"THE CLIENT IS READY"

"The customer is getting ready". This phrase from the sparkling comedy "The Diamond Arm" spoken by the character named Gesha Kozodoyev (played by outstanding actor Andrei Mironov) perfectly suits the vicissitudes of the negotiations around the supply of Turkmen gas to Europe.

Ashgabat, which has been showing a sluggish interest in the Trans-Caspian gas pipeline project for many years, seems to be ready for an active discussion of its gas exports to the EU.

A Turkmen trip

Based on the results of the negotiations between the heads of oil and gas departments of Turkmenistan, Azer-baijan, and Turkey and senior representatives of the EU, which took place in Ashgabat, a declaration on developing cooperation in the energy field was signed. The document defined the issue of "carrying out joint projects on laying transnational transit pipelines, in particular, on natural gas supply from Turkmenistan to Europe".

Moreover, the parties set up a working committee on the level of deputy energy ministers of the three states and EU representatives to better study the issue in more detail. Vice President of the European Commission Maros Sefcovic was especially optimistic following the results of the Ashgabat meeting. In an interview with Reuters, he noted that the EU hoped to have deliveries of Turkmen gas as early as 2019.

"We have a good rapport. For Turkmenistan, it is important to diversify its export opportunities, while for the EU, it is important to diversify its imports," Sefcovic said.

"In this format (energy ministers of Azerbaijan, Turkey and Turkme-nistan), we discussed all aspects relating to the Trans-Caspian pipeline ... We made a very big step in the strategic direction. Everybody spoke very positively," Sefcovic added.

According to Sefcovic, there is a political decision now that Turkmenistan will become part of this project (Southern Gas Corridor - SGC) and will supply the European direction. Furthermore, Georgia is going to join the quadripartite format in the future, as it is an important transit country in terms of the Southern Gas Corridor.

The access to the European gas market has become particularly urgent for Turkmenistan in recent years, after Gazprom reduced its gas purchases. The Russian monopoly, which used to procure annually up to 40-50bn cu m of gas from Turkmenistan just a few years ago, has decreased this volume ten times, with the plan for 2015 standing at merely 4bn cu m. And though Ashgabat exports its natural gas to China, the European market still remains a tasty morsel.

In the context of the intensification of the conflict between the West and Russia, the EU is ready to lobby for any options of alternative energy supplies.

In addition to the Turkmen gas, options for supplying Iranian gas are now being seriously considered in the light of a possible final settlement of the Iranian nuclear programme. Moreover, Sefcovic discussed other gas supply options with Turkmen President Gurbanguly Berdimuhame-dow in Ashgabat, exploring the feasibility of delivering gas not only via the Trans-Caspian pipeline, but also through the Iranian territory. While this option may be more expensive, as compared with the construction of a 300-kilometre gas pipeline under the Caspian Sea, because of the greater length of the pipe, it may serve as a temporary solution given the unresolved legal status of the Caspian Sea. Meanwhile, the Iranian route is also advantageous for the SGC main actors, as the Trans-Anatolian Gas Pipeline (TANAP) still remains the main transit corridor for Azerbaijani, Turkmen and Iranian gas in Turkey.

In any event, the TANAP provides Iran with a real opportunity to find its niche in the European gas market, and Tehran is very seriously considering this possibility.

"The construction of TANAP and TAP will be completed in 2018. We have plenty of time to get acquainted with the projects in detail. Currently, our experts are studying this issue. We will announce our decision after obtaining the result. There is a certain procedure for buying equity in the TANAP. We will take steps being guided by national interests, of course. We need to increase gas production in order to participate in the energy projects. If our production remains at the projected level until 2018, we will be able to take part in the regional projects. It is difficult to say anything concrete now. The main thing is the implementation of our plans for production. We will also observe the processes taking place in the world. We do not wish to compete with any country, we just want to sell our gas," Iran's Ambas-sador to Azerbaijan Mohsen Pakayin said in an interview with the APA news agency in Baku.

In general, the TANAP project already enjoys great interest of a number of companies. In particular, the Turkish government is in talks with a couple of companies about obtaining a stake in the pipeline, as Minister of Energy and Natural Resources Taner Yildiz said.

"TANAP is a major project. Demand for it grows together with the growing confidence in the implementation of such projects. We will meet with one or two companies to discuss specific goals," Yildiz said.

All issues concerning the Trans-Adriatic Pipeline (TAP) project, which is the continuation of TANAP, are also being resolved. The Italian government has approved the TAP construction project despite the concerns of certain communities about environmental compliance. In their joint statement, Greece, Italy and Albania have prolonged the TAP's status as an exclusion from some of the rules of the EU's Third Energy Package (which, in particular, provides for the separation of gas sale and gas transportation businesses), including exemption from third party access. This joint statement was made after the adoption of a corresponding decision by the European Commission.

In the Greek hall, in the Greek hall! Shame on you!

As regards the TAP issue, the position of the new Greek government led by the SYRIZA party gives ground for certain concern. Initially, SYRIZA, which came to power through parliamentary elections, declared its intention to revise the TAP construction agreement by increasing the transit rates and reducing the cost of buying Azerbaijani gas. However, Greek Energy Minister Panagiotis Lafazanis, who visited Baku in March, was apparently told that this was not the way to do serious business and that the agreements already signed should be honoured.

Right now the Greek government has decided not to sell a 66 per cent stake in the gas transmission system operator DESFA to the State Oil Company of Azerbaijan Republic (SOCAR). The agreement on the sale of DESFA for 400m euros was signed in December 2013. Later, however, the European Commission blocked the deal, having decided to examine its impact on competition in the Greek gas market. Azerbaijan keeps telling that SOCAR will not gain a monopoly position as a result of the deal, as the gas delivered to Greece via the TAP pipeline within the framework of Phase 2 of the development of the Shah Deniz [Sah Daniz] gas field is owned by a consortium of companies in which the Azerbaijani side has only a 16.6 per cent stake. Despite this, SOCAR actively cooperates with experts of the European Commission, responding to all requests. But the Greek government has again wedged itself in the matter. According to Bloomberg, Greece is considering the sale of a 49 per cent stake in DESFA to SOCAR. The final decision will be made after the European Commission has completed its investigation. Meanwhile, the Government of Greece should be interested in this issue most of all, as the sale of this asset to SOCAR will make it possible not only to attract significant funds to the state budget, but also to obtain a very reliable investor which has already proved its high skills in the management of gas distribution networks in Azerbaijan and Georgia. In case that such an uncertain situation continues, SOCAR may well abandon the idea of purchasing DESFA and concentrate on building a gas distribution network in neighbouring Albania, whose government fully supports the initiative of the Azerbaijani company in this project.

Of late, the new Greek government has actively used the deterioration of relations between the EU and Russia, trying to bargain certain preferences for itself. Greece, which conducts negotiations with the IMF and the EU over the allocation of additional funds and writing-off of part of its 300bn-dollar-worth debt, has intensified contacts with the Russian government. In particular, Greece and Russia are trying to agree on the extension of the planned Turkish Stream to the Balkan Peninsula. According to Greek Prime Minister Alexis Tsipras, Russia may allocate up to 3bn euros as an advance in case of signing a contract on the construction of a transit pipeline through Greece. The construction of this gas pipeline with a planned annual throughput of up to 47bn cu m of gas will be carried out by a Russian-European consortium, which will make it possible to follow the rules of the European Union's Third Energy Package. Russia's permanent representative to the EU Vladimir Chizhov said that this pipeline would "most likely be called the Greek Stream, given the uneasy relations between Greece and Turkey".

The "Misty Stream"

However, the Greek government is clearly jumping the gun with the possibility of building a transit gas pipeline. While Minister of Energy and Natural Resources of Turkey Taner Yildiz and head of Russia's Gazprom Alexey Miller agreed to start gas supplies via the Turkish Stream as from the end of 2016, there are still no legally binding agreements on the construction of a gas pipeline and gas transit to Europe through Turkey. The EU still maintains an attitude of non-acceptance of this route, insisting on the priority of Ukraine's gas transport system to supply Russian gas to Europe. This was once again reiterated by Deputy Chairman of the European Commission Maros Sefcovic. "The provision of Ukraine with a modern and functioning energy infrastructure is a common interest of Ukraine and the EU," Sefcovic said.

According to his words, consumers of Russian gas have long-term contracts providing for gas deliveries to Eastern or Central Europe rather than to the Turkish border. Sefcovic noted that the Ukrainian route was economically attractive and expressed hope that the relations between producers and consumers would once again be based primarily on economic principles.

Meanwhile, the Russian Federation and Turkey are still unable to agree on discounts on Russian gas. Though Gazprom has recently reached an agreement with Botas, a state-owned corporation that accounts for the bulk of Russian gas supplies, on discounts to private importers, which will allow for the reduction in gas prices from 374 dollars to 260 dollars per thousand cubic meters in the second quarter, the negotiations have reached an impasse. According to the Russian newspaper Kommersant, Botas pays 370 dollars for Russian gas, while prices in the European market are 100 dollars less.

As a result, Botas has increased the supply of spot LNG, which costs 50 dollars less than Gazprom's supply. The situation has a negative impact on the Russian monopoly, too, as in April alone Turkey reduced Russian gas imports by 38 per cent, compared to last year.

Turkey does not wish to promote the Turkish Stream without obtaining a discount. However, purely economic obstacles in the way of this pipeline have been exacerbated by political problems over the last weeks, as Ankara was clearly displeased with the visit of Russian President Vladimir Putin to Yerevan in connection with the 100th anniversary of a "genocide" in 1915 invented by the Armenians.

According to the Izvestiya newspaper, it was for this reason that a meeting of the Russian-Turkish joint strategic planning group, scheduled for 16 May in Antalya, was cancelled.

Certain European countries are also sceptical about the prospects of the Turkish Stream. The statement by Serbian President Tomislav Nikolic was particularly surprising: "I think that the implementation of the Turkish Stream (in Serbia) is not possible, and we shall not receive gas from this direction".

Serbia has always been noted for its loyalty to Russia; in particular, it has not acceded to the EU sanctions against Russia. But in this case Belgrade has apparently adopted a pragmatic approach.

It is clear that Turkey is going to greatly benefit from the implementation of the Turkish Stream which, coupled with the Southern Gas Corridor, will ensure for Ankara a serious position on the issue of gas transit to Europe. However, Turkey understands that the prospects of the Russian project are very vague, and therefore the country is in no hurry to open all the ways for its implementation, seeking to get as many benefits as possible.

Meanwhile, the deepening of a political chasm between the West and Russia is not conducive to the implementation of such large-scale projects with uncertain prospects.