Turkey should be cautious in gas deal with Russia

As expected, the Turkey-Russia High-Level Cooperation Council witnessed important developments particularly in the field of energy. Russian President Vladimir Putin declared the end on the much-anticipated South Stream project, a pipeline that would have carried some 63 billion cubic meters (bcm) of natural gas to Europe by going underneath the Black Sea and Bulgaria in a bid to bypass Ukraine.

The ongoing standoff between Russia and the European Union over Ukraine is the major reason for scrapping the $23 billion-worth project - a move seen by many as a Russian bluff - but obviously changed the forecast and plans for future gas supply to the European continent. In a bid to replace the South Stream project, Turkish and Russian officials have discussed and at the end signed a memorandum of understanding authorizing the two countries’ state companies, Botaş and Gazprom, to launch technical work for a new pipeline carrying exactly the same amount of natural gas (63 billion cbm) to Europe via Turkey. Turkey will take 14 billion cbm of it and the rest, around 50 billion cbm, will be delivered to European countries from a gas terminal to be stationed on the Turkish-Greek border.

It is Turkey’s every right as a sovereign country to negotiate with any country in order to meet its needs, especially when it’s about energy sources, at a compatible price. However, when it comes to inking such a major deal with Russia, Turkey should eventually cogitate on its regional and global consequences. Here are some reasons:

Turkey’s energy policy: Turkey’s entry into global energy games dates back to the early 1990s, especially after the collapse of the Soviet Union and the birth of independent countries sitting on major hydrocarbon reserves. Since then, Turkey’s short term policy was to become the main route for the transportation of Caspian and Middle Eastern natural gas and oil and its mid-term and long-term policy was to turn into an energy hub with making its Ceyhan port an alternative to Rotterdam. The core of this policy was to be able to attract Caspian countries like Kazakhstan, Turkmenistan and Azerbaijan, as well as Iran and Iraq, to prefer Turkey as their main route, obviously competing against Russia. The Baku-Tbilisi-Ceyhan oil and Baku-Tbilisi-Erzurum natural gas lines were two important achievements to this end. Now, entering into cooperation with Russia for carrying its natural gas to Europe through its soil could be understood as an important deviation from its two-decade policy.

Potential effects on Azeri, Iraqi gas: Just a day after Putin’s statement, Iraqi central and regional governments announced their deal about oil sale and revenue sharing. Ending nearly a decade-old internal dispute, Iraq now is expected to speedily change the supply balances in the world, not only by increasing the volume of crude oil it has been selling but also by its potential natural gas deals. Iraqi authorities, on all occasions, express their intention to cooperate with Turkey and carry their reserves to world markets via Turkey.

Likewise, Turkey is also developing an important partnership with Azerbaijan through the Trans-Anatolia Natural Gas Pipeline, known as TANAP, and Trans-Adriatic Pipeline, known as TAP. Both projects are envisaging transporting a good amount of gas to Greece and to Italy. Therefore, there are concerns that the realization of a Russian pipeline would make current Azeri projects unnecessary and potential Iraqi projections fully futile. Turkey’s Energy Minister Taner Yıldız assured yesterday that Turkey sees all of these projects as a package, adding that Turkey was a partner of Azeri projects.

Russia-EU tension: Although Turkey is a non-EU country and its European partners are reluctant in opening the energy chapter as part of accession negotiations, a Turkish government decision in opening its soils for the transportation of Russian gas would draw strong reactions from both Brussels and Washington. Giving Russia the kiss of life, especially at a moment when it was cornered by the EU and U.S. through sanctions and pushed down oil prices, would not be seen as a well-intentioned move. A recent indirect call to Turkey to join sanctions against Russia came from NATO on the same day Putin was in Turkey.

Economic conditions: One other aspect is the deteriorating economic conditions of Russia, whose authorities have already confessed that sanctions and reduced oil prices cost $140 billion to Russian economy. With the collapse of the South Stream, Gazprom’s envisaged revenues from European markets will have to be re-calculated, increasing concerns about its capacity in undertaking such huge investments. With the slowing down of economies in some European countries, there are forecasts of a stalled energy demand that would jeopardize all such huge investments. Therefore, starting up such a project would need more thinking of its feasibility.