A joint gas pipeline carrying Russian natural gas to Turkey and southern Europe while bypassing Ukraine has been put on ice, as the two countries continue to be at loggerheads after Ankara downed a Russian warplane.
Russia and Turkey have suspended talks on a joint gas pipeline project as relations continue to deteriorate between the two countries after Ankara shot down a Russian warplane last week.
The so-called TurkStream had been planned to deliver Russian natural gas to Southern Europe and Turkey, bypassing Ukraine via four pipelines under the Black Sea. The project was launched at the height of a pro-Russian separatist rebellion in eastern Ukraine, which has significantly strained ties between Moscow and neighboring Kyiv.
But now it's Russia and Turkey finding themselves at odds. The discontinued talks are only the latest event in the worsening diplomatic row between the two countries. Moscow has also reacted to the downing of the plane by restricting food imports, construction projects and visa-free travel.
'They will not stop regretting their actions'
And that might not even be the extent of it. In his annual State of the Nation address to parliament, Russian president Vladimir Putin on Thursday threatened to ratchet up the sanctions it has already imposed, although he did rule out military action.
"We will not rattle our sabres. But if anyone thinks that after committing a heinous war crime, the murder of our people, they will get away with (an embargo on) tomatoes or some restrictions on construction and other industries, they are deeply mistaken," Putin told lawmakers and top officials gathered in an ornate Kremlin hall.
"We will not stop reminding them of what they did and they will not stop regretting their actions."
In bed with the IS
Earlier in the week, in the so-called Islamic State's (IS) illegal oil trade. In his speech on Thursday, Putin said Russia has proof that Turkey was buying oil from the terrorist group, thereby helping IS finance weapons purchases, recruitment and attacks against civilians like in Paris and Beirut.
"It is precisely with this money that the bandits recruit mercenaries, buy arms and organize inhuman terrorist acts aimed against our citizens, the citizens of France, Lebanon, Mali and other countries."
Turkish president Recep Tayyip Erdogan has furiously denied the accusations, and countered that Turkey had proof that Russia was, in fact, involved in trading oil with IS. "We have the proof in our hands. We will reveal it to the world," the Turkish leader said in a televised speech in the nation's capital.
The war of words came as the foreign ministers of the two countries met in Belgrade for the first high-level bilateral talks since the downing of the plane. However, both sides remained tight-lipped about the outcome of the 40-minute meeting.
The current diplomatic difficulties have a real potential to hurt Turkey's economy. Exports to Russia were worth nearly €5.4 billion in 2014, while imports from Russia amounted to 23.2 € billion.
But experts warn that Moscow's sanctions could boomerang. Especially gas giant Gazprom, which is majority-owned by the government in Moscow, stands to suffer heavy losses. The company heads the Russian side of the project and has already spent billions of dollars building infrastructure for the pipeline.
"This is a negative event for Gazprom," said Sberbank CIB analyst Valery Nesterov.
Still, she added, delaying the project beats the worst-case scenario, which would have been shelving it altogether.
"The project has been postponed - maybe for a year. But I don't think for more than two years," Nesterov said.
But even a year is likely to add to Russia's economic woes. Slumping oil prices, Western sanctions over the Ukraine conflict and a crashing ruble prompted the Russian government to announce an amnesty against people who illegally spirited funds out of the country. On Thursday, the Russian president called on lawmakers to attend this amnesty, set to expire at the end of the year.