The influence of geopolitical relations on international projects on the example of the Turk stream

In the era of close international economic relations, the implementation of sanctions on one country and the response it receives, affect all the sectors of the world economy and the development of international projects in particular. Cessation of the development of international projects in the field of oil and gas industry in Russia is quite significant due to the dependence on sale of these minerals abroad.

The subject of this study is to analyze the dependence of international projects from geopolitical relations considering TurkStream as an example.

In recent years, "Gazprom" has been building pipelines to diversify gas supply routes and to minimize transit risks. From the end of 2005 paving the land section of the pipeline "Nord Stream" was carried out on the territory of Russia. In October 2012 the supply of gas in two pipelines was launched into commercial operation. Construction of the "South Stream" gas pipeline began in December 7 2012. But 1 December 2014, the Russian President Vladimir Putin declared that Russia wouldn’t continue the implementation of the "South Stream" because of unreasonable view of the European Union.

TurkStream construction was supposed to start on the Russian coast near the town of Anapa and run over 900 km through the Black Sea to come ashore in the Thrace region of Turkey. Turk Stream would directly connect the large gas reserves in Russia to the Turkish gas transportation network to provide reliable energy supply to Turkey and south-east Europe. "Gazprom" was supposed to construct the marine section of the system which would consist of two parallel pipelines running through the Black Sea. The pipelines would be laid in sea near Anapa, on the Russian coast, and come ashore on the Turkish coast about 100 kilometres west of Istanbul near the village of Kiyikoy.

This project was developed after the deterioration of relations with Ukraine. Yet construction did not start. Russia stopped talks about TurkStream which was aimed to increase export of Russian gas to southern Europe via Turkey. It was connected with a Su-24 attack aircraft that was shot down by a Turkish jet near the Syrian-Turkish border in November 2015. This action was followed by other restrictions such as grocery embargo.

However, after finding a compromise between the authorities of Turkey and Russia on 07.02.17, Putin has signed ratification. The ratification will provide annual revenue of export duties to Russia in the amount of approximately US $ 750 million only in respect of the first pipeline intended for gas supplies to Turkish buyers. The budget will not incur the cost of construction of the pipeline spends 7 billion euros and it was commercial investment. As for the demand for gas in Europe, it is supposed to increase to 526 bln cubic meters by 2030, demonstrated in chart 1. It should be noted that 93 bln should have been supplied by TurkStream, which is the equivalent of $ 13.7 billion.

Chart 1 - demand for gas in EU

Implementations of new international projects are aimed at developing trade for further maintenance of these projects. Development of trade leads to a capital flow result in increase in investment. With the help of investments new plants are supposed to be built and old equipment updated. Demand for technological equipment enables the development of production and scientific cooperation. Production and scientific cooperation allows participants of the projects to use scientific achievements that are to be engage in technological integration. So technological integration in this term leads to implementation of new international projects.

Chart 2 - The impact of international projects on scientific and technologicalprogress

Transport and energy project

Technological integration

Production and scientific cooperation

Investments

International trade