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In Diplomatic Defeat, Putin Diverts Pipeline to Turkey

President Vladimir V. Putin of Russia, left, and his Turkish counterpart, Recep Tayyip Erdogan, during a news conference Monday in the new presidential palace in Ankara, Turkey.Credit...Turkish Presidential Press Office, via European Pressphoto Agency

MOSCOW — President Vladimir V. Putin said Monday that he would scrap Russia’s South Stream gas pipeline, a grandiose project that was once intended to establish the country’s dominance in southeastern Europe but instead fell victim to Russia’s increasingly toxic relationship with the West.

It was a rare diplomatic defeat for Mr. Putin, who said Russia would redirect the pipeline to Turkey. He painted the failure to build the pipeline as a loss for Europe and blamed Brussels for its intransigence.

The decision also seemed to be a rare victory for the European Union and the Obama administration, which have appeared largely impotent this year as Mr. Putin annexed Crimea and stirred rebellion in eastern Ukraine.

Russia had long presented the $22 billion South Stream project as a sound business move. But Washington and Brussels had dismissed it as a thinly veiled attempt by the Kremlin to cement its position as the dominant supplier in Europe while sidestepping Ukraine, where price disputes with Moscow twice interrupted supplies in recent years.

The conflict in Ukraine increased pressure from Europe against the pipeline, and construction was halted by Bulgaria in June. As diplomatic and economic pressures increased, Mr. Putin personally decided to cancel the project, Russia’s energy minister, Alexander Novak, said.

If there was one winner it was Turkey, which, along with China and other energy-hungry developing nations, has been exploiting the East-West rift to gain long-term energy supplies at bargain prices. Mr. Putin noted that on Monday during a news conference in Ankara with Turkey’s president, Recep Tayyip Erdogan, saying Turkey would receive a discount on gas and an additional three billion cubic meters of gas annually.

Mr. Putin said the line to Turkey could eventually be connected to a wellhead in Greece, if that could be economically justified by market conditions in Europe.

The Ukraine conflict and the bitter relations between Kiev and Moscow that have resulted have cast a shadow over the entire European energy field. Most Russian gas to Europe is still transported through Ukraine, giving Kiev its only source of political leverage against its powerful neighbor.

As the Ukraine crisis deepened, eventually developing into a Cold War-like standoff, the Western powers became determined to resist Mr. Putin’s aggressive policies at every turn. One such effort was the South Stream pipeline.

The Ukraine conflict also helped turn Mr. Putin away from the West. He signed a major and long-delayed deal to provide gas to China and began seeking other, non-European markets for his oil and gas. This, too, made the pipeline seem more expendable.

The Russian president directs energy and pipeline strategy personally, as perhaps the major source of power he wields in the international arena. For years, he and the West have jockeyed over pipeline routes, in a sort of proxy Great Game over who would control the energy supply in Europe.

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transcript

Putin Scraps European Gas Pipeline

President Vladimir V. Putin of Russia announced today that Russia is dropping plans for the South Stream pipeline and instead will expand a pipeline through Turkey.

ANKARA, TURKEY (DECEMBER 1, 2014) (TURKISH PRESIDENTIAL HANDOUT - ACCESS ALL) (SOUNDBITE) (Russian) RUSSIAN PRESIDENT, VLADIMIR PUTIN, SAYING: “I think the attitude of European Union about this issue is negative. They didn’t help in any way for this project to happen but instead they blocked it. If Europe does not want to carry it out, then it will not be carried out, we are not going to make it happen.” (SOUNDBITE) (Russian) RUSSIAN PRESIDENT, VLADIMIR PUTIN, SAYING: “If both parties agree, a gas hub will be built on the Turkish-Greek border and whoever is interested in supplying gas will use this facility. This is another subject that needs more work but it is realistic and it can be achieved.” (SOUNDBITE) (Russian) RUSSIAN PRESIDENT, VLADIMIR PUTIN, SAYING: “As our cooperation increases, we will have a greater reduction in gas prices to Turkey. It will start from the 1st of January with six percent and even that number can increase. It depends on what kind of a cooperation we will have with our partners.”

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President Vladimir V. Putin of Russia announced today that Russia is dropping plans for the South Stream pipeline and instead will expand a pipeline through Turkey.CreditCredit...RIA Novosti/Reuters

Russia scored a major win with the Nord Stream pipeline to Germany that opened in 2011. But energy markets have changed in recent years with new sources of gas, principally from North America, becoming available to Europe.

At the same time, the sharp fall in oil prices has put a squeeze on the Kremlin’s finances, perhaps ruling out a multibillion-dollar investment in a pipeline that might never pay off, despite the political advantages.

Nevertheless, analysts said that even the $4.5 billion that Gazprom, the state-owned energy giant, had already invested in South Stream had not been entirely wasted. Simply talking about building it over the past decade had helped prevent the West from mounting a serious effort to build a competing pipeline that would have assured non-Russian supplies of gas to Europe.

Even in retreat, Mr. Putin took the offensive.

“If Europe does not want this to be realized, then it will not be realized,” he said of the pipeline during the news conference, which was televised live across Russia during prime time. He said it would be “ridiculous” to invest hundreds of millions of dollars in the pipeline to bring it to Europe through Bulgaria only to have to abandon it because of political differences.

“We believe that it does not coincide with Europe’s economic interests and harms our cooperation,” Mr. Putin added. “But such is the decision of our European friends. They are, in the end, customers. It is their choice.”

Mr. Putin also attacked Bulgaria, which had frozen construction of the pipeline in June under pressure from the European Commission, which suggested the pipeline may violate energy and competition laws.

In following instructions, Bulgaria had traded away fees of up to $500 million annually and been “deprived of the opportunity to act as a sovereign state,” Mr. Putin said with a rhetorical twist of the knife.

Russia is the most important international ally of President Bashar al-Assad of Syria, while Turkish-Syrian relations are tense. Nonetheless, analysts said that Turkey has seen an opportunity to take advantage of Russia’s confrontation with the West, in particular the retaliatory sanctions that Russia imposed against European food imports.

In addition to food, Russia and Turkey have found other avenues for economic cooperation. Russia is finishing plans to start construction on Turkey’s first nuclear power plant.

“Sanctions on Russia have let Russia impose its own prohibitions on imports from the E.U., and Turkey is trying to take advantage of this gap by becoming a more significant exporter,” said Sinan Ulgen, a Turkish former diplomat and a scholar at Carnegie Europe, a foreign policy group based in Brussels.

“But again there is a natural limit to how much this can be accomplished,” he said. “There is an expectation in the West that Turkey will not be carried away and erode the effectiveness of the sanctions.”

The NATO secretary general, Jens Stoltenberg, responding to a reporter’s question on Tuesday, urged Turkey to join the sanctions against Russia, saying “I’d like to see as many countries as possible be part of this, to support the sanctions. It’s important that it has an effect.”

Nonetheless, Mr. Erdogan was outspoken about his contempt for Mr. Assad on Monday, saying that it was “Assad’s regime that was guilty for the current situation.”

Sebnem Arsu contributed reporting from Istanbul, and Andrew E. Kramer from Moscow.

A version of this article appears in print on  , Section A, Page 1 of the New York edition with the headline: Putin, in Defeat, Diverts Pipeline. Order Reprints | Today’s Paper | Subscribe

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