Last July’s failed coup attempt in Turkey alarmed everyone who is involved in this region one way or another, writes Anir Jahangirli for NGW. Reactions were across the board: financial markets in the country were shaken and internal political structures were thrown into disarray. The government introduced a state of emergency and is pursuing a hunt of possible coup-attempt allies and supporters.
As a country in southeast Europe and a member of Nato, Turkey hosts US nuclear arsenal and was a key Western ally during the Cold War against the USSR. It has a large competitive market economy and the country is a member of the G20 Club. Since Mr Erdogan came to power, Turkey’s economy saw a boost and the society has been transitioning from the strictly secular into a so-called “moderate Islamic” state.
A few months before the mentioned dramatic developments, relations between Turkey and Russia badly deteriorated, due to downing of the Russian jet by the Turkish military. Turks claimed that the jet violated its airspace and despite many warnings it did not change its course. Few similar violations have been registered prior to this incident, so Turkey felt it had to act, also given the fact that Russian jets have been bombing the areas in the north of Syria, where Turkic-speaking ethnic groups reside and to whom Turkey has been and is providing support to fight against the current Syrian government. Russia’s response to the incident was an economic embargo and severing trade ties and business relations with Turkey. Turkey’s exports to Russia dropped by 40%, down from almost $6bn in 2014 to $3.5bn in 2015).[1]
Proving himself a true pragmatist, Mr. Erdogan sent a letter to President Putin just days before the coup attempt in Turkey, expressing regrets regarding the incident and wishing to restore damaged relations between the two countries. Further on, immediately after the coup, Turkish President mentioned Mr. Putin as someone who made him a phone call the next day to express support to the legitimately elected government. The two presidents met August 9 in Saint Petersburg and October 10 in Istanbul to discuss bilateral relations and end the tension between their countries. At this latest meeting, the parties agreed to rejuvenate the Turkish Stream pipeline project, which was shelved for the past year.
Turkey – vitally interested in getting this pipeline done has been adamant in pursuing it. Erdogan’s long-standing goal to turn Turkey to an energy hub could not have been served by a better project. Turkish Stream would deliver Russian gas directly to the country, that Turkey imports currently via Bulgaria, and moreover the gas could further be channeled to Europe.
While Turkey currently is a host to another major transit gas pipeline – TANAP, which is still under construction, there were questions on how these two projects and broader Russian-Turkish energy partnership are going to play out in the political and economic relations in the region.
Although there are surging hopes and enthusiasm regarding Turkish-Russian relations, complexities described above and Turkish ambitions to become an energy hub present some challenges to these relations.
Looking at the equation strictly from the quantitative point of view, hydrocarbons from the Caspian Sea are transited through Turkish territory with two pipelines: Baku-Tbilisi-Ceyhan (oil pipeline) and Baku-Tbilisi-Erzurum (natural gas). A new pipeline - TANAP is in the process of construction, which will connect South Caucasus Pipeline (running from Azerbaijan and Georgia to Turkish border) to the other pipeline to be built in the western border of Turkey, and TAP (Trans-Adriatic Pipeline). These three pipelines together will form a Southern Gas Corridor, which will deliver 16bn m³/yr to Europe from Azerbaijan’s Shah Deniz gas field (Phase II) in the Caspian Sea. 6bn m³/yr of this volume is intended for Turkey, the rest is destined to reach consumers in Europe.
It should be noted that, apart from being a transit country, Turkey is a huge consumer of natural gas. Turkey imports nearly 99% of the natural gas it consumes. Over the last decade, Turkey has been the second country, after China, in terms of natural gas demand growth. In 2015, Turkey imported around 48,4 BCM of natural gas. 55,3% of this import is from Russia, followed by Iran (16,2%), Azerbaijan (12,7%), Algeria (8,1%) and Nigeria (2,6%). [2]
If a qualitative analysis is conducted, another interesting question arises: what are the state of the strategic relations between Russia and Turkey to warrant the stability and success?
Although Russia seems to be looking at the natural gas supply contracts as transactional relationships, its ambitions to dominate the destination markets should not be overlooked. Turkey’s over-dependence on Russian supply might present strategic challenges to its economy. As demonstrated by the latest crisis, Russian-Turkish relations are all but stable. Without much of a historical background of strong ties, it takes an effort to cement strategic relationships between two countries.
The presence of Russian energy companies in Turkey and along the Southern Gas Corridor is not strong and their connectivity through network of ties, know-how transfers and licensing agreements are few. This is the indication of limited social capital and weak connectivity contrasted by the supply volumes. [3]
It is obvious that Turkey’s aspiration to become an energy hub cannot be accomplished without hosting natural gas pipelines to transit Russian gas, part of which is to be used domestically. This ambition, however, needs to be balanced with reducing over-dependence of the domestic energy market from the Russian gas, and increasing strategic ties with the Russian companies in order to minimize the risks of running yet into another crisis with that country.
On the other hand, TANAP pipeline (and SGC in general), which was officially never intended to be a substitute or compete against Russian natural gas, is very important for Turkey to continue to support and develop. Volumes to be absorbed by Turkey are realistic and the pipeline gives leverage to Turkey to act as energy hub for gas delivery to Europe. Along this corridor, the company, which holds the biggest social capital, is SOCAR of Azerbaijan. It is very well positioned and connected within Turkey with multiple ties and investments making it one of the important actors on the Turkish energy stage.
Whether this pipeline can in the future present an alternative to the Russian natural gas supply remains open for debate. Current declared capacity of the pipeline is insignificant to compare it as a substitute for the Russian gas supply to Turkey and Europe. However, there are plans that this capacity could be increased up to 60bn m³/yr in a distant future. It is unlikely that these volumes could be provided by Azerbaijan only, which is planning to supply the initial volumes as of now. However, once the infrastructure is in place, and there are other interested suppliers like Iran, Iraq and Turkmenistan, the TANAP could play even more important role than it currently is.
Turkey’s domestic demand for natural gas is likely to grow in the future and Europe’s demand is pretty much stable and might grow with slow pace. Increasing the capacity of TANAP and having new suppliers join to it, serves Turkish interests well. However, Russia is still not challenged with the supply/transit volume of TANAP, especially given the fact that it will take a long time before this pipeline can reach the mentioned capacity in the future.
Just on the eve of the Russia-Turkey summit last August, Azerbaijan hosted the presidents of Russia and Iran for trilateral talks, where many transport and energy related issues were discussed. While in Saint Petersburg, Mr. Erdogan also emphasized the importance of the Turkey-Azerbaijan-Russia trilateral format and hosted the presidents of both Azerbaijan and Russia in Istanbul quite recently. It is noteworthy that Azerbaijan is emerging as a connecting country in both of these axes and there is a possibility of having a quadrilateral format of energy alliance between Turkey, Russia, Iran and Azerbaijan.
While one would think that Russia is not interested in opening ways for seemingly competitor players to reach the same markets, we are observing a different approach.
Instead of bouncing potential suppliers of natural gas to Europe, Russia is trying to consolidate them in a cooperation framework, where it would have more leverage over the process. This is conditioned by few factors:
Although it is unclear how divergent are the positions regarding Syria, the parties were candid in mentioning their disagreements and willingness to work on the issue together.
As Turkey’s rapprochement with Russia will bring back the Turkish Stream project, the TANAP pipeline will continue to be a major strategic project that Turkey will be looking at. [4] Tanap, and the SGC in general will not deliver massive volumes of gas to Turkey and further to Europe compared to Russia. It is clear that these two projects are not intended to compete with each other in their current setting.
It seems increasingly possible that it is just a matter of time before Turkey manages to turn the dynamics created by the failed coup attempt into an opportunity to project itself more assertively both at home and abroad.
Anar Jahangirli is an expert in international affairs and energy geopolitics, currently Visiting Scholar at the Sam Nunn School of Georgia Institute of Technology, Atlanta USA.
[1] Report of the Turkish Statistical Institute ( http://www.turkstat.gov.tr/PreTablo.do?alt_id=1046)
[2] http://www.mfa.gov.tr/turkeys-energy-strategy.en.mfa
[3] Thomas McDermott, Molly Nadolski, Adam N. Stulberg, and Rahul Basole, “Analysis of Political and Trade Decisions in International Gas Markets: A Model-Based Systems Engineering Framework,” 2016 IEEE Systems Conference (SynCon) Proceedings (April, 2016). A research presently conducted at the Georgia Institute of Technology is using the international gas market as a focal point, and examines geographical, physical (cross-border infrastructure), and commercial value streams through the prism of network analyses.
[4] http://www.naturalgaseurope.com/socar-promises-to-continue-investment-in-turkey-30752
SOURCE
Turkey’s domestic demand for natural gas is likely to grow in the future and Europe’s demand is pretty much stable and might grow with slow pace. Increasing the capacity of TANAP and having new suppliers join to it, serves Turkish interests well. However, Russia is still not challenged with the supply/transit volume of TANAP, especially given the fact that it will take a long time before this pipeline can reach the mentioned capacity in the future.
Just on the eve of the Russia-Turkey summit last August, Azerbaijan hosted the presidents of Russia and Iran for trilateral talks, where many transport and energy related issues were discussed. While in Saint Petersburg, Mr. Erdogan also emphasized the importance of the Turkey-Azerbaijan-Russia trilateral format and hosted the presidents of both Azerbaijan and Russia in Istanbul quite recently. It is noteworthy that Azerbaijan is emerging as a connecting country in both of these axes and there is a possibility of having a quadrilateral format of energy alliance between Turkey, Russia, Iran and Azerbaijan.
While one would think that Russia is not interested in opening ways for seemingly competitor players to reach the same markets, we are observing a different approach.
Instead of bouncing potential suppliers of natural gas to Europe, Russia is trying to consolidate them in a cooperation framework, where it would have more leverage over the process. This is conditioned by few factors:
- In natural gas, once the contracts are signed and infrastructure is being laid out, there is no way that the new contracts or deliveries might jeopardize the old ones, before they expire. Therefore, TANAP will by no means be affected by the new co-operation between Turkey and Russia.
- Russia is trying to “bundle” the emerging gas suppliers from the East to West together and instead of “not allowing” them to export, it is welcoming their ambitions to reach European markets and promotes Gazprom’s participation in the local markets.
- None of the new suppliers are able to compete with the volumes Russia is providing to Europe and therefore it feels pretty safe in terms of future continuation of contracts and new volume negotiations.
Against this background, Turkey’s relations with Russia are going to see a boost in the coming months. The range of issues that Mr. Putin and Mr. Erdogan have just recently agreed upon is manifold: increased economic co-operation; new co-operation regarding defence industries; a nuclear power station to be constructed in Turkey will be contracted to Russians; the Turkish Stream gas pipeline will be brought back to life.
Although it is unclear how divergent are the positions regarding Syria, the parties were candid in mentioning their disagreements and willingness to work on the issue together.
As Turkey’s rapprochement with Russia will bring back the Turkish Stream project, the TANAP pipeline will continue to be a major strategic project that Turkey will be looking at. [4] Tanap, and the SGC in general will not deliver massive volumes of gas to Turkey and further to Europe compared to Russia. It is clear that these two projects are not intended to compete with each other in their current setting.
It seems increasingly possible that it is just a matter of time before Turkey manages to turn the dynamics created by the failed coup attempt into an opportunity to project itself more assertively both at home and abroad.
Anar Jahangirli is an expert in international affairs and energy geopolitics, currently Visiting Scholar at the Sam Nunn School of Georgia Institute of Technology, Atlanta USA.
[1] Report of the Turkish Statistical Institute ( http://www.turkstat.gov.tr/PreTablo.do?alt_id=1046)
[2] http://www.mfa.gov.tr/turkeys-energy-strategy.en.mfa
[3] Thomas McDermott, Molly Nadolski, Adam N. Stulberg, and Rahul Basole, “Analysis of Political and Trade Decisions in International Gas Markets: A Model-Based Systems Engineering Framework,” 2016 IEEE Systems Conference (SynCon) Proceedings (April, 2016). A research presently conducted at the Georgia Institute of Technology is using the international gas market as a focal point, and examines geographical, physical (cross-border infrastructure), and commercial value streams through the prism of network analyses.
[4] http://www.naturalgaseurope.com/socar-promises-to-continue-investment-in-turkey-30752
SOURCE
