Russia, Turkey Fight Spreads to Energy Sector

The fallout from the Turkish downing of a Russian jet last month is growing ever more dangerous, with even the seemingly untouchable energy sector now apparently the latest casualty of increasingly chilly ties between Ankara and Moscow.

On Wednesday, Reuters reported that construction work had been halted at the $20 billion Russian-led Akkuyu nuclear power plant in Turkey, which was meant to be the culmination of Ankara’s half-century quest to develop nuclear energy. Akkuyu’s apparent woes come just days after Turkey and Russia froze a natural gas pipeline that was at the heart of the two countries’ “strategic partnership” unveiled one year ago.

Since Turkish fighters shot down a Russian bomber that violated its airspace in late November, relations between the two countries have gone dramatically downhill. Russian President Vladimir Putin decried Turkey’s “stab in the back,” and slapped a host of economic sanctions on Ankara. Russian defense officials accused Turkish President Recep Tayyip Erdogan of underwriting the Islamic State by buying stolen oil from the terror group — an accusation Turkey threw right back at Moscow.

Over the weekend, Erdogan reiterated his threat to find energy suppliers other than Russia. And on Wednesday, Turkish Prime Minister Ahmet Davutoglu accused Russia of “ethnic cleansing” in its targeting of the Turkmen minority in northern Syria.

The threat to energy cooperation between Moscow and Ankara underscores how quickly relations have deteriorated. Those ties were widely seen as immune to the escalating war of words because Turkey needs Russian energy, and Russia needs the Turkish market. What’s more, the Turkish Stream gas pipeline was meant to let Russia bypass Ukraine when it exports natural gas to Europe, a long-time Russian objective.

But Putin seems determined to punish Turkey for shooting down the Russian jet, even if economic sanctions and energy-sector halts threaten to do more damage to the Russian economy and cash-strapped Russian firms than to Turkey itself. Gazprom, the gas giant, has sunk billions of dollars into pipes and other infrastructure that can be used only for Turkish Stream. And Turkey, Gazprom’s second-biggest export market, is about the only place in Europe where demand for natural gas is set to grow.

“Basically, Gazprom is held hostage by Putin’s foreign policy endeavors, time and time again,” said Sijbren de Jong, an analyst at the Hague Center for Strategic Studies.

The situation at the Akkuyu nuclear plant is not entirely clear. Turkish officials told Reuters work had stopped; Russian media said construction continues. Rosatom, the Russian nuclear energy firm overseeing the project, did not respond to requests for comment.

And while nobody doubts the Turkish Stream pipeline is on hold, that’s not just because of bilateral tensions. The project had been plagued from day one by disputes over what price Turkey would pay for the gas. Moreover, the pipeline’s initial capacity had already been cut in half.

“If Moscow wanted a way out of Turkish Stream, then the downing of the jet has handed them a golden opportunity,” said Andreas Goldthau, an analyst of energy geopolitics at Harvard University’s Belfer Center.

The two countries can’t even agree who definitively pulled the plug on Turkish Stream. Russian officials say they killed the pipeline. Erdogan says Ankara axed the project.

Whatever ultimately is its cause of death, the demise of Turkish Stream would be a serious blow to Russia’s long-term energy goals, which hinge on cutting Ukraine out of its role as the middleman for gas exports to Europe. Russia’s desire to bypass Ukraine has only intensified over the past two years, due to the military conflict between Moscow and Kiev over Crimea and the eastern part of the country.

Turkish Stream, if it ever passed muster with the European Union and was built to full capacity, would have given Russia the ability to export significant amounts of natural gas to southern Europe while avoiding Ukraine.

But icing that project leaves another controversial pipeline — the so-called “Nord Stream” expansion across the Baltic Sea to Germany — as Russia’s only fallback if it wants to cut Ukraine out of the picture. Nord Stream has the backing of several big Western European energy companies and many German officials. But it still faces a huge number of legal, financial, and regulatory hurdles before it can become a reality.

That means Russia’s furious reaction to its new enemy in Ankara could end up making it harder for Moscow to stick it to its old enemy in Kiev.

“Putin will now double down on Nord Stream, but that bet is risky,” said de Jong. “If they can’t overcome all the hurdles, then they should get used to living with transit through Ukraine.”

Photo credit: Adem Altan/AFP/Getty