Wed | Sep 26, 2018

Russia to scrap South Stream gas pipeline

Published:Tuesday | December 2, 2014 | 12:00 AM
Russian President Vladimir Putin, left, and his Turkish counterpart, Recep Tayyip Erdogan, shake hands after a joint news conference at the new Presidential Palace in Ankara, Turkey, Monday, December 1, 2014. - AP PHOTOS

Russia is scrapping the South Stream natural-gas pipeline project and may cooperate with Turkey on building a gas hub for southern Europe, President Vladimir Putin said Monday.

He said Russia can't implement the South Stream project because of the European Union's opposition to it. The project would have involved running a pipeline under the Black Sea to Bulgaria and further on to southern Europe.

However, Moscow will boost gas supplies to Turkey and may cooperate with it in creating a hub for natural-gas supplies on the border with Greece, he said.

Putin met his Turkish counterpart, Recep Tayyip Erdogan, amid striking differences over the crises in Syria and Ukraine, but the leaders focused instead on their countries' booming economic and trade ties. The Russian leader arrived in Turkey accompanied by a large delegation, including 10 ministers.

The two countries, who are major trading partners, have set an aim of increasing their two-way trade volume from US$33 billion to US$100 billion by 2020.

Russia provides the bulk of Turkey's gas and is set to build Turkey's first nuclear power plant. Turkish construction firms are active in Russia, while millions of Russian tourists travel to Turkey each year.

Putin was welcomed at Erdogan's new megapalace, which has drawn the ire of Turkish opposition parties, environmentalists and activists, who say the 1,000-room complex is too costly and extravagant and went ahead despite a court ruling. Putin is the second foreign dignitary to receive an official welcome at the palace, after Pope Francis, who visited on Friday.

Also on Monday, Russia's ruble hit a new all-time low, dropping about five per cent, as declining oil prices and the conflict in eastern Ukraine weigh on the country's economic prospects.

The Russian currency traded at 52.75 rubles against the dollar in morning trading Monday after shedding 15 per cent in the previous week. The ruble was also down five per cent against the euro.

Battered by low oil prices and the conflict in eastern Ukraine, the ruble has been declining throughout the year, losing about 42 per cent of this value since January.

The Kremlin, which in the past supported the exchange rate by buying up the rubles, says it considers the pressure on the currency to be speculative and is happy for it to remain freely floated in markets.

The price of oil, the backbone of the Russian economy, has dropped roughly 25 per cent since the summer. Brent crude, an international benchmark, fell three per cent on Friday and was down another one per cent on Monday to US$69.47 a barrel. US benchmark crude climbed back to US$68.70 at mid-afternoon after hitting a five-year low earlier in the day.

Russian monetary officials sought to assuage fears of a ruble free fall.

Ksenia Yudayeva, deputy chairman of the Russian Central Bank, told Russian news agencies on Monday there is enough currency liquidity in the market and that the Central Bank has prepared new economic forecasts based on a price of US$60 per barrel.

- AP