Igor FedykRight now, Russia is finding schemes to bypass sanctions and continue supplying its oil and gas to Europe. One of such schemes, created in partnership with Turkey, involves “laundering” Russian gas on its territory and selling it in Europe as “Turkish gas blend.” To learn more about how this scheme works, who’s involved, and whether Europe can ever truly break free from Russian energy, NGRN interviewed Martin Vladimirov, Director of the Energy and Climate Program at the Center for the Study of Democracy (Bulgaria).
In your article for Politico, you write that “Europe cannot look away while Gazprom launders Russian gas exports.” How is this happening?
It’s the same model being used for Russian oil. Did you know that at least 20% of the fuel used in Europe is actually Russian? But it doesn’t get there directly. Instead, it passes through third countries like Turkey, Egypt, or Tunisia. And right now, Brussels can’t stop these imports because there are loopholes in European law. Specifically, there’s no rule saying European consumers can’t import fuel from third countries. So, once Russian oil is processed or moves through another port, blocking it from entering Europe becomes nearly impossible. Now, Russia is trying to do the same thing with its pipeline gas. This allows them to dodge sanctions and keep their foothold in the European gas market.
Who is Russia’s partner in this gas laundering scheme?
First of all, it is Turkey. Turkey is working to pass as much Russian gas as possible through its gas infrastructure and export it to Europe as part of a “Turkish gas blend.” Turkey’s end game here is to help Russia bypass the Ukrainian gas transport system entirely and shift all of its gas volumes to routes through Turkey.
But Turkey alone is not enough in this scheme, because this gas must somehow get to Europe. And the only window to Europe for laundered in Turkey Russian gas is Bulgaria…
That’s right. To transport Russian gas from Turkey to Europe, they have to use Bulgaria’s infrastructure. There are currently two routes: the first is the European extension of the TurkStream pipeline (in Bulgaria, they call it the Balkan Stream), and the second is the Trans-Balkan Pipeline, which is being used in reverse mode. The TurkStream is already fully loaded with Russian gas under existing agreements. The Trans-Balkan Pipeline, though, is currently empty. However, under a contract between Gazprom and Bulgartransgaz, the entry point for the Trans-Balkan Pipeline, Strandzha 1, is fully reserved for Gazprom until 2030. Plus, in early 2023, Bulgaria’s Bulgargaz signed an agreement with Turkey’s Botas, giving Turkey exclusive rights to sell gas through Bulgaria using the Strandzha 1 entry point. These two deals allow Gazprom to push more Russian gas through Bulgaria’s pipeline system and sell it as “Turkish blend” to Romania and then to Moldova, Ukraine, Hungary, and Slovakia.
But isn’t the Trans-Balkan Pipeline part of the Vertical Gas Corridor project, which the EU is backing as an alternative to Russian gas?
Yes, it is. Since 2016, the idea behind the so-called Vertical Gas Corridor has been to use the Trans-Balkan Pipeline to move non-Russian gas from the Mediterranean northward, through Bulgaria and Romania. But right now, it looks like even if the Vertical Gas Corridor gets built—and honestly, there’s not much work being done on it, except maybe in Bulgaria—it’ll end up carrying Russian gas. That’s because Russian gas is still cheaper than the LNG that’s coming to Europe from other suppliers, like the United States. So, in reality, we’re building infrastructure that Gazprom will likely use for transporting its gas to Europe under the guise of “Turkish blend.”
Can the European Union do anything to stop this Russian-Turkish scheme?
There are a few options. First, the EU could declare the deal between Bulgargaz and Botas illegal. The agreement violates European competition laws because it gives one company, which isn’t even in the EU, exclusive rights to sell gas. The European Commission’s Directorate-General for Competition is currently investigating this. Another option would be for the EU to treat any gas purchased from Turkey as Russian gas, unless there’s 100% proof that it isn’t. Finally, the EU could impose a tax on all Russian gas. Right now, Russia is undercutting its competitors by dumping cheap gas on the market, and a tax would level the playing field. However, such a decision should be made at the level of the entire EU, so that the companies that buy Russian gas start preferring its alternative: LNG or any other.
So why hasn’t the EU implemented any of these measures?
The current structure of the EU makes it hard to act. Investigations and enforcement depend on individual member states, and they’re not willing to take these steps. And the Americans let us down a bit here…
What do you mean by that?
The U.S. missed an opportunity to flood Europe with affordable LNG. They’re selling a lot of gas to Europe, but at higher prices than Russian gas, often above the European market average. European consumers aren’t happy about that. And of course, they’ll keep buying Russian gas because it’s cheaper. The U.S. government could encourage American companies to lower gas prices for Europe. They can afford to do so because U.S. gas is produced at costs that are 7-8 times lower than the market price in Europe. Transporting it is costly, but that’s still a small part of the overall price. U.S. traders don’t want to give up their huge profits. They’re saying, “If we can’t sell at the prices we want in Europe, we’ll just export to Asia—China, Japan, Korea. They’ll buy everything.” So, the Biden administration should come up with a mechanism to encourage the US exporters to sell gas to Europe at lower prices. They could, for example, be offered tax breaks, some kind of one-time subsidy, or something that would compensate them for their “losses.”
Another thing the U.S. could do is sanction the TurkStream pipeline. Without such sanctions, the EU can’t block Russian gas on its own. Because in the EU, sanctions are imposed unanimously, and countries such as Slovakia, Austria and Hungary will definitely vote against. But if sanctions come from the U.S., EU countries would have no choice but to follow them.
But none of that has happened…
Exactly, and that’s an issue with the current U.S. administration. The Democrats are trying to please everyone. In our region, they gratify especially the Greeks, who “launder” Russian energy resources the most. By the way, when Ukraine blacklisted Greek companies last year, the U.S. immediately pressured its government to remove them from the list. This shows just how powerful the Greek lobby is in Washington. As a result, Greece continues importing large amounts of Russian oil and gas.
Given all this, how should we interpret the EU’s plan to eliminate Russian energy imports by 2027?
It’s more of an aspiration than a concrete plan. It’s not legally binding, and there’s no real enforcement mechanism. Right now, it seems unlikely that the EU will completely stop buying Russian energy by 2027. This is partly because Europe isn’t seriously working toward this goal. They say, “There used to be a lot of Russian gas, and now there’s much less. So we did our work.” But this is really wishful thinking.