Charles Ellinas
The 23rd World Energy Congress was held in Istanbul between October 9 and 13. There was heavy participation from world political and industry leaders, attracting more than 10,000 top world experts in the field of energy.
Meetings around the Congress resulted in progress on a number of areas of direct or indirect importance to Cyprus. These included TurkStream, gas price discounts by Russia to Turkey and political and defence agreements between Russia and Turkey. I address these in this article and, where appropriate, draw on their impact on Cyprus.
TurkStream
On Monday October 10 the presidents of Russia and Turkey put their past problems behind them and signed an agreement for pipelines to deliver natural gas to Turkey and Eastern Europe through Turkey. This envisages the construction of two subsea pipelines, known as the TurkStream, each with a capacity of 15.75 billion cubic metres per year (bcm/y). Construction is scheduled to start in 2017.
The first pipeline will deliver gas to Turkey, replacing the gas currently going through Ukraine, through which Russia intends to limit gas deliveries after 2019. The second pipeline is expected to go through Turkey to a hub at the Turkish-Greek border, from where it would be transferred to other European countries. If built, this opens a new route for Russian gas exports and will redraw the energy map of Europe.
Russia to help TurkeyDuring these discussions, President Putin confirmed that Turkey will become a major energy hub for the European market with assistance from Russia. Turkey depends heavily on gas imports from Russia and it needs to ensure that it not only has a secure flow of energy coming through, but that it can also capitalise on its geographic location as a bridge to Europe.
Turkey’s geographic position makes it ideal as a bridge to transport energy resources from Central Asian suppliers to the European market.
«Please note that we are moving towards the implementation of the Turkish President’s plans to establish a large energy hub in the country,» Putin said.
Russia ready to compete on price
Russia and Turkey also resumed talks on the price which Botas, the Turkish gas transport company, pays for its gas imports. Russia’s Energy Minister Alexander Novak said Gazprom was prepared to cut prices and was ready to compete for the Turkish market with any other gas suppliers, including Israel. President Putin said Russia had agreed a gas price discount mechanism for Turkey as part of a broader deal to construct the TurkStream gas pipeline.
Prices have already come down significantly due to the linkage of the gas price to the oil price. Until recently, the price of Russian gas to Turkey was down to about $6 per million British thermal units (mmBTU). Turkey imports 55% of its gas, about 26 bcm/y, from Russia.
On Tuesday October 11, Turkey’s Energy Minister confirmed “there had been a mutual agreement between Russia and Turkey on the matter” of gas prices.
Such an approach could potentially be a threat, at least in terms of price, to the import of gas from Israel, or the East Med, to Turkey. At $6 East Med gas would find it hard to compete.
Seeking common ground
The talks on October 10 between Erdogan and Putin, in addition to energy, included discussion of trade and tourism ties, defence and the conflict in Syria, where the two countries back opposing sides.
This was the third meeting between them in three months. Erdogan said: “I have full confidence that the normalisation of Turkish-Russian ties will continue at a fast pace”. They agreed to work toward full-scale normalisation.
This comes at a time of growing mistrust between Turkey and the West, following the coup attempt that plunged the country into turmoil. By contrast, in his speech on Monday, Putin confirmed support to Erdogan over the failed coup, saying he was happy that the country had «retained control».
Erdogan also said plans for the stalled Russian-built Akkuyu nuclear power plant in Turkey would be accelerated. In 2013, Rosatom won a $20-billion contract to build four reactors, in what was to become Turkey’s first nuclear plant. He said that time lost on the project because of strained relations would be made up.
They made some progress on Syria, but they still remain divided. Erdogan said that the topic was “very sensitive”, but foreign ministries, top military leaders and intelligence officers would come together to discuss the problems further.
However, the upshot of all these contacts, discussions and agreements is that Turkey and Russia are getting closer together at a time of strained ties with the West. It will be interesting to see how this closer relationship reflects on their views on East Med.
Israeli gas
The Israeli and Turkish energy ministers met on Thursday, the last day of World Energy Congress, and discussed the export of natural gas from Israel to Turkey, as well as cooperation on energy matters. This is the first such meeting following rapprochement between the two countries, and is expected to turn a new leaf on economic and energy relations.
The two ministers agreed to “establish immediately a dialogue between our two governments” and examine the feasibility of building the gas pipeline from Israel to Turkey.
Laying a pipeline from Leviathan to Turkey involves diplomatic complications, since Cyprus opposes it. But, based on the United Nations Convention on the Law of the Sea (UNCLOS), and the Energy Charter Treaty, Cyprus can pose environmental and routing objections, but ultimately it would be difficult to stop such a project. And if Turkish companies undertake the construction of the pipeline, neither Israel nor Turkey would be directly involved. Decisions on this are not expected until 2017.
Implications for Cyprus and the East Med
During the World Energy Congress both Erdogan and Turkish Cypriot leader Mustafa Akinci referred to Cyprus, repeating their positions that the export routes for East Med gas are through Turkey.
“Turkey provides the most viable route for the distribution of eastern Mediterranean gas,” said Erdogan.
Akinci attended the Congress and, in his presentation, said a united Cyprus would “be able to contribute to matters of international energy security and energy access”. He said the natural gas discovered in the region “can reach Europe in the most economic and safe way through an energy corridor that will be constructed in Cyprus via Turkey”.
Akinci added that this would not only benefit Greek Cypriot and Turkish Cypriots, but would allow countries like Turkey, Greece, Israel and Egypt, which play an important role in the region, to redefine their relations in the spirit of peace and cooperation. He added that the settlement in Cyprus would be a huge opportunity for the larger geographical region.
At a time when low global gas prices limit export options for Cyprus and Israel, the outcomes of the congress in Turkey have significant implications for the region.
Dr Charles Ellinas is a non-resident Senior Fellow, Eurasian Energy Futures Initiative, Atlantic Council
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