Abstract: TurkStream, which has been the lynchpin of Russian-Turkish energy cooperation, is now in operation. With the new gas pipeline, Russia has established an alternative export route to the EU, while Turkey has moved a step closer to becoming an energy power in its neighborhood. However, TurkStream’s market impact will be limited. Russia is facing tougher competition in both Turkey and Southeast Europe. Local countries are investing into the diversification of external supplies. Economic hardship is depressing demand for energy and boosting consumers’ leverage vis-à-vis producers.  The surge in imports of liquefied natural gas (LNG) and the progress made in the Southern Gas Corridor linking Turkey and the Balkans to the Caspian are similarly changing the rules of the game and contributing to regional integration.

On January 8 2020, Vladimir Putin and Tayyip Erdogan officially launched the TurkStream natural gas pipeline in Istanbul. The leaders of Bulgaria and Serbia, Prime Minister Boyko Borisov and President Aleksandar Vucic, took part in the ceremony as well. TurkStream is a landmark achievement.  First, it strengthens economic links between Russia and Turkey, at a time when they have found themselves at odds in Libya and northwest Syria. Indeed, the pipeline across the Black Sea had many hoops to surpass to make it to this point, since it was proposed in December 2014 by Putin. TurkStream was put on hold during the crisis in Russian-Turkish relations caused by the shoot-down of a Russian jet in November 2015 and was subsequently resumed once ties were normalized in August 2016.[1]  Second, TurkStream adds to Moscow’s geopolitical clout as it establishes yet another export route bypassing Ukraine. Since the start of 2020, gas volumes shipped through Russia’s southwestern neighbor have dropped by a staggering 40%.[2]  Last but not the least, the new pipeline brings Turkey a step closer to fulfilling its long-standing ambition to turn from a major consumer of gas to a transit country and, potentially, an intermediary in Eurasian energy trade.

This report examines TurkStream’s political and economic impact on Turkey and its neighbors in Southeast Europe. It argues that the pipeline’s extension into the Balkans and Central Europe will face further delay. Meanwhile, Russia will lose its market share in Turkey as well as in Greece and Bulgaria along with some Western Balkan countries. Efforts at diversifying gas sources, improving interconnectivity at the regional level and upgrading infrastructure are already changing the rules of the game, even though the economic downturn in the wake of the COVID-19 pandemic is sure to slow down cross-border projects.