‘Turkey shoots down a Russian jet fighter’.
It’s not the kind of news you expected to hear. Major powers aren’t supposed to cross paths like this. Yet overnight, in this never ending Syrian proxy war, Turkey did just that.
The reaction was predictable. It was shocking, partly because it signalled a new twist in the ongoing saga. Oil prices fell. As did European markets. Russian President Vladimir Putin called it a ‘stab in the back’.
Questions began mounting. Is the conflict entering a new phase? How will Russia respond? Will we see direct conflict between Turkey and Russia? There’s a lot to answer for. But beyond the immediacy of the issue, there are much broader implications at play. One way or another, this incident is a potential game changer in global energy markets.
Before we look at this in closer detail, let’s stay with the incident. Why did Turkey actually shoot down the Russian fighter plane?
The Turks aren’t pleased about Russian air raids in northern Syria. Russia’s airstrikes in Syria use flightpaths through Turkish airspace. Twice the Turkish government warned the Russians not to violate this airspace. On both occasions it came to no avail. This wouldn’t be an issue if Turkey and Russia were fighting for the same cause. But they’re not. Turkey wants to topple Bashar al-Assad’s regime in Syria. Whereas Russia seeks to support it.
In any case, the timing of this incident is curious. Morality aside, there must be a reason why Turkey chose to make good on its threat. It will have known full well the consequences of its actions. Major powers tend to avoid direct conflict like this because it can ruin relations. And Turkey knows that it jeopardised its relationship with Russia in carrying out the attack.
Whatever Turkey’s reason for doing so, one thing is crystal clear. The future of the Turk Stream pipeline is up in the air. I’ll explain.
Rerouting Russia’s energy supplies to Europe
Europe imports 40% of its natural gas from Russia. Yet Russian plans to supply Europe have been met with resistance of late. The most recent victim of this was the proposed South Stream pipeline. It was designed to flow through the Black Sea, Bulgaria, and up through Serbia. Its final destination was Western Europe.
The South Stream pipeline is a now nothing more than a pipe dream. As a result of the Ukrainian conflict, EU pressure derailed the project altogether.
Russia sought alternatives. One of these was the Turk Stream pipeline. The plan was to run the pipeline through Turkey, bypassing Bulgaria altogether. Russia’s cordial relationship with Turkey could have made it work. But yesterday’s incident casts serious doubt on the future of this.
When we simplify the Syrian — or even the Ukrainian war — it’s all about energy. More specifically, it’s about controlling the routes that facilitate energy trade.
Russia has the largest proven natural gas reserves in the world. It’s also the eight biggest oil producer. It has plenty of energy to sell, and no shortage of buyers in Europe. For Russia, ensuring that Europe remains dependent on it is a strategic goal. In this way, Russia achieves two objectives. It reaps the financial benefits of this lucrative trade. And it influences Europe politically, as it can threaten to turn the taps off at any time.
From Ukraine to Syria
The reality of Russia’s influence in Europe makes it a target of competing interests. The US in particular is guilty of influencing European partners to antagonise Russia. There’s no better example of this than the conflict in Ukraine.
The Maidan Revolution, an effective coup, was a provocation of Russia. President Putin reacted the only way he could. He provided the rebels with arms, without getting directly involved in the conflict.
Russia never sought to annex eastern Ukraine because it’s not interested in doing so. Regardless of what the mainstream tells you, Russia wants a buffer more than anything. If it annexed eastern Ukraine, it’d still have NATO on its doorstep. It would prefer an independent eastern Ukraine that it can influence.
Truthfully, Russia won that conflict by not doing much. And we know they won because no one pays any attention to the conflict any more. The West failed to draw Russia into a war, which was its underlying aim. It failed, and it moved on to the next thing.
The media war machine is now switched onto Syria. But the Syrian conflict itself is in many ways a continuation of what started in Ukraine. The overarching goal among Western powers remains the containment of Russian influence in Eurasia. If Russia has it’s tenterhooks in energy supplies across Eurasia, it wields great influence. And it’s this that the West wants to prevent at all costs.
So where does Syria come in? The Syrian conflict predates the start of the Russian containment. But it boils down to the same thing as in Ukraine. The Assad regime in Syria isn’t as tyrannical as the media makes out. It’s painted as a conflict between an oppressive regime and freedom fighters. But if we’re being honest, it’s a tale of competing interests, with no room for moral high ground.
Since the start of the Syrian war, the rebels have largely failed to make progress. Then, in 2014, ISIS appeared out of nowhere in Iraq. It started making territorial gains across Iraq at first. It then stretched its influence into Syria. It all happened very quickly, and very conveniently. But who funded, and continues to fund, ISIS? The Saudis and Qataris for the most part. And there’s a good reason for this. ISIS is being used as a tool to bring down Assad, among its various other aims for statehood.
Why are the Saudis and Qataris keen to get rid of Assad? By now, the answer should be obvious. Remember, this isn’t a story about freedom over tyranny. It comes back to the same common denominator: energy.
Saudi Arabia and Qatar are major players in global energy markets. The Saudi’s sit on the sixth largest natural gas reserves in the world. On top of this, they also have the second largest oil reserves. In Saudi Arabia’s ideal world, the Middle Eastern energy powers would supply Europe with all its energy needs.
And it’s here that Syria becomes important. The war torn nation occupies an important piece of land in the Middle East. Take a look at the picture below.
Source: MintPress News
As you can see, Syria is a crucial cross point for the transportation of ME energy.
But Syria hasn’t been as cooperative as the West and its ME partners would like. Back in 2013, Assad refused to sign an agreement that would’ve seen the Qatar-Turkey pipeline run through Syria. He was protecting the interests of Russia, which remains a stout ally.
The Qatar-Turkey pipeline aims to bypass Russian gas. It’s this factor that explains why Russia must ensure that it has a government in Syria it can influence.
The same is true of Iran. Its own proposed pipeline plans to run through Syria as well. Iran, of course, remains staunch supporters of Assad.
The Syrian conflict is obviously more complex than this, but you get the picture. Energy is at the heart of the conflict taking place in Eurasia.
From the West’s point of view, containing Russia and ousting Assad remain key objectives. Anything that replaces Russian energy in Europe is a win for Western powers. Why? Because they influence the likes of Saudi Arabia and Qatar. They don’t influence Russia, and that makes Russia dangerous to them.
Turkey’s action won’t goad Russia into a military response. That’s not how Russia operates. It’s too shrewd for that. But the big picture is what all this means for Turk Stream. If nothing else, Turkey’s provocative act could be a sign that there is no future for the pipeline.
Contributor, The Daily Reckoning
Investment guru Rick Rule believes there are three commodities which are set to explode in the next few years. It could herald the start of a new cycle of commodity driven growth.
Rick is the founder of Sprott Global Resource Investments, one of the world’s leading resource investment firms. He’s witnessed several cycles come and go in his 40 year career.
Rick’s experience has given him a knack for spotting companies that are set to flourish before the new commodity cycle booms. That’s why he’s put together a free video for you. In it, Rick reveals his top three commodities. He’ll also show you how to identify the right companies to boost your portfolio as the new cycle gains pace. To find out how to watch the special report, click here.