The Energy Card

Turkey

Economic News

22 Jul 2010
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Turkey’s importance as an energy conduit feeding Europe received fresh attention this month as Greek Development Minister Dimitris Sioufas announced that the Greek section of a 285-km Greece-Turkey natural gas pipeline - bringing gas from Azerbaijan through Turkey to Europe - would be running by May 2007.

With the much-heralded Baku-Tibilisi-Ceyhan (BTC) pipeline already supplying Europe with oil from fields in the Caucasus, Europeans are now looking forward to a parallel inflow of gas, bolstering Turkey’s importance as an energy hub feeding the continent.

“When the pipeline is operational, a major step will be taken in the implementation of a natural gas corridor between Greece, Turkey and Italy” confirmed Sioufas. Drawing from Azerbaijan’s 400bn cu metre Shah Deniz gas field, and eventually from other sources, is intended to reduce European reliance on Russian energy supplies. Indeed, Russia’s use of its vast energy supplies as a political tool to bully energy-reliant former Soviet Union states in 2006, caused justifiable concern in Europe, which imports 40% of its gas from Russia. Austria and Hungary were among those countries that registered a drop in supply in January 2006 as a result of Russia’s strong-arm tactics. The US accused the Russian government of using pricing as a political weapon against the likes of Georgia, Ukraine and Belarus.

While Moscow’s behaviour has led Europe to diversify its sources of supply, it has also forced Turkey and its neighbouring states to adjust their own energy plans. According to an agreement reached between Azerbaijan, Georgia and Turkey in 2001, the Turks are to receive almost 3bn cu metres of gas per year from the Shah Deniz field through the Baku-Tbilisi-Erzurum pipeline. But with the Georgians and Azerbaijanis concerned about minimising imports of increasingly expensive Russian gas, Ankara has agreed to reduce its quota in 2007, which will be consumed by its two partners. Negotiations as to what the final quotas will be for the three states continue.

Yet, contrary to the experience of its smaller neighbours, Turkey has been able to resort to Russian supplies – which satiate the bulk of local demand - to fill its own energy gap. In mid-December, Iran reduced the daily supply of natural gas flowing to Turkey to 7m cu metres, in spite of a bilateral agreement pledging 27m cu metres per day. Cold weather conditions, Tehran claims, led to the move. To offset the loss, the Turkish ministry of energy and natural resources increased the gas purchases from Russia’s Blue Stream from 27m cu metres to 34m cu metres per day. The move underlines Turkey’s ability to increase supplies from its main source when those from alternative markets falter.

Still, Turkey’s real strength as an energy conduit to Europe derives from the fact that it is not only able to tap reserves in Central Asia and the Caucasus to lessen dependency on Russian energy, but is also able to channel supplies from the Middle East – as demonstrated with the Arab gas pipeline that will run from Egypt through Jordan, Lebanon and Syria to Turkey, with supplies flowing on to Europe. Continental consumers will be glad to have a greater supply of Iranian energy to wean them off Russian fuel, notwithstanding concerns over Iran’s nuclear programme. The Nabucco project, a 3000-km pipeline channelling Iranian and Caspian natural gas to Europe at a cost of 6bn euros, testifies to Europe’s concern over diversifying energy sources. A memorandum of understanding on energy cooperation between Iran and Turkey is expected to increase trade between the two states from $5bn to $10bn.

As Turkey continues to develop an increasingly intricate energy network and capitalises on its geographical position as a transit route, Ankara may also be tempted to flash the energy card to gain some leverage over Europeans. Drawing parallels with Russian behaviour would surely be misplaced, not least because Turkey depends on energy imports itself and is largely pro-Western. But the prospect of Ankara taking a less cooperative approach on energy matters should not be written off in the case of the EU and Turkey experiencing a larger fallout. Turkey, quite pointedly, continues to follow its own independent energy policy.

 

 

 

 


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