Russia expects to revive major joint projects with Turkey, including in energy sector - Putin

Lahey Büyükelçiliği 11.08.2016

Russia expects to revive a number of major joint projects with Turkey, including those in the energy sector, Russian President Vladimir Putin said at a meeting with members of the Russian and Turkish business communities in St. Petersburg on August 9, in which the Turkish leader also took part.

"We expect to revive the most far-reaching joint projects," he said.

Putin particularly mentioned the energy sector, in which the two countries have been cooperating for more than 30 years.

He pointed out in this respect that Russia is the largest and the most reliable natural gas supplier to Turkey.

Russia will be gradually lifting special economic restrictions from Turkish companies, Russian President Vladimir Putin said at a joint press conference with Turkish President Recep Tayyip Erdogan on Tuesday.

"Following the press conference, we will have an opportunity to talk substantively with the heads of major companies from the two countries. We intend to gradually lift the special economic measures and restrictions imposed earlier on Turkish companies," he said.

"We intend to attach particular significance to increasing investment, commodity flows, and the implementation of promising projects," he said.

The Russian-Turkish mixed intergovernmental commission on economic cooperation should meet in the fall, and the relevant ministries have been instructed to hold a meeting of the joint strategic planning group in the first half of 2017, he said.

"Energy occupies a key place in trade and economic cooperation between Russia and Turkey. In this context, we discussed major joint projects in this sector, the continuation of which will require certain political decisions. By the way, I'd like to point out that Turkey has already made certain decisions on a number of major projects of which we talked earlier - for instance, those concerning the construction of the Akkuyu Nuclear Power Plant and the Turkish Stream gas pipeline system," he said.


Russia and Turkey are launching active preparations to build the first strand of the TurkStream gas pipeline to supply Russian gas to Turkish consumers Russian Energy Minister Alexander Novak told reporters.

The first line would be completed in the second half of 2019.

"We need to work this matter through in the near future. Firstly, we have already provided Turkey with a road map and Turkey has the draft of an inter-governmental agreement. Today we have received further confirmation that Turkey is interested in this, and that they have received all commands from their leadership to speed up the process of considering these documents. We're talking above all about the draft of the intergovernmental agreement, the road map which defines in addition the whole algorithm for the actions to be taken and then obtaining all necessary permits for surveying, construction and so on," Novak said.

"We'll now be in close contact with our colleagues, with Turkey's energy ministry, with the companies Gazprom and Botas, we'll be acting on the tasks set by our leadership. We have already started negotiating in earnest," he said.

"Now we're looking more practically at what needs to be done first and foremost, which is to build a first strand [of the pipeline] specifically for be consumers in Turkey," he said.

A decision by Turkey would be sufficient to build the first line, he said.

But the construction of a second or any other TurkStream lines to supply Russian gas to Europe without guarantees from the European Union is not being discussed, Novak said,.

"As for a second line, the president said at today's press conference that here we would need guarantees from the European Union that there will be a need for this infrastructure, and that southeastern countries in Europe will receive gas via this infrastructure," he said.

Novak said work on this issue would continue with the EU. "We together with our Turkish partners want to see this project happen, and European countries are interested. It remains to resolve the technical issues and obtain the necessary agreement and guarantees that this infrastructure will be in demand," he said.

He said the first line would involve a great deal of work, finding a contractor and agreeing on the configuration and financing. "Such a large project is a whole range of measures, some of them technological in nature - it's agreeing on the configuration, financing issues, choosing the contractor and so on. Therefore the first line will be completed in keeping with the road map, that's December 2019," Novak told the Rossiya 24 TV channel in an interview.

Russia and Turkey hope to be able to approve a draft intergovernmental agreement on the TurkStream gas pipeline in October, Novak told the Rossiya 24 TV channel.

"We've agreed with our partners to set up a working group for this project. An intergovernmental agreement to build at least one line across the Black Sea bed to Turkey with the possible addition of a second line will be drafted and approved in the framework of this," Novak said.

Each line would have the capacity to transport 15.75 bcm million of gas per year.

"We'll start working on this soon. We hope to be in a position to approve the draft intergovernmental agreement in October," he said.

"And this agreement will be signed and work on the first line will begin after all permits for construction and surveying in Turkish waters have been obtained. This work will be carried out soon," he said.

Meanwhile, Gazprom and Turkish regulators will update the approvals Turkey granted for the construction of the South Stream gas pipeline in Turkish waters for the new Turkish Stream project
, the Russian gas giant's CEO, Alexei Miller said in an interview with TV channel Rossiya 24.

"We plan to now continue negotiations on the basis of the work that was done at the first stage. I can say that a very large amount of work was done at one time, surveys were done and a study was done on the impact on the environment in the Turkish economic zone. And now the Turkish side intends to confirm the permit that was granted to Gazprom for the section in the Turkish economic zone. This permit was granted at the time for the South Stream project, and this will be the essence of this new permit," Miller said.

"The Turkish side also intends to issue a permit for surveys in the Turkish economic zone from the boundaries between Turkey and Bulgaria in the Black Sea to the Turkish coast, and surveys for the receiving terminal for the Turkish Stream project on the Turkish coast," Miller said.

"We have now received information from the Turkish side that they are also interested in continuing negotiations on supplies of gas through Turkey's territory to the European market," Miller said.

The objective of South Stream and the Turkish Stream project that replaced it in 2014 is to bypass Ukraine. Therefore, both pipelines were designed to go around Ukrainian waters and run through Turkey's exclusive economic zone. Some 660 km of Turkish Stream run along the same approved route of its predecessor South Stream and 250 km run along a new route to the European part of Turkey.

Russia has already prepared the Turkish Stream project for practical implementation. Infrastructure in Russia is completely ready to feed gas into the Black Sea pipeline, pipes have been purchased for the offshore section and contracts have been signed for building the offshore pipeline. Russia submitted the draft intergovernmental agreement to Ankara before relations between the countries deteriorated last November.

In recent years, the configuration of the project has been revised, with plans downscaled from four 900-km lines to two lines, one for the Turkish market and one four southern Europe.

The pipeline is expected to be continued from the Turkish border by the ITGI Poseidon project, through Greece and across the Ionian Sea to southern Italy.

South Stream

Bulgaria wants to come back to the development of the South Stream gas pipeline, but to date, the country has given Russia no guarantees that works will be resumed under the project, Russian President Vladimir Putin told a news conference on August 9.

Putin recalled that Russia had attempted earlier to start implementing the project on construction of a gas pipeline from Russia to Bulgaria to be laid on the seabed of the Black Sea, but was unable to receive necessary permits, neither from the EU nor from Sofia.

"We have not received the approval from the Bulgarian authorities for the entry into Bulgarian territories. Now we see and know that the Bulgarian side wants to return to the project but we incurred losses due to Bulgaria's refusal. And now intentions are not enough in themselves. We need some hard guarantees of legal nature but we haven't any," Putin said.

Gas discount issue

The issue of discounts on the price of Russian gas for the Turkish market is no longer acute due to the decline in the global energy prices, Russian Energy Minister Alexander Novak said.

"This issue is not being touched today. We know that the Turkish side posed this question last year. But today we know that the price of hydrocarbons, oil and gas, is significantly lower than in the same period when the talks were held. Therefore, this issue needs to be approached from the other side, to look at the extent to which prices in accordance with the formula for supplies to Turkey are market-based and competitive. If the Turkish poses this issue, we will have a discussion," he said.

Russia and Turkey reached agreement on a reduction in the price of gas back in 2014, but that agreement was linked to permission to build the TurkStream pipeline. Due to election of a new government in Turkey, signing of the intergovernmental agreement on construction of the gas pipeline was postponed, and documents concerning the discount went unsigned. Subsequently, in October 2015, Turkish Botas filed a lawsuit seeking retroactive revision of its contract from December 29, 2014.

Akkuyu NPP project

Turkey is ready to grant strategic investment status to the Akkuyu Nuclear Power Plant project, Turkish President Recep Tayyip Erdogan said at a joint press conference with Russian President Vladimir Putin.

The Akkuyu Nuclear Power Plant project has been somewhat stalled but can well be sped up, with the investments in it amounting to about $22 billion, Erdogan said.

"The Akkuyu project has been somewhat stalled now, but I think that, if we make the necessary steps, we can add some speed to this work. This involves significant investment, about $22 billion," Erdogan said.

The Akkuyu NPP should be a significant power generating asset for Turkey, he said.

"The Turkish Stream is also a very significant step, and it will be put into practice in the form of two lines," he said.

Turkey and Russia also agreed to set up a joint investment fund and resume the work of bilateral commissions, Erdogan said.

He said he was sure that Russian investors would be appealed by a lot of new projects in Turkey, as well as Turkish investors would find such projects in Russia.

"We expect you, the businessmen, to take major steps in terms of pursuing and implementing projects that would make a contribution to economic development between our two countries," he said.

Meanwhile, strategic investment status during construction of the Akkuyu nuclear power plant stipulates profit tax discounts for 20 years and VAT refunds for the construction period, Energy Minister Alexander Novak said in an interview with Rossiya 24.

"We also held negotiations earlier with our partners from Turkey in order to give this project the status of a strategic investment. This means that, with the implementation and the granting of such status under current Turkish legislation, the project will get the possibility of tax breaks, including on profit taxes - a reduction of the rate for 20 years, as well as the possibility of refunding value-added tax during the construction of the plant. In addition, this is a possibility to attract more investment on preferential terms for the implementation of this project. In other words, the payback period of the project and its economics become far better," Novak said.

He also recalled that in June Turkey's parliament passed changes to three laws that significantly simplify obtaining licensing and permit documentation. "In other words, the objective that we planned to carry out together two years ago has now been finally implemented by the Turkish authorities," Novak said.

"As soon as all of the approvals are finally received, and actual construction already begins - the actual construction of the nuclear plant - this project should launch the first phase within seven years," Novak said.


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