December 11, 2014 "ICH" -  The status of South Stream and the newly announced Russia-Turkey gas deal is much more than it seems.  It is primarily about putting the brakes on what has slowly been developing into the next world war.

This new deal may also represent a serious culmination of Russian, Chinese, and Iranian efforts to realign the entire bandwidth between the Adriatic Sea and India.  This has ramifications not only for the EU, Bulgaria, and Turkey, but also Syria, Egypt, Israel, Iran, China and most of Latin America.  Its effects reach far beyond the scope of this report, and includes currency wars, and military alliances.

Thus, this turn of events may be massive, and the culmination of the success which Iraq, Iran, and Syria have had, with their allies, in rolling back ISIS.  Additionally, this comes on the heels of the big changes in Egypt, which saw Turkey’s main ally in the war on Syria removed.  It also represents a major revival of the Russian effort to build an alternative route to the line going through Ukraine.  That line has been the subject of numerous problems as the Ukrainians had been difficult partners.  The recent outbreak of hostilities within Ukraine has made them an even less reliable partner, pushing the need to speed up the process of an alternative Russian gas route into high gear.

Let us begun with the reality as it has been presented.  On December 1st, Russia declared to the world that it had dumped the South Stream project because the European Union had decided that it did not want it.

The EU can be said to have decided this simply because it placed too many barriers on the project, mostly surrounding two factors.

The first factor was a constraint placed on the project by the Third Energy Package (TEP), which was passed in the EU in 2009.  This was done much after the South Stream project had already been proposed in 2007, and the tentative agreement already inked.  This change of conditions after the fact means that Russia has not abrogated any of its commitments, either morally or legally.  This is important in terms of Russia’s other numerous important trading and strategic partners, both in the region, and in the world.  No one will see that Russia pulls the plug on deals it makes.

In fact, Russia showed both good faith and due diligence in all spheres of the South Stream negotiations and construction process.  The initial terms of South Stream were made under conditions prior to the latest round of restrictions placed upon Russia, on top of the Third Energy Package.  In other considerations, as the project evolved, some elements of the TEP were interpreted in a way which still made the South Stream a viable project.  This means that the signatories to the South Stream tentative agreement cannot be held retroactively accountable for newer restrictions to the execution or workability of said agreement, which were unforeseeable at the time of the deal.  As the deal evolved over time, the manner by which the restrictions imposed by TEP were interpreted, also figured into the entire project.

The second factor is that Bulgaria had been under extraordinary pressure to conform to EU dictates in this arena.  The Bulgarian reluctance to buck EU dictates was understood by Putin, which is reflected in the exact words that were used to describe the failure on the Bulgarian end.  By and large, blame was placed on the EU for pressuring Bulgaria.  At the level of diplomacy, this gives the Bulgarians an important out, which will figure into this analysis, shortly.  Simultaneously, given how power is popularly understood, the Bulgarian government is being held by Bulgarians – who mostly wanted this project for a range of obvious reasons – as being primarily responsible.  The Bulgarians were also thinking they had an option, which was snapped away from them with this Russian-Turkish deal.  This will also figure into the scope of things to come, that we will describe.

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