Turkey pursues arbitration against Gazprom's gas price

Turkish state-owned pipeline firm BOTAS states that it has brought dispute over natural gas price discount with Russian state-run company Gazprom into international arbitration

Photo by: AA
Photo by: AA

Natural gas lines from a Gazprom installation

Updated Oct 28, 2015

Turkey’s state-owned pipeline company BOTAS announced that the dispute with the Russian energy giant Gazprom over natural gas price discount has been carried out into the International Court of Arbitration to receive its promised gas price from the company.

Russian Energy Minister Alexander Novak announced in late July that Gazprom and BOTAS reached an agreement on a 10.25 percent discount concerning natural gas prices. However, Novak also indicated at the time that the deal has not yet been signed.

"Gazprom has failed to sign the amendments regarding the agreement on price discount between the two companies," a BOTAS statement said over the issue on Oct. 27, according to Reuters.  

Turkish energy ministry spokesman has stated that, "on October 26, an international arbitration case was filed related to purchases of natural gas from Russia in the period from December 29 2014," speaking to the Russian news outlet TASS on Tuesday.

Energy Minister Ali Riza Alaboyun also said that “we have indicated that the prices are too high, so we asked a discount. Russians have previously agreed with us on the discount, but the deal could not be signed between us under the time limits of the contract,” speaking to the Turkish press during a ceremony on Tuesday.

“We have been mandated to go to arbitration in a certain time of period according to the terms of our contract. We have demanded that the promised discount [by the Russians] to us should be at an equal level with Europeans. Now the arbitration will probably make the ultimate decision after this point,” he added.

Though Turkey is a Russian state-run natural gas company - Gazprom’s second biggest export market after Germany, Russia is the number one gas supplier of Turkey's natural gas, the country could not get the same price as Germany from the Russians - which is what Turkey has requested from Russia, the energy minister recently complained.

Gazprom’s spokesman Sergei Kupriyanov has said that "filing an arbitration claim is one of the options under the contract terms. The possibility of an out-of-court settlement, as well as an arbitration decision still remains,” in a statement made to Russian Ria Novosti.  

Reuters has reported, referring to Turkish energy officials, that Russia has tried to link the gas discount with the activation of the Turkish Stream pipeline project.

“The two issues could never have been interrelated each other,” Alaboyun previously declared, refusing Russia's efforts to connect the two topics.

He also criticised Russia saying that the country has not pursued a decisive agenda concerning the Turkish Stream, although it has demands from Turkey about the project.

Gazprom Deputy Chairman Alexander Medvedev announced in mid-September that the Turkish Stream pipeline project will not be implemented by the end of 2016 ,as it has previously been planned because of continuing disagreements between Turkey and Russia.

In addition, Gazprom’s top manager Alexei Miller recently announced that the company will provide Turkey two billion cubic metres of gas through Turkish Stream pipeline which is currently not a working project, rather than Ankara’s request of an additional three billion cubic metres through the Blue Stream.

The new Turkish Stream project is an alternative pipeline which is planned to bring gas to Europe through Turkey, bypassing Ukraine, with an aim of pumping 63 billion cubic metres (bcm) of gas per year - 47 bcm of which will be delivered to Europe - by 2020. The rest of 16 bcm will be allocated for domestic use in Turkey.

The pipeline will have four lines and each one will have an annual capacity of 15.75 bcm and the project is planned to lay out a total of 660 kilometres of pipelines through the old South Stream route beneath the Black Sea.

Gazprom CEO Miller said in early October that the company has now plans to build the two lines of the pipeline with an annual total of 32 billion cubic metres of gas, effectively downgrading the planned capacity of the project.

Turkey-Russia relations have been quite tense since Russian jets violated Turkish air space near the Syrian border on Oct. 3, during their air strikes against mostly anti-Assad groups in the country, elucidating strong protests from Turkey, US, and the NATO alliance.

Turkey and Russia have prominently disagreed with each other over the Syrian civil war. Turkey and the US have consistently defended to topple the Assad regime backing opposition groups, while Russia has supported the regime since the beginning of the conflict.

TRTWorld and agencies