Russian project jeopardizes Turkey’s energy advantage

Barçın Yinanç - barcin.yinanc@hdn.com.tr

Accepting Moscow’s proposal would make Turkey even more dependent on Russian gas, says Mithat Balkan adding saying no to Russia would not hamper bilateral ties. HÜRRİYET photos, Levent KULU

Russia’s proposal to sell gas to Europe via Turkey, the so called “Turkish Stream,” to replace the South Stream may jeopardize Turkish interests, according to an energy expert. “Turkey’s advantage is to provide an alternative gas supply to Europe; the Turkish stream will risk this advantage,” said Mithat Balkan, a former ambassador.

Were you surprised when Russia canceled the South Stream project?

I was surprised, but it seemed to come with the stance the EU had taken against Russia. With the unbundling issue [EU provision, which requires the separation of gas production and sale operation from the transmission networks, to the effect that a single company may not both own and operate a gas pipeline] and the EU’s strict attitude to not have Russia dominate that part of Europe; it seemed it was going to happen, but such a swift action was a surprise for everyone.

Where you among those who never believed in the project?

I was always skeptical about it, but one has to go back to the past to assess the presence. Baku-Tbilisi-Ceyhan (BTC) and Baku-Erzurum-Ceyhan (BTE) projects were policy decisions made by Turkey, Azerbaijan, Georgia and the United States with the objective to provide Caucasus and Central Asian energy sources to European markets, which would guarantee their [the energy producing states] independence and to give Europe and the world an alternative with regard to Russia.

Then came the Nabucco project. At the beginning, it was United States supporting these projects; the EU was a spectator, it was reluctant vis-a-vis Nabucco, which started with the objective to provide an alternative to Russian gas.

Then came Russia’s counter moves. Russia’s aim was to bypass Ukraine, as well as to block Nabucco; these two objectives gave life to South Stream. Even at the beginning, South Stream did not seem realistic financially, yet Russia insisted on it for political reasons.

After a while, the EU came to the picture; when the EU was coming in, United States was going out.

Was it because of the advent of shale gas?

It started even before that. Democrats supported these projects and when Republicans came to power they were less supportive, as they considered it the Democrats’ projects. With decreasing U.S. support, the EU’s ambivalent policies and lack of sufficient supply to be provided to Nabuccu, the project faded away. As a result, South Stream came to the forefront and it seemed more probable. Southern European countries had no alternative and had no choice but to accept it. In the meantime; what I call the ‘half-Nabucco,’ TANAP [Trans-Anatolian pipeline project that would carry Azerbaijani gas to Europe via Turkey] came into being.

TANAP will provide 10 billion cubic meters of gas to Europe and 6 billion to Turkey; but it has the potential for receiving gas from Iran, Iraq and even Turkmenistan. It can be expanded and provide alternative gas to Europe. The EU was not so willing to accept Russian gas on Russian conditions, so it came out with the idea of conditionality, the unbundling; you cannot own the pipelines, you have to leave the pipeline business to private companies, etc.

If Europe had wanted Russian gas, it could have easily provided an exception and some of the European energy companies, like ENİ and others, insisted that this project is being given an exception. But the EU acted on political, rather than economic, grounds. Russian President Vladimir Putin had no alternative but to give up the project.

Was the EU’s stance hardened due to Russia’s regional assertive policies, like in Ukraine?

Even before the Ukraine crisis, I believe the EU was motivated by avoiding being too dependent on Russian energy. At the present situation; Russia has decided to provide gas to Europe through Turkey; it will bring it to Thrace. The pipelines will not be under its control; so it would have been the same situation with South Stream, had it accepted European conditions.

But what will Turkey gain from it?

We don’t know whether EU countries will agree to buy Russian gas, and if so, under what conditions?
Would any investment be possible without taking into consideration how this gas will be sold and how much of it under what conditions? I believe such investment would not be realistic. There are many that questions need to be answered.

In addition, there is the economic situation. Will Russia be able to invest such a deal of money at a time when financing from Western markets is not possible and when the Russian economy is under sanctions?

I have my doubts about the realization of this so called ‘Turkish Stream.’ In the short term, it might be useful for Turkey. Nobody is sure what will happen in Ukraine. Turkey’s supply line from Ukraine could be interrupted. Although we have Blue Stream, an additional attentive might be useful in the short term.

But in the long term, the project being actualized could take some time. In addition to that; the 60 billion cubic meters of Russian gas coming to Europe through Turkey will jeopardize the expansion of TANAP.

I think TANAP will be realized, but what is at risk is the expansion of TANAP; 60 billion plus 16 million; it would be too much. Europe will again be dependent of Russian gas.

Looking from this point, we need to ask what Turkey’s importance for Europe is as far as energy is concerned. It is to provide an alternative gas supply to Europe so that it can be independent from Russia. That advantage from Turkish Stream might be at risk.

It was a political decision perhaps on the part of Turkish government; not seeing a future on its relations with the EU; it might have sought to strengthen its relations with Russia.

Do you think Turkey no longer values being an alternative energy supply to the EU?

That would be too strong; Turkey is trying to balance these two interests. Perhaps it also wants to give some messages to the EU.

But could Turkey say ‘no’ to Russia, when Putin came with this proposal. Can it risk antagonizing Moscow?

We are already too dependent on Russia, why should we be more dependent on Russia? In addition, Russia and Turkey have always been on good terms, they need to be on good terms. They need each other. All Turkish and Russian governments in the past have been careful not to disrupt their relations in spite their differences on many political issues. They were able to compartmentalize their differences and move forward on issues on which they had mutual interests. I don’t think our refusal would have in any way hampered our relations

So Turkey could have said ‘no’ to Russia, without worrying about being antagonizing?

Look at Russian policies: They proposed a 5 percent reduction in the price of the natural gas they sell us, whereas the oil prices have decreased almost 50 percent and gas prices are usually calculated in accordance with oil prices. This 5 percent reduction is ridiculous; they should have given us this reduction even before oil prices dropped.

They are bargaining like they are at the Turkish bazaar; that’s not fair and I understand that the Turkish government does not agree and they are trying to increase the reduction. We need to insist on it.

As a former diplomat, you were part of an establishment for which foreign separate relations with Iraqi Kurds was a taboo; what do you think about the current situation on energy?

I worked with [former late President Turgut] Özal. I was Özal’s adviser for more than two years. I am a student of Özal in this respect. Özal always had the solution of the Kurdish problem in his mind; to forge strong economic links both with Iraq and northern Iraq. He always said it is through these relations that we can strengthen Turkey. I believe in those policies, so I think, here, the government should pursue the same line.

How do you think Turkey’s overall energy policies evolved in the course of, say, the last two decades?

We have taken very important steps by realizing the BTC and the BTE, as well as initiating TANAP.

We are too reliant on Russia. We should limit our reliance on Russia and we need to balance it more carefully. We should not discard Russia; it is an important player both in terms of energy and international politics. But we should play the game taking into account Turkish interests and its relations with both Europe and the West. I think that balance is being disrupted to some extent in favor of Russia.