Russian Gas Hub in Turkey, a Profitable Reality

Given the high dependence of today’s energy-intensive economy on gas supplies, it can be argued that any proposals to optimize the transit and sale of the blue fuel are of high interest in world markets.

Before the aggravation of Russian-Ukrainian relations, the European Union was the main buyer of Russian gas, with export volumes reaching as high as 174.3 billion cubic meters in 2021. However, with the beginning of Russia’s special military operation in Ukraine, due to anti-Russian sanctions from the collective West, the establishment of a ceiling on Russian gas prices, the refusal of several EU countries to pay in rubles for Russian gas and, finally, the undermining of of the Nord Stream 1 and 2 pipelines on September 26, 2022 in the waters of Denmark and Sweden, gas supplies from Russia to Europe have almost halved. This had an overall negative impact, primarily on the economies of the European states themselves.

Unfortunately, the leaders of most EU countries have become a “blind tool” in the hands of the American-British consortium and have led to the disorganization of the gas market. At the same time, Gazprom LLC was forced to record an increase in its gas supplies to China and other Asian countries. Russian gas continues to be delivered to Europe via one pipeline through Ukraine to Poland and through the Turkish Stream pipeline to Serbia and Hungary.

Due to the politicization of the topic of Russian gas and the subversive actions of Western intelligence services on the Nord Stream pipeline, on the one hand, and given the reliability of Turkey as a partner for the purchase and transit of gas from Russia, on the other, Russian President Vladimir Putin in October 2022 proposed a major energy project to create a gas hub in Turkey to depoliticize the topic of Russian gas exports and optimize global gas trade.

This mutually beneficial proposal of the Russian side was welcomed by Turkish President Recep Tayyip Erdoğan, who gave operative instructions to the relevant agencies and organizations to work out the details of creating a “gas hub.” Through this hub the supplies of Russian gas from the damaged Nord Stream in the Baltics will be moved south to Turkey. According to Alexander Novak, Russian Deputy Prime Minister, new trading platforms (in fact, a gas exchange) will be created in Turkey to re-export incoming gas as well as to develop the gas storage infrastructure and increase the volume of gas supplies via the southern route. Other gas exporters (in particular, Azerbaijan, Algeria, Iran and Qatar) may take part in the project along with Russia.

Turkish Minister of Energy and Natural Resources Fatih Dönmez proposed the geographical location of the gas hub – the Turkish territory of Eastern Thrace, bordering with Europe. This Russian project is now at the stage of detailed elaboration, legal registration and discussion of financial issues. The gas hub issue will be included in the agenda of a meeting of the Turkish parliament for amendments to the legislation and formation of the legal framework of the project. The conference scheduled for March 14 and then rescheduled for March 22 this year for a Russian-Turkish discussion of the entire complex of issues on the gas hub project is currently postponed for objective reasons linked to the tragic consequences of the large-scale earthquake in southeastern Turkey and the country’s transition to the election process.

Moscow’s interest in the gas hub in Turkey is determined by the fact that implementation of this project may depoliticize gas relations between Russia and the European Union and, at the same time, it allows to develop Swap-operations with Azerbaijan, Qatar, and Iran.

In fact, the Turkish gas hub in the foreseeable future can become an effective gas distribution center mainly for pipeline gas supplies to Southern and Southeastern Europe. A new electronic trading platform can also be created here, which will require the introduction of a global digital software. Real and potential gas suppliers to the Turkish hub, in addition to Russia, may be Azerbaijan, Iran and Turkmenistan, and in terms of Liquefied natural gas (LNG) also Algeria, Qatar.

Given the high potential of Russian gas export volumes to increase supplies through the Turkish hub, the construction of new maritime infrastructure from Russia to Turkey, the expansion of the Trans-Balkan pipeline and the construction of interconnectors in Europe itself will be required one way or another.

Various opinions have appeared in the media from detractors of this project about the alleged financial problems that could postpone the implementation of the Russian proposal for an indefinite period. In this connection, financial difficulties in Turkey caused by the consequences of the economic crisis and the devastating earthquake were cited as an argument (apparently, billions if not tens of billions of US dollars would be needed to implement the project).

In particular, on March 6 this year, Çağrı Erhan, a member of the Security and Foreign Policy Council under the President of Turkey, made a statement that Ankara would need Russian investment to build the hub because Turkey currently has no money to build it after the devastating earthquake.

However, no one has discussed the financial costs of creating a gas hub in Turkey. Accordingly, there is no clear idea of the volume of necessary expenses. Naturally, the earthquake tragedy has altered many of Turkey’s economic projects because of the shift in financial priorities. Nevertheless, the Turkish leadership and expert community remain aware of the economic and geopolitical importance of this project for the country’s interests.

Given the fact that, in total, potential suppliers of gas to the Turkish hub own more than 60% of the world’s gas reserves, Turkey could become an important regulator of gas exports to the EU countries. Accordingly, Ankara will have both economic and political impact on the fate of Europe.

President Recep Tayyip Erdoğan is known for his policy of extending the independent course of Turkey, which is largely rooted in the economic power of the state. This project complements the political course of the Turkish leader.

Moreover, Erdoğan is a well-known supporter of strengthening the unity of Turkic states and the implementation of the geopolitical project Great Turan. In this regard, his pragmatic policy is aimed at the formation of a new energy communication to export gas from the Turkic countries of Central Asia (primarily, Turkmenistan and Kazakhstan) through Turkey to Europe. Accordingly, the gas hub project, in which Russia is also interested for the purpose of depoliticizing the topic of gas supplies, creates an opportunity for Turkey to gain access to Turkmen gas. The latter concern will also be motivated by the idea of the necessity to increase gas supplies through the Turkish hub. And in these circumstances, it will be difficult for Russia to deny Erdoğan the opportunity to build a new gas pipeline from the Turkmen shelf of the Caspian basin to Turkey via Azerbaijan.

Given the fact that the gas hub is internationalized and meets the interests not only of Russia but also Turkey, Azerbaijan, Turkmenistan, Kazakhstan, Qatar, Algeria and possibly Iran, it is quite fair to solve the issues of financing infrastructure facilities in Turkey not only with the participation of Russia but also other direct and potential participants. In this case, the fate of the Turkish gas hub will become a near-term reality.

Iran, despite its interest in exporting gas to the European market, will obviously not consider “Turkish transit” as the only communication with the EU, and will try to implement alternative routes. Tehran fears the strengthening of NATO’s pan-Turkic strategy in the post-Soviet southeast, which could block Iran in the northern and north-eastern directions. That is why the struggle over the geography of Turkmen gas transit to the West could lead to a clash of Turkish interests on the one hand and the interests of Iran and Russia on the other. Nevertheless, the implementation of the Russian gas project in Turkey represents a real benefit for a group of supplying and buying countries.

By Aleksandr SVARANTS, PhD
Source: New Eastern Outlook

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