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    Turkey Hopes to Become a Gas Market-Maker, Expert Says

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    A decision to broaden the cooperation between Russia and Turkey in energy sector might remodel energy diplomacy in the region. What kind of change could that be? Radio Sputnik is discussing it with Alexey Grivach, Russia, and Prof. Ilter Turan, Turkey.

    A decision to broaden the cooperation between Russia and Turkey in energy sector might remodel energy diplomacy in the region. What kind of change could that be? Radio Sputnik is discussing the issue with Alexey Grivach, Deputy General Director of Gas Projects at Russia's National Energy Security Fund, and Ilter Turan, Professor of Political Science at İstanbul Bilgi University.

    Speaking at a joint news conference with Turkish President Tayyip Erdogan, Putin said: “Taking into account the European Commission’s position, which is not contributing to the realization of this project, … we think that Russia is unable to continue realization of this project in such conditions”. “Russia and Turkey have agreed to increase the capacity of Russian energy giant Gazprom's Blue Stream gas pipeline”, he added.

    So, what kind of prospects does the decision hold?

    Alexey Grivach: It is absolutely clear that the South Stream was stopped by Russia, as a reaction to an unconstructive position of the EU regulators and the EU countries involved in this project. For a few years they were trying to agree on the terms of constructing and realizing of this project, but we had a political decision from the EU not to develop this route and the solid political pressure against the EU countries like Bulgaria, Hungary and even non-EU countries like Serbia not to start the construction without a positive decision from Brussels.

    So, we had to find another solution and the alternative was found in constructing the pipeline to Turkey, and then from Turkey through the EU border in Greece, for example, to deliver the gas which we are obliged to supply to the European customers under the long-term contracts.

    Of course, we have a long history of cooperation with Turkey is the gas sphere and we even have joint investments in the gas pipeline which is going across Ukraine, in Bulgaria and Romania to deliver some gas over the Western route through Turkey. And we have a direct Blue Stream from Russia to Turkey, across the Black Sea. And Turkey is our second largest gas customer.

    And what is the value of the project?

    Alexey Grivach: Speaking about the South Stream, the onshore part in Europe and the offshore part, the cost was about 24 billion Euros. I think that this new project across the Black Sea to Turkey and to Greece will be cheaper because of the smaller distance of the expensive offshore part; it is two times less than for the South Stream.

    Which makes it economically more viable?

    Alexey Grivach: Yes, it makes it more viable, but, politically, the South Stream was the first choice due to the direct supplies from Russia to the European customers.

    How does this project need to be updated?

    Alexey Grivach: Of course, it is the matter of further negotiations. Now we are in a position in which we will fulfill this project by ourselves, but we welcome the Turkish companies if they want to join us in the offshore part of this pipeline. And of course we will have some joint ventures to develop the pipelines in Turkey, to deliver gas from the Black Sea to the European border.

    This is an open secret that politics in that part of the world in particular is largely defined by gas and oil interests of different parties involved.

    Alexey Grivach: For sure! This huge project brings the Turkish dream of becoming the huge gas transit hub to Europe closer. But first it was based on the gas from the ME and the Caspian, and now it is occurring that this hub will be based on the Russian gas. The first loser is Europe which will not have such a great project for the European economy, and even more importantly for some countries, not very rich countries of the EU, like Bulgaria. And they will lose the investments and transit fees, and this will go to Turkey and enforce the Turkish position in the market, and in the region as well.

    Do you see any challenges coming from other international player?

    Alexey Grivach: I think that Turkey will now feel this pressure from the Western countries – from the US and the EU. But previously Turkey managed to overcome this pressure and they never joined the sanctions regime against Russia, leading their sovereign foreign policy, even being the members of NATO. So, I see that there are some challenges, of course, coming from the situation in the world, but also hope that Turkey will be strong enough to resist this political challenge.

    Prof. Ilter Turan: It seems that Mr. Putin and Mr. Erdogan have developed a personal relationship. And even though there are many points of disagreement between Russia and Turkey, they seem to be capable of not letting these differences get into the way of cooperation. And when Mr. Putin was coming, people speculated on the agenda, but some things were known – that Turkey was interested in the reduction of the gas price that Turkey imports from Russia, since the fuel prices in the world have been going down.

    It was hoped that maybe some grounds for cooperation in Syria might be found, that there is hope for expanding the economic relations. In particular, Turkey has been interested in expanding its agricultural exports to Russia, in the light of the fact that some of the food stuffs that Russia imports from Europe are no longer available.

    So, there were many issues on the agenda. In some areas, I think, the leaders agreed to disagree, such as in the case of Syria. But there has been a small reduction promised in the price of gas. But it is not definitely, because, apparently, the technical teams are still negotiating.
    But the surprise came as Mr. Putin announced that rather than developing the South Stream, which would have shipped the natural gas through Bulgaria to Europe, the preference now is to sort of send the shipments to Turkey, and then send the gas on to Europe from Turkey. This was unexpected, we could not talk about it before and it came as a surprise.

    What does Turkey stand to gain from this change?

    Prof. Ilter Turan: Actually, we will have to wait and see, because the immediate benefit would be to get some transit fees, and then Turkey also hopes to be a hub from where gas, coming from other parts of the broader region, is collected and marketed. So, Turkey hopes to become a market-maker.

    But whether this project will be successful will also depend on whether there will be buyers of the Russian gas past Turkey. And there is reluctance on the part of the EU countries to purchase larger and larger amounts of gas from Russia. So, for the project to be fully successful, essentially, the buyers have to be brought into the equation. And we don’t yet know enough about the way they will approach it.

    Are there any competing projects in Turkey?

    Prof. Ilter Turan: I would not necessarily brand them as competing, but there also are other projects. I mean, already the Azeri gas is coming into Turkey and a pipeline project has been developed, called the Transanatolian pipeline, which will then connect to the Transadriatic pipeline and carry Azeri gas to the points in Europe.

    There is a plan to essentially develop the gas from northern Iraq to be shipped through Turkey to Europe. And the Iranian gas will eventually be shipped when the relations between the EU and the US, and Iran are improved. The Iranian gas and, possibly, the Turkmen gas coming through Iran will also be transiting Turkey for the points west. And there are other possibilities, such as the Mediterranean gas going through Turkey.

    So, there are other projects, but the need for gas seems to be quite large. And Turkey’s own need for gas seems to be growing. So, it might be better not to term these as competing projects, but as a number of projects that will be going through Turkey to the points west.

    Professor, moving away from the gas subject, how do you see the prospects for our bilateral relations? And what are the points on which we still have differences and problems?

    Prof. Ilter Turan: Essentially, the differences seem to be in the political domain, particularly in not seeing the events in Syria the same way. And Turkey also has found it difficult to accept that the Russian forces have overtaken Crimea. So, these are some of the problems. And there are also, maybe, disagreements on the Caucasus and, maybe, other places as well.
    But in terms of the economic relations, if one examines the already existing linkages, one discovers that Turkey buys gas from Russia, Turkey imports maybe some other raw materials from Russia, that lots of Russian tourists also come and spend their vacations in Turkey.

    On the other hand, when you look at it from the Turkish perspective, there are a lot of Turkish construction firms in Russia. And Turkey does export some finished goods – textiles, ready to wear clothing and agricultural products. And Turkey wants this trade to grow even more, and has been unhappy that the progress in helping Turkey’s exporting of the agricultural products to Russia has been slow.

    And I think recently there has also been talk about investigating the potential of Russia in terms of producing parts for automotive industries etc. So, the process of exploration continues. And on the whole, I think both sides want to keep the economic relationship going.

    And one should also finally add another thing. And that is that the Russians are constructing a nuclear power plant on the Mediterranean coast of Turkey, which is going to be the first power plant. And it is entirely possible that cooperation in that domain will also progress in other projects.

    Turkey is a NATO member. So, are its NATO allies comfortable? How do they view this growing cooperation with Russia at this particular moment in history?

    Prof. Ilter Turan: Well, it seems that most NATO members, before the relations ran into a difficult situation because of the Russian actions in Crimea, many NATO members were competing with each other to develop better economic relations with Russia. So, there is no reason to sort of take Turkey out and say – if Turkey develops economic relations, it is problematical, whereas if other European countries develop the economic relations more, it is not problematical.

    After all, Russia has a very comprehensive relationship to the best part of my knowledge with Germany. And there have been British firms operating in Russia. And there also are the activities of many other NATO countries. So, there is no reason for NATO countries to be particularly concerned that Turkey’s relations with Russia are developing.

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    European Union, NATO, South Stream gas pipeline, Turkey, Russia
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