Carlos Antaramian

Political Implications of Turkey’s ‘Gas Hub’

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By Carlos Antaramian

Special to the Mirror-Spectator

On October 14 of this year in Astana, the capital of Kazakhstan, Turkish President Recep Tayyip Erdogan surprisingly approved Russian President Vladimir Putin’s project to create a Turkish-Russian gas hub in his country. The proposed site is Thrace, in Turkey’s European region, where infrastructure for both gas storage and pipelines already exists. Although details on the costs, deadlines, scope, and conditions for implementing the proposal have not been released, the project has already generated criticism and is widely perceived, especially by the United States, to constitute a threat to several countries. French president Macron, for example, said that the project “made no sense” (“L’Elysée estime que le ‘hub gazier’ proposé par la Russie en Turquie n’a ‘aucun sens’,” https://francais.rt.com/international/101737-elysee-estime-que-hub-gazier-propose-russie-turquie-aucun-sens).  On October 19, Vedant Patel, spokesperson for the US State Department, made a highly critical announcement, stating that “Turkey and other U.S. allies will not become a safe haven for illicit Russian assets or transactions,” adding that Washington is willing “to assist (Turkey) in its efforts to enhance its long-term energy security.”

Supplying energy is a critical and controversial issue in global politics, one that creates problems between producing and exporting countries, as we have seen recently in the case of Russian supplies of gas and oil to Europe, a commerce impacted by sanctions due to the war in the Ukraine, including measures to cut planned supplies, restrict gas sales, and place limits on sales of oil (as proposed recently by the G7 at US $60/barrel), and destabilized by “shadowy” attacks on pipelines. It is clear that producers are fighting fiercely for market share and will exploit any opportunity to “gain” ground from their rivals. It is important to note that in June of this year the US, for the first time in its history, supplied more liquid natural gas (LNG) to Europe than its main competitor, Russia through its pipelines, a feat that would have been unimaginable just two or three years ago (Dustin Meyer, “U.S. LNG Outpaces Russia for First Time Ever as EU Opens Another Door for Natural Gas,” American Petroleum Institute, at: https://www.api.org/news-policy-and-issues/blog/2022/07/08/us-lng-outpaces-russia-for-first-time-ever). However, that supply chain is still very costly since middlemen push up the price of the gas that leaves the US fourfold before it arrives in Europe, with an impact that has provoked complaints by European leaders, voiced, for example, by French president Emmanuel Macron (América Hernández, “Why cheap US gas costs a fortune in Europe,” at: https://www.politico.eu/article/cheap-us-gas-cost-fortune-europe-russia-ukraine-energy/). Gas supplies, moreover, cause problems between producers and exporters when pipelines pass through third countries, like Turkey.

Energy is Turkey’s Achilles’ heel, states William Hale. Its principal problem “is that it has limited domestic supplies of fossil fuels, and that other sources have not been fully developed, so it is heavily dependent on imports, which account for about 70 per cent of energy consumption” (William Hale, “Turkey’s energy dilemmas: changes and challenges,” Middle Eastern Studies, Vol. 58, Nº 3, 2022:453). There is very little oil there (barely enough to satisfy 5.75% of the nation’s needs) and only small reserves of hard coal. Turkey has lignite, but that fuel is highly contaminating. Virtually all natural gas is imported, though a field (Sakarya) discovered in the Black Sea could begin production in 2023. Today, Turkey has no nuclear energy, but two construction projects are underway to supply hydroelectric plants (Hale: 457). One result of this situation is that a large portion of the country’s commercial deficit is due to fuel imports (mainly coal, oil, and natural gas), so reducing their volume would go a long way toward mitigating one of its most persistent, serious economic problems.

Over the past two decades, natural gas has become one of the most reliable sources of imported fuel in Turkey. Ankara enjoys the enormous advantage of being a neighbor to three key gas-producing countries: Russia, Iran, and Azerbaijan. Before 2001, Turkey’s only supplier was Russia, through the pipeline that entered Europe from the east (through Ukraine), but since then a pipeline was constructed that connects Tabriz with Ankara, allowing Turkey to access gas from Iran and Turkmenistan. Later, two pipelines were built from Russia, the “Blue Stream” (2003) that crosses the Black Sea from the east (read Ukraine) to avoid traversing Europe, and the “Turkstream” (2020) that crosses the Black Sea and extends to Kiyikoy, in the Turkish region of Thrace, and from there to Greece. Azerbaijan, meanwhile, has the Southern Gas Corridor that begins in the fields of Shah Deniz and reaches Italy through three sections: first, the South Caucasus Pipeline from Baku, passing through Georgia, to Erzurum, inaugurated in 2006; second, TANAP (Trans-Anatolia Pipeline) that stretches from Erzurum to Ankara and then to the Turkey-Greece border; and, third, TAP (Trans-Adriatic Pipeline), from the Turkey-Greece border across the Adriatic to southern Italy, where it connects to the Italian supply network. That project, conceived to reduce European dependence on Russian gas, was completed in 2020 with U.S. support.

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One consequence of the new pipelines is that Turkish imports of Russian gas, which accounted for 46% of the total in 2010, decreased to 34% in 2020, while imports from Azerbaijan and Iran increased by 24 and 11%, respectively. The remaining 31% is liquid natural gas introduced from Nigeria and Algeria that, due to recent technological developments and improved conditions in world markets, has dropped considerably in price to a point where it is competitive with the gas that arrives by pipeline. Existing pipelines do not use 100% of their capacity, but if Turkey becomes a “gas hub,” they could approach that figure. Moreover, Putin mentioned in the “Russian Energy Week that Russia could build other pipeline systems that would convert Turkey into the hub that supplies gas to countries in Europe that require it (“Turkish hub should unite gas flows from Russia, Azerbaijan, Turkmenistan — expert” at: https://tass.com/economy/1523797).

Today, Turkey operates as a transit state between producers and consumers. In reality, it is a budding “gas hub” that only requires enhanced infrastructure that would allow it to store and distribute enormous amounts of gas which it could sell to the highest bidder. Alternatively, it could provide Turkish companies, like BOTAS, with gas previously delivered to its internal market for re-sale or re-export. Turkey already receives gas from Russia, Iran, and Azerbaijan and, through the last, from Turkmenistan. In the near future, this could allow it to accumulate enormous reserves that it could offer for sale to European nations.

Many predictions hold that European gas imports will increase exponentially in the coming years. In a related development, the European Parliament voted in favor, under certain circumstances, of considering natural gas a “sustainable” energy source, a move that could free up millions of Euros for investment. Even though the price of liquid natural gas has fallen to levels that sometimes make it competitive with pipeline gas, additional pipelines would improve efficiency, reduce sales costs, and allow Turkey to take on a crucial role as a transit country for flows of gas from Russia, Iran, the Caucasus, and Central Asia. That, in turn, could allow it to play the “energy card” to obtain concessions from the European Union, similar to how it utilized the “migration card” to support its application for admittance to the EU.

But the US has no desire for Turkey to play such a role, much less for Russia to reap additional income through triangulated sales of its gas, for this would impact its economic interests and sales of its own gas. Recently, multimillion dollar investments have been made in Louisiana and Texas to construct plants for processing liquid gas for export to gas-thirsty markets in Europe and other parts of the world. Washington is worried over the potential transformation of Turkey into a “gas hub,” as that would undermine its vested interests in the energy sector. And, maybe, it might strengthen its ties with Azerbaijan to avoid Turkey’s influence and access to its immense reserves of hydrocarbons.

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