After the downing of a Russian Su-24M bomber by a Turkish F-16 fighter jet, Turkey’s energy policies have been brought to the table once again with the most crucial issue coming to the agenda being how to balance Turkey’s energy dependency on Russia. According to 2014 statistics, Russian gas accounts for 54.7 per cent of Turkey’s overall gas imports. Additionally, considering that Turkey commissioned the Russian company Rosatom with the construction of its first nuclear energy power plant, Turkey’s energy dependency on Russia could became more complex. Currently, however, the more immediate focus centers on the increasing risks entailed by Turkey’s dependency on Russian natural gas.


Potential risks awaiting Turkey 


As of December 2015, Turkey entered its most critical period in terms of annual natural gas consumption. Particularly, when considering that Turkey’s gas consumption peaked at 230 million cubic meters in January and February 2015 and was therewith faced with supply shortages, it would not be a surprise if a similar situation were to occur in winter of 2016. Throughout this period, Russian policy has the potential to influence a wide range of activities in Turkey from the industry sector to household heating.


Looking at the general behavior of Russia’s natural gas company Gazprom, it can be argued that economic interests have been the main determinants of the course of Russia’s relations with Turkey. Even during the Ukraine crisis, the company did not make any cuts to the flow of gas to Ukraine despite its difficulties in receiving payments. Although a direct cut to the flow of gas to Turkey is not expected, a possible cut due to what may be deemed ‘technical malfunctions’ could happen. Such is illustrated in the fact that Russia’s Ambassador to Ankara Andrey Karlov brought attention to this risk in his interview with Cumhuriyet newspaper. He says that “Russia will continue to supply gas to Turkey, but to give an example what can it do if something goes wrong in Ukraine”.


Additionally, it is important to underline Russia’s balancing role in Turkish energy sector. Russia has provided Turkey with additional gas when it faced supply shortages in the past, however, it may not be as enthusiastic to do this as it had been before.  Going back to 2012, as a result of simultaneous technical malfunctions, both Iran and Azerbaijan cut the flow of gas to Turkey, hence the 40 million cubic meter gas flow decreased to 7 million. During this time Turkey faced significant problems in meeting its domestic demand. If such a situation were to be experienced this year, it would be difficult for Turkey to quickly find alternatives to Russia that would be able to provide it with 90 million cubic meters of gas on a daily basis. In this way, Turkey should carefully consider such short term risks.


Turkey’s pursuit to balance Russian energy


More mindful of its dependence on Russian natural gas, Turkey is now striving to develop new short and long-term alternatives. Currently, Turkey prioritizes four alternatives that could mitigate emerging risks in the post-2020 period while also aiming to send Russia the message that it is not Turkey’s only option. Turkey’s current priorities are securing liquefied natural gas (LNG) from Qatar, increasing its natural gas imports from Iraq and Israel via pipeline, and facilitating the existing procedures for the early delivery of 6 billion cubic meters of gas from Azerbaijan.


Turkish President Recep Tayyip Erdoğan signed a memorandum of understanding on the establishment of LNG trade between Turkey and Qatar during his visit to the country from December 1-2 2015. In line with the negotiations held between Turkey’s BOTAޞ and Qatar Oil, the parties agreed on a framework for the future of LNG trade between Turkey and Qatar, and Qatar is expected to invest in the construction of a LNG storage facility in Turkey. If negotiations conclude in a healthy way, the arrangement will propose two advantages. One of them is that Qatar will partially or entirely cover the expenses of a very costly LNG power plant in Turkey which will function as a direct investment and constitute a crucial inflow of capital to Turkey. The other significant advantage is that the arrangement would create new opportunities for Turkey’s own LNG sector. In particular, the share of LNG in meeting Turkey’s domestic energy demand would likely grow beyond its current 15 per cent. Along with the rapid transformation of Turkey’s domestic natural gas market, Turkey would gain a more flexible import structure via pipeline and LNG trade, which together would bring certain advantages. However, it is difficult to formulate an in-depth analysis on the subject in terms of the costs of the entailed projects before a final agreement is signed.


Frequently articulated by the Turkish authorities and various companies operating in the region, Turkey’s second prioritized alternative is increasing its imports of natural gas via pipeline from Iraq. According to CEO of Genel Energy Tony Hayward, by developing the reserves in northern Iraq, anywhere between 10 and 20 billion cubic meters of natural gas could be delivered to Turkey at a very advantageous price. In this regard, two important issues with respect to Turkey’s management of its bilateral relations with Iraq come to the fore. Firstly, considering the waning investment in Iraqi energy infrastructure after ISIS’s occupation of Mosul, Turkey needs to carefully consider what kind of formula should be developed between itself and Iraq when it comes to the necessary capital required to construct infrastructure in the country. If the efforts to remove ISIS from the region produce positive results, this process would be facilitated. The second issue directly relates to how the trade relations between Baghdad, Erbil and Ankara would be shaped. The development of better relations between Ankara and Baghdad, the latter of which has raised concerns about Turkey’s deployment of military forces to Bashiqa in order to train Peshmerga soldiers, will in turn pave the way for smoother relations between Ankara and Erbil.


Eastern Mediterranean gas poses another alternative for Turkey; and in this sense, the normalization of relations between Tel Aviv and Ankara represents a turning point for cooperation in this direction. However, the role that Cyprus will play throughout this process should not be forgotten. While a solution to the Cyprus issue could facilitate cooperation, a possible deadlock in negotiations could pose an obstacle thereto.  


The fourth primary alternative for Turkey is seen in speeding up the delivery of Azerbaijani gas to Turkey via the unfinished Trans-Anatolian pipeline (TANAP). Remarkable momentum has already been gained in this endeavor. During Turkish Prime Minister Ahmet Davutoğlu’s most recent visit to Baku, both parties declared their intention to complete the pipeline and begin using it to deliver gas at an earlier date than planned. However, finishing the construction of the pipeline before 2019 in addition to developing the necessary technical infrastructure for the development of Azerbaijani gas fields, such as the ޞah Deniz II, will bring about extra technical and financial burdens. It may be difficult to realize these two objectives on a shortened schedule. This is augmented by the fact that the infrastructure works will continue in accordance with the same amount of capital and personnel allocated by the stakeholder companies. Throughout this process, while the goodwill of the parties is of crucial importance, how these intentions will be reflected in the reality should be closely followed. In this sense, it should be noted that resource extraction projects have slowed due to rapidly retreating commodity and oil prices. While this brings its own advantages particularly in terms of the costs and availability of technical assistance, decreasing income poses a serious problem. In this regard, the responsible management of extra costs is critical in enabling the early delivery of gas from Azerbaijan’s Shah Deniz II gas field to Turkey. 


Turkey’s energy strategy after the Russian crisis


After the downing of the Russian bomber, Turkey has to consider its energy relations with Russia from the perspective of energy security. Although some alternatives that could balance these relations are available in the middle term, severe problems may be faced in the management of risks in the short term. The most concrete solution to mitigating risks seems to be turning to the LNG spot market. However, considering the interruption in the flow of gas from Iran to Turkey on 8 December 2015, it could be said that the existing risks are structural, and thus turning to the LNG spot trade would most likely be a short term solution.


This situation once again clearly demonstrates that Turkey’s energy strategy should be reviewed within the context of resource diversity. Even if Turkey does come to view its energy relations from the perspective of energy security, its newly developed formula should not exclude Russia, and should instead seek to balance it. Such would be a better scenario for Turkey’s long term interests.


To sum up, the deepening of the crisis in the region requires Turkey to consider the principle of ‘energy security’ more seriously as it moves beyond the cliché concept of energy politics. Throughout this process, Turkey, aside from turning to and exploring alternative resources, should improve the capacity of its storage facilities while developing its technical infrastructure. Additionally, Turkey should come to reconceptualize its notion of energy diversity to include local resources such as coal and renewable energy, thus allowing it to develop a more holistic energy strategy.











April 2016