For more than a year (since autumn 2022) Russia, highly appreciating Turkey’s reliability as a trading partner, has proposed to form a gas hub on Turkish territory for subsequent sales of blue fuel to the world markets.
The essence of this project is that after the Nord Stream-1 and Nord Stream-2 pipelines are put out of operation due to sabotage actions of Western special services, Russian gas flows from the north-west direction could go to the south. At the same time, Turkey plans to create an electronic platform for price coordination based on the world market conditions and subsequent gas trading to consumers (primarily Europeans) without political disagreements.
Ankara supported Moscow’s proposal and took a pause to coordinate legal, organisational and technical issues. As a result, the Turkish side, based on geographical logic, proposed the territory of Eastern Thrace as the location of the gas hub, the formation of the relevant technical infrastructure for the accumulation and storage of blue fuel and the electronic gas trading platform. Due to the devastating earthquake in February and the general (parliamentary and presidential) elections, negotiations on the gas project were objectively delayed.
Meanwhile, as in all such commercial projects, the parties clarify their approaches in the course of negotiations in accordance with their financial and economic interests. Turkey is a tough trading partner, which knows its price and, as a rule, claims the maximum in order not to lose the minimum. In addition, the consequences of the devastating earthquake and the unstable situation in the economy dictate for Ankara new high standards of participation in promising projects.
It should be added that President R. Erdogan is quite well oriented in the geopolitical situation, understands the economic demand for the implementation of such a project for Russia, which is under pressure from Western sanctions, and finds an opportunity to link the transit of Russian gas through Turkey with Kazakh and Turkmen gas for the implementation of an ambitious programme of Turkic integration.
In particular, Ankara believes it is necessary to fill the gas hub from different sources (countries). This, according to the Turkish side, will create a high volume of imported raw materials, depersonalise its national index and bypass political intrigues on the way of subsequent exports (in particular, the sale of the same Russian gas to Europe).
Currently, Turkey receives gas from Russia, Azerbaijan and Iran. Accordingly, Ankara expects to supplement the potential list of suppliers with such key Caspian countries as Kazakhstan and Turkmenistan. The latter will allow Turkey to:
first, to reach out to gas-rich Turkmenistan, which has up to 7% of the world’s gas, and Kazakhstan, which is no less successful in this area (both of these Turkic countries are members of the Organisation of Turkic States, both as members and candidates);
secondly, to strengthen its energy influence on the EU gas market, which may to some extent contribute to the intensification of Turkey’s European integration;
thirdly, to provide a more fundamental basis for pan-Turkic integration within the OTS and to ensure Turkey’s systemic access to the Central Asian market.
Meanwhile, while negotiations are ongoing to clarify the parameters of the gas hub (i.e. electronic trading point) in Eastern Thrace, Russian gas is already being traded through Turkey to external markets (including Europe). Traders buy Russian gas in Turkey and resell it to the EU (for example, to Bulgaria).
In all trade transactions, the key issue is the price of goods. Accordingly, the parameters of Moscow’s and Ankara’s price view may differ significantly. Russia is interested in maximising gas exports to Europe after the disruption of the Nord Stream pipeline, the reduction of gas transit through Ukraine and the suspension of the Yamal-Europe pipeline. Given the high potential of gas volumes to increase export supplies, it is more profitable for Russia to create additional infrastructure in Turkey in a short time than to build alternative and long pipeline routes to China.
At the same time, the EU countries, which are under pressure from the United States, have so far shown little interest in additional gas supplies from Russia via pipelines. Europeans are eagerly buying liquefied natural gas, including Russian gas.
In this situation Turkey is trying to maintain the status quo on the gas hub project and sell the demanded volumes of Russian gas to Europe without much publicity. At the same time, Ankara is trying to find new gas suppliers (in particular, in the face of the above-mentioned Turkic countries of Central Asia – Kazakhstan and Turkmenistan).
In fact, Turkey is becoming a real energy hub for Europe, through which gas and oil products are supplied to the European market. Thus, following the results of three quarters of 2021, oil products supplies from Russia to Turkey amounted to 4.86 million tonnes, in 2022 for the same first three quarters – 5.06 million tonnes, and for the same period in 2023 this volume reached 12.84 million tonnes. (i.e. exports have increased threefold in almost two years). Accordingly, the export of oil products from Turkey to the EU in the first three quarters of 2021 was 3.71 million tonnes, and by September 2023 it increased to 8.24 million tonnes. So, the Europeans are increasing their purchases of Russian oil products via Turkey to circumvent the “sanctions”.
It is profitable for Turkey to import new volumes of gas and oil products from Russia for subsequent export to Europe. As for the gas hub, Ankara expects not just to form an electronic trading platform, but actually dictate the pricing of gas sold to foreign markets.
Gas trading through the hub is supposed to nullify the possibility of manipulation by Western politicians. Turkey aims to obtain the status of a “logistical superpower” in this project, and subsequent deliveries of inexpensive Russian gas to Europe should be carried out on the condition that there are no direct contacts between Gazprom and the EU, i.e. with the exclusion of any political preconditions for gas trade. For this purpose, Ankara seeks to increase the list of gas suppliers in addition to Russia, Azerbaijan and Iran. The surplus of gas allegedly depersonalises a particular seller.
Meanwhile, the implementation of Turkey’s plans to access Kazakh and Turkmen gas may lead to a situation where Ankara sets more stringent conditions for Gazprom (e.g., 25% discount and/or instalment payments for a year). Today, the total volume of blue fuel coming through gas pipelines to Turkey is 82.5 billion cubic metres per year, where Russian gas reaches 47.5 billion cubic metres. Turkey itself needs about 40 billion cubic metres of gas for domestic consumption. Accordingly, in case of 100% utilisation of the gas pipelines, Turkey will have 42.8 billion cubic metres of gas per year for export to Europe.
Time will show how the story of the gas hub project will develop. It is clear that the establishment of new gas supplies via Turkey to Europe from the Turkic countries of Central Asia, firstly, will require time and considerable finances; secondly, it may be hampered by geopolitical disagreements with both Russia and Iran; thirdly, it will depend on the subsequent regional and global world conjuncture (resolution of the Russian-Ukrainian, Armenian-Azerbaijani and Palestinian-Israeli crises).
At the same time, Turkey should realise that once the issues with Ukraine are resolved, the international climate between Russia and Europe, which is dependent on foreign raw materials, will naturally change. A stronger Russia with a dynamically developing economy will devalue not only the role and place of the U.S. in world affairs, but also the U.S. sanctions, which will force the EU to restore mutually beneficial trade and economic relations with Moscow. Consequently, long deliberations (and even more so, inappropriate conditions) on the part of Turkey with regard to the gas project may lead to the loss of Russia’s interest in the Turkish electronic platform.
As they say, time is not only money, but also more expensive than money…
Alexander SVARANTS – PhD of Political Science, Professor, especially for the online magazine «New Eastern Outlook».