Russia’s energy reliant economy running high, dry

Russia sees Ukraine as unreliable transit route to export gas into Europe leading Russia to seek alternatives

Photo by: Reuters
Photo by: Reuters

Russian Foreign Minister Sergei Lavrov attends a news conference in Moscow, Russia, January 26, 2016


Ukraine was an unreliable transit route for exporting Russian gas into Europe, Russian Foreign Minister Sergei Lavrov said on Tuesday in a news conference in Moscow.

With almost half of its fiscal revenue relying on energy, Russia is searching for a new transit route to export Russian gas into Europe. 

It ran a budget deficit of 2.6 percent in 2015, the Russian Ministry of Finance said.

Putin had called for greater diversification of the Russian economy almost 15 years ago in 2001 while addressing the Russian parliament and added that oil and gas generated some 30 percent of federal budget revenues, according to the Russian Ministry of Finance, this figure had reached 44 percent in 2015, potentially putting Russia’s economy in trouble this year.

Turkey supplies more than half of its gas demand from Russian sources.

However, tension escalated between Turkey and Russia after Turkey shot down a Russian warplane that invaded Turkish airspace, which led to Turkish President Recep Tayyip Erdogan to meet with Qatari Emir Sheikh Tamim bin Hamad Al Thani to discuss alternative gas agreements.

Turkey’s state-owned energy company BOTAS signed a preliminary agreement with Qatar’s national petroleum company to purchase LNG over a long-term period, leaving Russia in a lurch.

Vladimir Putin had proposed a natural gas pipeline project known as the Turkish Stream which was planned to bring gas to Europe through Turkey bypassing Ukraine with an aim of delivering 63 billion cubic metres of gas per year by 2020, but Russia had failed to meet Ankara's demands.

The project was shelved by the Turkish government.

The proposal was announced by Russian President Vladimir Putin on 1 December 2014, during his state visit to Turkey. 

Erdogan said, “There have been reports in the press that the Turkish Stream project has been stopped by Russia. Our dear brothers do not believe such lies. On the contrary, Turkish Stream is a project which has been shelved by us for some time because our demands have remained unmet [by Russia],” in a meeting on innovation, in Istanbul Congress Centre.

“We need to know what is true about this issue. Therefore, there is no connection between recent incidents [concerning downing of Russian jet] and Turkish Stream project,” he added.

The recent incident has caused a political crisis between the countries, which have strong economic ties with each other, leading Turkish and Russian leaders to issue warnings to one another.

Russia, having put its economy in risk by tensioning ties with its neighbouring countries, now suggests that the Nord Stream-2 gas pipeline project with Germany would be mutually beneficial for Russia and Europe, Lavrov stated.

TRTWorld and agencies