Iran Announced New Gas Project While Turkey Is Still Thinking…

Following the undermining of Russian gas pipelines Nord Stream 1 and 2 in the Baltic Sea by Western special services at the end of September 2022, Russian President Vladimir Putin, speaking at the Russian Energy Week forum in Moscow on October 12, 2022, proposed to depoliticize the issue of gas trade and create a “major gas hub” on the territory of Turkey. Moscow plans to redirect the main gas export flows through Turkey to third countries (including the EU). This topic has caught the attention of world actors and provided the same Turkey with new horizons for energy development.

The Russian leader’s initiative also came as a surprise for Turkey itself, since then-Minister of Energy and Natural Resources Fatih Dönmez, as a participant of the plenary session of the Moscow forum, first learned about the idea from President Vladimir Putin’s speech. Turkish side took a time-out to work through the relevant legal and trade and economic issues, but President Erdoğan promptly supported the Russian side’s proposal.

Since then, Turkey has conducted the necessary consultations with Russian partners on a range of issues related to the “gas hub” project, made certain amendments to its own legislation, identified the western territory of East Thrace as a site of the new gas system for the concentration of gas and the formation of a modern electronic trading platform Ankara has apparently agreed with Moscow on its financial and energy dividends from the implementation of the gas hub.

However, the time of agreement and the beginning of the project was somewhat delayed for all the objective reasons related to procedural and legal issues, the aftermath of the devastating earthquake and, of course, the tense general Parliamentary and the Presidential elections.

As the reader may be aware, Kemal Kılıçdaroğlu, Recep Erdoğan’s main opponent and leader of the Nation Alliance opposition bloc, publicly opposed the implementation of the Russian “gas hub” project in Turkey ahead of the second round of the presidential election. The main motivation of the Turkish pro-Western opposition was the unconvincing statement that if today Turkey is 30-40% dependent on Russian energy, tomorrow the gas hub will increase Ankara’s total dependence on Moscow to 70-80%. However, Kılıçdaroğlu did not point out that it is exactly Russia that is building at its own cost the $21 billion first Akkuyu Nuclear Power Plant in Turkey, which will give his country 10% of all energy and new production and competitive opportunities. He did not mention either the fact that the gas hub will actually allow Turkey to become involved in the joint sale of Russian gas to third countries, as well as continue to receive additional discounts on Russian gas. Nevertheless, Kılıçdaroğlu did not become the leader of Turkey and remained in the status of a now retired opposition figure.

Thus, the elections were held, the leader is determined, and it remains to move from words to deeds. Generally, President Erdoğan maintains a policy of partnership with Russia on this issue as well, which will certainly stimulate economic growth and strengthen Turkey’s independence. However, so far there have been new appointments to the government, Erdoğan’s first foreign visits have taken place, and Turkey is immersed in a new round of financial crisis and devaluation of its national currency (lira).

Meanwhile, the new government (primarily Minister of Treasury and Finance Mehmet Şimşek and Central Bank Governor Hafize Gaye Erkan) is objectively concerned about the collapse of the Turkish lira and relies on a monetarist method of economic management, which is likely to lead to higher lending rates in accordance with international norms. The latter suggests that the leaders of Turkey’s financial sector, who have passed the professional school of education and business in the US, apparently aim to obtain external investments and loans from the IMF to overcome the developing crisis and solve the country’s acute social and economic problems (including the reconstruction of the earthquake zone).

Mehmet Şimşek knows fully well that IMF grants politically secured credits, and the very content of such guarantees and the amount of credit is determined by the United States. Thus, Washington will continue to put forward possible anti-Russian theses to Ankara, the acceptance of which by Erdoğan will determine the regime and terms of the financial stabilization of Turkey. Can the private negotiations between the IMF and Turkey also have an impact on the subject of the implementation (at least the timing) of the Russian “gas hub” project? There is definitely no way to deny it.

Another topic of probable differences of Moscow and Ankara’s approaches to the gas hub could be issues related to Turkey’s policy on: a) expanding its zone of influence in the Central Asian region and the Caspian Basin; b) energy and economic integration of Turkic countries within the framework of the Turan project. In particular, the Turks refer to the Western anti-Russian economic sanctions and talk about the expediency of increasing gas export flows with different indexes to the same gas hub in East Thrace in order to hide from the West the “Russian origins” of gas supplied to the European market. So what does this mean in real life?

Ankara (especially after another victory of Erdoğan – the architect of the new Turan) plans to claim the transit and export of gas of all Turkic countries (including Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan) through its territory to Europe. Such a deal and new communications of the southern energy corridor (including a network of oil and gas pipelines) has already taken place with Azerbaijan. Baku signed a new agreement with EU Commissioner Ursula von der Leyen to increase gas supplies because of the anti-Russian sanctions. Now Ankara, having received the Trans-Anatolian pipeline TANAP from Azerbaijan, is interested in the possibility of building a new gas pipeline TANAP-2 from Turkmenistan, which has 7% of the world’s gas reserves. The motivation for Russia is “more foreign gas in Turkey, more opportunities to export Russian gas to the EU under their flag.” But will Russia be satisfied with such a chain reaction of losses and concessions in favor of strengthening Turkey? After all, finances are followed by soldiers…

It is no accident that on June 7 this year (that is, four days after the inauguration of President Erdoğan), Tehran, represented by its Oil Minister Javad Owji, proposed to create a gas hub in the industrial district of Asaluyeh in Bushehr Province on the Persian Gulf coast with the participation of Iran, Russia, Turkmenistan and Qatar. At the same time, India, Pakistan and China can become potential buyers of natural gas from the Iranian hub. And this is nothing less than 61% of the world’s gas reserves (Russia – 24%, Iran – 19%, Qatar – 11% and Turkmenistan – 7%) with a focus on the multibillion-dollar consumer market.

So far, Tehran has not announced a specific timeline for the gas hub project, but the likely participating countries (Russia, Iran, Turkmenistan and Qatar) have a favorable geography and an established infrastructure (utilities) that is safe and independent of external factors. Asaluyeh, in particular, is the famous production center of the North-South Pars – world’s largest oil and gas field, which is located in the central part of the Persian Gulf in the territorial waters of Iran and Qatar. Turkmenistan borders Iran by land and the Caspian Sea. Russia can also connect with Iran directly through the Caspian Sea.

In addition, Russia and Iran already have an active partnership in the gas industry. The Iranian authorities, for example, support negotiations between the National Iranian Oil Company and Gazprom on the development of ten new gas fields in Iran (in particular, the Kish and North Pars fields with subsequent liquefaction of gas for delivery to world markets). These joint Russian-Iranian projects are valued at 40 billion dollars.

This early-June Iranian initiative is a wake-up call for the West and Turkey as well. It is unlikely that Russia and Iran will be interested in strengthening Turkey’s pan-Turkic strategy aimed at the gas of Turkmenistan for example. That means, the elections are over, and it is time to pass from words to deeds on the “gas hub” mega-project in Turkey.

By Aleksandr SVARANTS, PhD
Source: New Eastern Outlook

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