Could Turkey become more dependent on Russian energy?

Turkey has set very ambitious targets to decrease its energy dependency, including increasing its local energy production, becoming an energy hub and diversifying its energy sources.

To be sure, it is good for such an energy-hungry country to set such goals. However, Turkey may be failing to reach them.

After a series of heartbreaking fatal mine accidents, the country has recently appeared to waver in the priority of its targets regarding the level of local energy production. The second most pertinent energy target, becoming an energy hub, has risen rapidly to top the agenda. 

Russian President Vladimir Putin made a “surprising” announcement on Dec. 1 during his one-day visit to Ankara, which served Turkey’s desire to become an energy hub. Putin scrapped the South Stream pipeline project intended to supply gas to southern Europe without crossing Ukraine. Citing EU and specifically Bulgarian objections, Putin instead named Turkey as its preferred partner for an alternative pipeline, with the promise of energy discounts.

I will be short in the details. The proposed undersea pipeline to Turkey, with an annual capacity of 63 billion cubic meters (bcm), is planned to cross the Turkish-Greek border to supply gas to southern Europe. Around 14 bcm of this amount is planned to be appropriated to Turkey.

Let’s do some mathematics here: Turkey imported around 45 bcm of gas last year. Some 58 percent of this gas came from Russia. Russia was followed by Iran with 19 percent, Azerbaijan and Algeria with 9 percent each, and Nigeria with 3 percent. The remaining 2 percent of its needs were met by spot markets.

In the road to becoming an energy hub, Turkey has recently made other international deals. The planned Trans-Anatolian Natural Gas Pipeline (TANAP) may be the most prominent project. TANAP will span from the Turkish-Georgian border to Turkey’s frontier with Bulgaria and Greece. TANAP envisages carrying 16 bcm of gas per year from Azerbaijan’s Shah Deniz II field in the Caspian Sea upon its initial launch in 2019. Its capacity is set to rise to 23 bcm by 2023, and to 31 bcm by 2026.

Turkey will take some 6 bcm of gas from this pipeline to start, while 10 bcm will be carried to Europe. However, whether Turkey is a transit country or a hub country in these existing or projected deals is unclear. In a country that has become an energy trading hub, suppliers and consumers meet and trade in hydrocarbons in an open and transparent market. This will only be possible in Turkey after the planned liberalization of the gas market is implemented. The necessary infrastructure is also required to store and transport hydrocarbons. However, Turkey has a limited gas storage capacity and the launch of a gas stock exchange is still being discussed.

An “energy transit state” refers to a state where pipelines connect an energy-producing state with an energy-consuming state. Deals are made between the energy producer and the transit state, according to which the latter collects transit revenues for allowing energy sources to be transported across its territory.

This brings us to the question of the third target, diversifying energy sources, which may help us as we try to find an answer to the real question in the headline.

Turkey will be buying around 40 bcm of gas from Russia by the 2020s, during which the country’s gas needs are projected to be around 70 bcm, which means Turkey will be still very dependent upon Russia for energy.

Of course, I will set aside the fact that Russia is set to build Turkey’s first ever nuclear power plant for a later discussion.