Russian Gas Company Makes Concessions in Bid to Resolve Pipeline Dispute With Turkey

As it strives to resolve a dispute involving deliveries to Turkey, Russian natural gas giant Gazprom faces a double-edged threat. If the concessions offered so far by Gazprom fail to induce Turkish officials to resume gas imports, the future of the new Blue Stream pipeline could be jeopardized. Conversely, if Gazprom's concessions are viewed as too generous, other customers may demand revisions in existing contracts, undermining the company's profitability.

The Turkish-Russian dispute over gas deliveries has simmered since March, when Ankara suspended imports via the Blue Stream pipeline, a $3.5 billion project that began operations only in late 2002. [For background see the Eurasia Insight archive]. Since the suspension, Russian and Turkish company representatives and government officials have engaged in often contentious negotiations. Turkish leaders are seeking reductions in the price and the volume of the Blue Stream gas deliveries, citing weak domestic demand.

Gazprom CEP Alexei Miller is expected to arrive in Ankara on July 10 for direct talks with Turkish Energy Minister Hilmi Guler and leading Turkish industry officials. Miller's scheduled visit follows a recent offer by Gazprom to lower the price for gas by an unspecified amount.

Russian commentators believe the Miller's visit will mark the critical point of the Blue Stream dispute. "Gazprom is losing the [Blue Stream gas price] battle to Turkey," said a commentary published in the Russian business newspaper Finansovye Izvestiya. "If the upcoming negotiations