The Big Chill

Turkey

Economic News

22 Jul 2010
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Freezing temperatures and heavy snowfalls across Turkey this week have left many villages cut off, flights and journeys cancelled and even some fatalities. At the same time, the cold snap has also left many analysts pondering long-standing questions over the country's energy security. A sudden turn down of the gas from Iran, recent disputes over gas prices between Russia and Ukraine and possible sabotage of gas supplies to Georgia have all been sending extra shivers down some Turkish spines.



The cold weather that hit Turkey overnight Sunday - and which is reportedly to continue this weekend, with temperatures down as low as -15 C in Ankara - had cut off some 10,000 villages and hamlets by mid-week, the daily Hurriyet reported. Some 40 deaths nationwide from hypothermia, traffic accidents or asphyxiation in poorly ventilated rooms have also been recorded.



Meanwhile, Education Minister Huseyin Celik has ordered schools to remain closed an extra week, bringing children the unexpected pleasure of a month-long break since schools broke up for mid-year holidays back at the start of January.



The move clearly saves a lot of trouble in getting the nation's kids to school down snow-blocked roads, but it also saves the state an enormous amount in fuel bills.



Just how crucial that saving may in fact be was brought home by the news on Wednesday of a sudden and dramatic drop in the amount of natural gas coming to Turkey through the pipeline from Iran.



Private news channel NTV reported on January 26 that the normal flow was down by more than three-quarters.



At the same time, gas from Turkey's other main supplier - Russia - was also reportedly down. The culprit here was Ukraine, NTV reported, saying that Energy Minister Hilmi Guler had written to the authorities in Kiev complaining that supplies of Russian gas destined for Turkey and passing through Ukraine were being siphoned off.



At the same time, while Russia also supplies gas to Turkey via the Blue Stream pipeline, which runs under the Black Sea, Russian energy officials were reported reluctant to boost the amount coming down this route, with the increase that did occur unable to cover Turkey's boosted requirements.



This sudden shortfall caused something of a crisis. On January 27, some 21 large factories found their gas supplies cut, while the mayor of Ankara, Melih Gokcek, told reporters that Ankara could run out of natural gas supplies within two to three days.



"If they cut off the natural gas, the Ankara people will not have natural gas. Will it be cut? We do not know. The Energy Ministry know the details," he said.



Ministry officials were quick to reassure though. The factories were told gas supplies would be back to normal shortly, while the Iranians were reportedly set to increase the flow, while citing heightened domestic consumption as the reason for the sudden cut.



Yet few in Turkey's media believed such an explanation.



"Why has Iran cut the natural gas?" asked the newspaper Vatan on January 26. "When the natural gas deficit reached 9m cu metres yesterday, authorities decided to limit the
natural gas given to build-operate-transfer power plants," the paper reported. Iran's reduction of the amount of natural gas transferred to Turkey had "made Turkey uneasy because Turkey is thinking that this is being used as a diplomatic trump card. Some think that Iran is leaving Turkey in the cold as Turkey is not so welcoming about Iranian President Mahmud Ahmadi-Nejad's visit."



A proposed visit by the Iranian president to Turkey was cancelled in early January. At the same time, Turkey has also voiced concerns over Iran's nuclear programme, while a string of top US and EU security officials have recently been in and out of Ankara. Many Turkish columnists therefore drew the conclusion that the gas cut was somehow Iran's response to this political manoeuvring.



Whether that is the case of not, the cuts do highlight certain weaknesses in Turkey's energy security.



A World Bank report on this subject - issued just after the Russian/Ukrainian spat on gas supplies at the start of the year - pointed to a lack of storage facilities for gas in Turkey as a major worry. In Western Europe, the report said, countries typically store enough gas to meet 20-30% of their normal requirements, yet in Turkey, even after current schemes for storage facilities have been completed, only around 10% of requirements will be able to be held.



"It's a huge risk for a country like Turkey to go through the winter without a reasonable amount of storage," Ranjit Lamech, World Bank sector leader, commented in the report.



The current storage scheme has focused on using a $325m loan under the World Bank's Gas Sector Development Project to finance construction of an underground natural gas storage facility and two key compressor stations. The facility will be built in an underground salt formation south of the Tuz Golu (Salt Lake) in central Anatolia and will provide storage for about 1bn cu metres of gas. Permission was finally given for the project's go ahead last November.



While this will be a start, the Bank commented, clearly a lot more needs to be done. This is particularly so as Turkey long ago decided to switch much of its energy demand over to gas from coal and oil. Currently, according to the World Bank, natural gas consumption in Turkey is growing at some 24% per annum. Power stations have been widely converted to gas firing, while domestic natural gas networks have also been rolling out over the last decade.



"You need to build buffer stocks so you can draw them down on particularly cold winter days or if an import pipeline goes down," Lamech noted.



As the cold weather bites, the wisdom of these words is taking on an icy clarity.

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