Turkey’s chance to benefit from Russian pull back

Istanbul: Vladimir Putin’s suggestion that Turkey could serve as a “gas hub” in lieu of Moscow’s now abandoned South Stream pipeline chimed with Ankara’s energy ambitions.

With scarce hydrocarbon energy resources of its own, Turkey is keenly aware of the oil and gas deposits that surround it on all sides. Under President Recep Tayyip Erdogan the country has declared its aim to bring oil and gas to Europe from the Middle East, the Caucasus and elsewhere — and in so doing bolster its own energy security while pocketing transportation fees.

Turkey has made big strides to realise that ambition. Plans are proceeding to build a gas pipeline from Azerbaijan across Turkey to southeastern Europe. Turkish officials also hail an agreement between the Iraqi central government and the Kurdistan Regional Government, formalised this week, which they say could make it much easier for Iraq’s Kurds to transport oil and eventually gas through Turkey to international markets.

But there are roadblocks elsewhere — such as piping gas to Turkey from the eastern Mediterranean. Meanwhile, some analysts argue that Putin’s just-unveiled proposal is no sure thing.

David Tonge at IBS, an Istanbul-based consultancy specialising in energy, warns that engineering the requisite pipeline across the Black Sea will be “a complex business”, saying: “It is not going to happen overnight; it is going to require construction of very specialised pipes.”

Tonge also argues that, to meet other countries’ varying demands, Ankara will need gas storage capacity, which it lacks.

A broader issue is that with natural gas demand rising some 3 per cent a year, Turkey’s role as an end-consumer may eclipse its aspirations as a hub.

Putin was much more definite on stepping up gas supply to meet Turkish demand — a move that consolidates Russia’s role as Turkey’s principal supplier — than he was on his plans for the hub.

While he said Moscow was “ready to provide” Turkey with additional gas — initially some 3 billion cubic metres a year — he cautioned that the construction of a further pipeline would take place only “if that is necessary”. Putin added that “we could also reduce our gas price for Turkey as our strategic partner”.

Despite a 6 per cent price cut announced by Putin, Turkish officials complain the country will still pay more for Russian gas than do other European countries and will still sell it on the domestic market at a loss.

— Financial Times