Does the cancellation of South Stream signal a fundamental reorientation of Russian gas export policy?
The cancellation of the South Stream gas pipeline across the Black Sea may signal a fundamental reorientation of Russian gas export policy. Its replacement by similar pipelines direct to Turkey, and the abandonment of Gazprom’s long time strategy of supplying gas directly to European customers, comes in the wake of financial sanctions and an inability to negotiate the construction of new pipelines within the EU due to Third Energy Package regulation. The signing a first major pipeline export contract with China in 2014, and the possibility of a second contract in 2015, is shifting the emphasis of future Russian gas exports away from Europe and towards Asia. The irony of this change, which has largely been forced on Russia following US and EU measures taken in response to the Ukraine crisis, is that it has pushed Gazprom into a much more logical commercial export strategy and one which it should have adopted some years previously. The principal problem is that financial sanctions may prevent the company from being able to simultaneously finance a number of very large pipeline export projects.