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Cancelling South Stream Was No Defeat for Russia

  • Gazprom made it clear it won't submit to EU's conditions
  • But will forge ahead to make deals with new customers
MORE: Business

This post first appeared on Russia Insider

The quote from Alexei Miller (CEO of Gazprom) we reproduce below should kill any idea that South Stream may be revived. 

Miller says it clearly: Gazprom will not trade in Europe on the EU's conditions if these mean submitting to the Third Energy Package.

By trying retrospectively to impose the Third Energy Package on the South Stream project the Europeans have wrecked their relationship with Gazprom - their key energy supplier, which as a result is forging ahead cutting deals with new partners such as China and Turkey (and before long Japan and Korea).

On the subject of whether this is a victory or defeat for Russia, South Stream’s cancellation is not a victory for Russia since the Russians have been obliged to call off a project that they had clearly wanted. 

However it is not a defeat for Russia because the Russians have succeeded in finding quickly in Turkey an alternative customer/partner albeit one who will pay a lower price. 

Price is only one part of a business relationship. The potential gains for Russia in finding in Turkey a reliable and predictable partner able to make its own independent decisions based on mutual self-interest and the likely geopolitical gains from forging a long term relationship with Turkey (which will surely outlast the Erdogan government) arguably outweigh considerations of price.

What would have been a defeat for Russia (and a sign of the desperation some of the more overexcited commentary in the US is talking about) would have been if Russia had capitulated to the EU's demands by accepting the Third Energy Package and by pressing ahead with the South Stream project on that basis.

That is something the Russians have made clear they will not do. 

From Interfax

"Europe will have to care about delivering Russian gas from Turkish border - Gazprom CEO Miller

MOSCOW, Dec 6th (Interfax) - After the closure of the South Stream gas pipeline project, European companies should care themselves about the delivery of Russian gas from the Turkish border to the end consumer in line with the Third Energy Package, Gazprom CEO Alexei Miller said in an interview in a Saturday analytical program on the Rossiya-1 television channel hosted by Sergei Brilyov.

"The principle of our strategy in relation to the European market is changing. The decision on stopping South Stream is the beginning of an end of our operation model on the market, within which we oriented ourselves toward supplying [gas] to the end consumer on the European market," Miller said.

"But you can't win love by force. If the buyer doesn't want the purchase to be delivered home, well, then perhaps he needs to get dressed and go to the store, and if it happens in winter, get dressed warmer.

Well, he could also take some package, of course, which can well be the Third Energy Package, but what counts most is that it should not be empty. In our case, the store is certainly the delivery point" on the Turkish-Greek border, Miller said.

"The Third Energy Package does not apply to Gazprom's new project instead of South Stream, i.e. a gas pipeline across the Black Sea to Turkey and further to the border with the EU (Greece), he said."

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