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