Turkish Forum

Tag: South Stream

  • Turkey Reiterates Commitment to Southern Corridor with Trans-Anatolia Pipeline

    Turkey Reiterates Commitment to Southern Corridor with Trans-Anatolia Pipeline

    Turkey Reiterates Commitment to Southern Corridor with Trans-Anatolia Pipeline

    Publication: Eurasia Daily Monitor Volume: 9 Issue: 1
    January 3, 2012
    By: Saban Kardas
    Turkey and Azerbaijan signed a memorandum of understanding that will facilitate the transit of Azerbaijani natural gas to Europe, changing the calculations over the EU-backed Southern Corridor concept. In October 2011, the two countries signed numerous agreements regulating the volume and price for Turkey’s gas imports from Azerbaijan as well as the transit terms for Azerbaijani gas exports to Europe through Turkish territory (EDM, November 1, 2011). Among these documents they agreed to work on a dedicated pipeline that will transport gas from the second phase of the Shah Deniz gas field through a pipeline from Turkey’s eastern frontier to its western border, in addition to using the existing Turkish grid for transiting Azerbaijani gas.

    On December 26, 2011, Turkey’s Energy Minister Taner Yildiz and his Azerbaijani counterpart, Natig Aliyev, signed a memorandum of understanding on the construction of the Trans-Anadolu natural gas pipeline. The Trans-Anadolu consortium will be formed by the State Oil and Gas Company (SOCAR) and Turkey’s BOTAS and TPAO. While the Azerbaijani side will hold 80 percent of the shares, the Turkish participants will control the remaining 20 percent, but the stakes might change over time, as the consortium will be open to participation by other international energy companies. The construction work is scheduled to start in 2012 and be completed in 2017, when the Shah Deniz-II is also expected to become operational. The pipeline will have an initial annual capacity of 16 billion cubic meters (bcm), which could be increased to 24 bcm. The 6 bcm capacity will be used for consumption in Turkey’s western regions, while the rest of the throughput will constitute Azerbaijan’s exports to Europe. Since Turkey will retain the re-export rights for its imports from Azerbaijan, the total volume of gas available for European markets could increase depending on the market conditions. Though the construction costs will be determined after feasibility studies, Yildiz estimated these costs at around $5 billion (Anadolu Ajansi, December 26, 2011).

    This development raises many interrelated issues about the future of bilateral relations, as well as the EU’s Southern Corridor project seeking to diversify European natural gas supplies tapping into Caspian basin reserves.

    With this decision, Turkey and Azerbaijan took another step to cement their evolving strategic partnership, while Ankara also reconfirmed its Baku-centered South Caucasus policy. Energy occupies a major place in both countries’ ambitious foreign policy agendas. While Azerbaijan is eager to capitalize on its developing hydrocarbon reserves to emerge as a major regional actor in the South Caucasus, Turkey has sought to use its geographic location as an asset to establish itself as a major transportation corridor for oil and gas from the Caspian basin and Central Asia as well as the Middle East.

    Given Azerbaijan’s need for a reliable export route and Turkey’s interest in sustainable throughput to feed its ambitions to become an energy hub, there are economic and strategic imperatives forcing the two countries to forge a closer partnership in the energy sector, which is further strengthened by overlapping perspectives on regional issues. Such a shared vision led to the construction of the Baku-Tbilisi-Ceyhan pipeline marketing Azerbaijani oil globally and the Baku-Tbilisi-Erzurum pipeline exporting Azerbaijani gas to Turkey, part of which is re-exported to Greece by using the Turkish grid. With the successive energy deals signed in recent years, including a rising volume of Azerbaijani investments in Turkey’s energy sector, and deepening political dialogue such as the establishment of a high level strategic cooperation council, the two countries are healing the frictions caused by Turkey’s thwarted normalization efforts with Armenia.

    Currently, there seems to be a strong determination to develop joint energy projects and turn this partnership into a solid axis in the South Caucasus and beyond. Natig Aliyev’s remarks that with the trans-Anatolia project the two countries will work in European energy markets together reflected this shared vision (www.ntvmsnbc.com, December 26, 2011).

    Moreover, the implications of this development for the EU-backed Southern corridor remain a matter of controversy. The competing projects including Nabucco, Interconnector Turkey-Greece-Italy (ITGI) and Trans-Adriatic Pipeline (TAP) submitted their bids to the BP-led consortium operating the Shah Deniz field in October 2011. While Azerbaijan and the consortium were expected to make their decision, the trans-Anatolian project has altered the equation in the ongoing competition to secure access to Azerbaijan’s export volumes.

    To complicate these calculations even further, Turkey also moved to sign an accord with Russia by the end of 2011. An agreement finalizing Turkey’s approval for the construction of South Stream in its territorial waters in the Black Sea was signed in Moscow by the heads of BOTAS and Gazprom, overseen by Yildiz and Prime Minister Vladimir Putin. With this decision, which Russia had been expecting for over one year, Turkey removed its objections to the South Stream project, which Russian sources expect to be completed by 2015. In return, Yildiz claimed that he secured guarantees from the Russian side to resolve the dispute over the western pipeline in terms favorable to Turkey, especially including a reduction in the price for gas imports from Russia (Anadolu Ajansi, December 29, 2011).

    The Turkish government has faced the criticism that by taking these controversial steps it is effectively killing the Nabucco project, which it claimed to have deemed as a strategic priority (Hurriyet, December 31, 2011). For its part, the Turkish government has been arguing that the trans-Anatolian project was in fact complementary to Nabucco and Southern corridor projects, as it will reduce the costs of the other projects (Anadolu Ajansi, December 26, 2011; Yeni Safak, November 19, 2011).

    Ankara considers that it has fulfilled its responsibilities towards the Nabucco project by granting the necessary permissions earlier for its construction on its territory. The recent deal on the trans-Anatolian project in that context reiterates that Turkey would not be the deal-breaker in Southern corridor projects, as it effectively resolves issues pertaining to the transit of Azerbaijani gas. More importantly, the willingness of the BP-led Shah Deniz consortium, for Azerbaijan and Turkey to undertake a major portion of the transportation corridor might allow Nabucco and other projects to redesign themselves on scalable terms. Now it will be up to other Nabucco partners to do their part, readjust to the new conditions, and find a supply source, which remains the main obstacle before the project.

    https://jamestown.org/program/turkey-reiterates-commitment-to-southern-corridor-with-trans-anatolia-pipeline/
  • Progress in Turkish-Azeri Talks on Gas Prices and Transit

    Progress in Turkish-Azeri Talks on Gas Prices and Transit

    Progress in Turkish-Azeri Talks on Gas Prices and Transit

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 153
    August 10, 2009
    By: Saban Kardas
    Following the signing of energy cooperation agreements between Turkey and Russia, Turkish Energy Minister Taner Yildiz continued his “energy diplomacy,” by visiting Azerbaijan. Prior to departing for the Nakhchivan Autonomous Republic, the Azerbaijani enclave between Turkey and Armenia, on August 8 Yildiz stressed that his trip followed the agreements Turkey recently signed on both the Nabucco project and South Stream. He also added that as part of intensive energy diplomacy, he will travel to Syria this week to sign an agreement for the construction of a pipeline that will connect the Arab gas pipeline with the Turkish grid (Anadolu Ajansi, August 8).

    In Nakhchivan, Yildiz met with the President of Nakhchivan Vasif Talibov and the head of the Azerbaijani oil company SOCAR, Rovnag Abdullayev. Turkey and Nakhchivan signed a memorandum of understanding on laying a pipeline from the East Anatolian city of Igdir to Nakhchivan, which will carry half a billion cubic meters (bcm) of Azeri gas annually to Nakhchivan (Cihan, August 8).

    Another major part of Yildiz’s agenda were talks between Turkey and Azerbaijan concerning the gas trade and transportation. Although the negotiations have been under way for some time, Ankara and Baku have been unable to reach an agreement on three inter-related issues: re-pricing the gas Turkey imports from Azerbaijan’s Shah Deniz I reserves, setting the price and volume for Turkey’s imports from the Shah Deniz II, and developing a regime for the transit of the gas through the Turkish territory (www.cnnturk.com, August 8).

    These issues have implications beyond bilateral relations between Ankara and Baku. In the context of the discussions concerning the construction of alternative pipelines carrying Caspian basin gas to European markets, there is growing interest in tapping into Azerbaijan’s resources, particularly the Shah Deniz II field, which is expected to be operational by 2016. Whereas the European companies are interested in purchasing Azeri gas to feed Nabucco, Russia has been trying to lock in the same resources through a long-term contract to supply its alternative South Stream project and to pre-empt Nabucco. Baku is looking to secure the best deal from this competition, and diversify its export routes as much as possible, which led it to export a symbolic volume of gas to Russia through a non-binding agreement in June, which seems to have paid some tactical dividends (EDM, July 17).

    Azerbaijan’s decision is considered as a “flexible tactical move” on Baku’s part (EDM, July 2). The agreement demonstrated to Ankara and its Nabucco partners that Azerbaijan was not short of options for the sale and transport of its gas. Indeed, the urgency induced by the agreement served as a wake-up call for Turkey and other European countries, which helped convince Ankara to end its stalling and open the way to sign the Nabucco inter-governmental agreement (EDM, July 6).

    Nonetheless, a second tactical goal of the Azeri-Russian agreement has yet to bear concrete results: “the $350 price offer [which Russia will pay for the Azeri gas] has set a benchmark that other importers of Azerbaijani gas may have to bid against” (EDM, July 2). Indeed, Baku’s sudden move surprised many in Ankara at the time, leading to speculation that Turkey might have to pay higher prices. Nonetheless, when asked about the impact of the Azeri-Russian deal on the Turkish-Azeri talks on re-pricing, Yildiz preferred to decouple the two processes from each other. “How much does the [Azeri-Russian agreement] affect the price? This question should be directed to Abdullayev. We had submitted our offer before the agreement with Russia, and we are still at the same position. Because, [we believe] our price offer takes into account both sides’ interests, and ensures that the project remains feasible” (www.haberturk.com, July 10).

    Ankara claimed that it offered a “fair” price to Baku, and it expected this to be accepted (EDM, June 4). Apparently Turkey proved unable to satisfy the expectations of the Azeri side, and Yildiz and Abdullayev have held several meetings to discuss this issue. Ankara’s reluctance to revise the price for Azeri gas raises suspicions that, using its geographic position as leverage, Ankara is resorting to “tactics of extortion” to maximize its benefits at Azerbaijan’s expense, which might eventually undermine the prospects for Nabucco (EDM, July 2).

    Nonetheless, Azerbaijan’s ongoing talks with Turkey demonstrate its willingness to export its gas to European markets independent of Russian-controlled pipelines and its treatment of Nabucco as an overriding national interest. However, the conditions that Ankara will attach to the use of its territory for exports, including transit fees and re-export rights, are a major factor influencing Baku’s decision, which raises a larger question about the Turkish government’s position on pipeline diplomacy.

    After signing agreements on both Nabucco and South Stream, Ankara maintains that the two projects are not necessarily exclusive. Moreover, in response to charges that Turkey’s agreement with Russia, which granted South Stream the right to conduct seismic feasibility studies in the Turkish zone of the Black Sea, was a serious blow to Nabucco, Turkish officials maintain that “Turkey is not a partner in the South Stream project and only allowed the use of its territorial waters in the Black Sea, while the country is a partner state in Nabucco.” They also added that Turkey still considers Nabucco as a strategic priority (Hurriyet Daily News, August 7).

    If Turkey indeed treats Nabucco as a priority project, one area where it could tilt the balance in favor of Nabucco is to facilitate the westward flow of Azeri gas. In this way, it could cement its ties to Baku and reassure its Western partners of its commitment to Nabucco. No agreement was signed during Yildiz’s meeting, but the statements by Azeri officials signaled a promising future. Abdullayev said that, “we came close to concluding Turkey-Azerbaijan gas agreements. We can soon finalize the issue of transit prices. Gas from Shah Deniz will also come to Turkey, and will flow to Europe through Turkey. This will support the two sister nations” (www.ntvturk.com, August 8).

    https://jamestown.org/program/progress-in-turkish-azeri-talks-on-gas-prices-and-transit/
  • Turkish-Russian Grand Bargain in Energy Cooperation

    Turkish-Russian Grand Bargain in Energy Cooperation

    Turkish-Russian Grand Bargain in Energy Cooperation

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 152
    August 7, 2009
    By: Saban Kardas
    Russian Prime Minister Vladimir Putin’s August 6 visit to Ankara marked a new era for “enhanced multi-dimensional partnership,” between Ankara and Moscow. Putin and Recep Tayyip Erdogan signed some twenty agreements covering energy, trade and other fields. Italian Prime Minister Silvio Berlusconi also attended part of the talks between Erdogan and Putin, considering the involvement of Italian companies in some of these projects. The most remarkable dimension of the various joint projects concerns energy cooperation, most notably Turkey’s expression of support for Russia’s South Stream project (Anadolu Ajansi, www.cnnturk.com, www.ntvmsnbc.com, August 6).

    In oil transportation, Russia committed to participate in the planned Samsun-Ceyhan pipeline (SCP), connecting the Turkish Black Sea city of Samsun to the Mediterranean terminal Ceyhan. Turkey has solicited Russian participation in the SCP, which will bypass the congested Turkish Straits. Moscow has proven reluctant, and has instead promoted another bypass option through Burgas-Alexandroupolis between Bulgaria and Greece. Meanwhile, Turkey took further steps to make the SCP attractive for the Russian side, by linking this project with the Turkish-Israeli-Indian energy partnership (EDM, November 25, 2008).

    Erdogan expressed his pleasure with the Russian decision to commit its crude. Ankara can consider this development as its greatest success in this grand bargain, given that Turkey has worked to convert Ceyhan, where the Baku-Tbilisi-Ceyhan pipeline also terminates, into a global energy hub. However, Putin did not rule out interest in Burgas-Alexandroupolis, and instead emphasized that the two pipelines might be complementary in meeting the growing demand for export routes. This statement raises questions about how committed Russia will be to the SCP, given that Russian companies own the majority of shares in the other Burgas-Alexandroupolis option.

    In terms of gas cooperation, Turkey will allow Russia to conduct explorations and feasibility studies in the Turkish exclusive economic zone in the Black Sea, as part of Russian plans to construct South Stream. Since this move comes against the background of Turkey’s decision to sign the rival Nabucco pipeline agreement last month, it raises many questions, as to how it will affect Nabucco, which Turkey considers a “strategic priority,” as well as European energy security issues. Despite the questions surrounding its feasibility and high costs, as well as its negative implications for Nabucco, Erdogan maintained that both projects contribute to diversification efforts.

    It appears that the “grand bargain” was between the SCP and Blue Stream. Ahead of the meeting, Yuri Ushakov, the Deputy Head of the Russian Government Staff said that “Turkey made concessions in South Stream and we made concessions in SCP,” but added that he had doubts over the SCP’s feasibility (Anadolu Ajansi, August 5). A statement from Berlusconi’s office also claimed that he had helped broker a rapprochement between both countries on these two issues (Hurriyet Daily News, August 6). However, domestically, there are concerns that in this “exchange” of concessions, Turkey did not gain much. The SCP’s importance was inflated, because it was developed by business interests close to the government (www.turksam.org.tr, August 7). Another gas deal concerned Ankara’s request to renew the contract under which it purchases Russian gas through the Western pipeline via the Balkans. Erdogan announced that the contract (which expires in 2011) will be renewed for 20 years. Turkey had complained about the high prices and the leave-or-pay conditions in its gas deals with Russia. Putin said it was renewed on favorable terms to Turkey, but the contract’s details are unclear.

    Erdogan also said that they discussed the extension of Blue Stream II to transport Russian gas to Israel, Lebanon and even Cyprus. Blue Stream, running underneath the Black Sea, is the second route carrying Russian gas to Turkey. Moscow previously raised the possibility that it could use Blue Stream II in order to transport gas to Europe, but this option was rejected, since it contradicted Nabucco and Russia sought to use Turkey only as a transportation route. Now, Ankara wants to revive it as part of a North-South corridor. Based on the leaders’ statements, it appears that the existing capacity of Blue Stream might be improved and gas could be transferred to the Mediterranean through this pipeline.

    However, although Erdogan praised this development as another major success, there is no guarantee that Russia will grant “re-export rights,” which indicates that if Blue Stream II is implemented, Moscow will continue to view Turkish territory as a mere conduit for its gas, which raises the question: how will Turkey benefit from the agreement? Russian priorities also involve Turkey’s first nuclear power plant tender, which was awarded to a Russian-Turkish consortium. As the original price was too high, the tender has long awaited cabinet approval (EDM, January 26). Meanwhile, the Russian side lowered the price, and offered a compromise. Prior to Putin’s visit, it was expected that with further “bargaining,” a final deal might be reached, but apparently it failed. Nevertheless, Ankara and Moscow signed protocols regarding energy cooperation, including the use of nuclear energy for peaceful purposes, early notification of accidents, exchange of information on facilities, and to continue talks on the nuclear tender.

    The most controversial development is perhaps Ankara’s support for South Stream. Erdogan reiterated his belief that Nabucco and South Stream are complementary, yet turned a blind eye to several Russian officials’ (including Putin) statements to the contrary. It is assumed in Ankara that growing European energy demand will accommodate both projects; but this ignores the competition between both projects over the same downstream markets. Moreover, the Turkish side fails to appreciate the challenges Russia is facing in investing in its domestic gas industry, and acts on the assumption that “Russia has enormous reserves,” while failing to realize that Russia is also planning to tap into the same upstream producers, namely Central Asian and Caspian gas, just as the Nabucco project envisages (www.ntvmsnbc.com, August 6).

    Putin also added that a consensus was reached on Russia building gas storage facilities in the Salt Lake. Taken together with the announced joint investments between Turkish and Russian firms, including Gazprom, it is unclear whether the Turkish government recognizes the consequences of these decisions. Russia has effectively used the practice of co-opting the gas infrastructure of transport and consumer countries, as part of its efforts to monopolize downstream markets. It is unclear how this penetration into the Turkish grid might affect Ankara’s future energy policies.

    https://jamestown.org/program/turkish-russian-grand-bargain-in-energy-cooperation/
  • Ankara Approves Nabucco Following High Level Visit to Moscow

    Ankara Approves Nabucco Following High Level Visit to Moscow

    Ankara Approves Nabucco Following High Level Visit to Moscow

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 128
    July 6, 2009 12:48 PM Age: 4 hrs
    Category: Eurasia Daily Monitor, Home Page, Turkey, Energy, Foreign Policy, Economics, Featured
    By: Saban Kardas
    Ankara has reportedly finally given the green light to the Nabucco project, and the intergovernmental agreement might be signed on July 13. When the news broke on the Russian deal with Azerbaijan (EDM, July 2), the Turkish media initially suggested it represented a lethal blow to Nabucco. Partly as a result of the Russian media’s manipulation, it was interpreted as a negative development to undermine the viability of Nabucco (www.nethaber.com, June 30).

    On July 1-2, the Turkish Foreign Minister Ahmet Davutoglu visited Moscow to meet his Russian counterpart Sergei Lavrov. Before his departure, Davutoglu said that Turkey was unconcerned about the gas deal between Moscow and Baku, and supported enhanced cooperation between its neighbors. Davutoglu maintained that growing regional cooperation, especially in energy, will benefit everyone in the region, (Anadolu Ajansi, July 1).

    Energy Minister Taner Yildiz made a similar point, arguing that the different projects are not alternatives and choosing one does not necessarily mean foregoing another. Yildiz added that the Russian-Azeri agreement would not affect Turkish-Azeri talks on the re-negotiation of the price for Turkey’s gas imports from Shah Deniz-I, and the country’s future imports from Shah Deniz-II (www.iha.com.tr, July 1).

    In Moscow, Davutoglu held talks on bilateral relations as well as regional security issues. During their joint press briefing, Davutoglu emphasized that Turkey and Russia have developed close economic, commercial, cultural and political ties, while both countries could solve their differences through dialogue. Davutoglu told reporters that, though the date was not set, Russian Prime Minister Vladimir Putin would visit Turkey in the near future. Lavrov also underlined that the approaches of the two countries toward regional and global problems overlap.

    Asked about the possibility of Turkey’s cooperation with Russia in the South Stream project, Davutoglu said: “There are no limitations and barriers on Russian-Turkish cooperation. We decided to consider all projects, including alternative energy projects. Therefore, I want to express our readiness to collaborate with Russia on South Stream or other projects in a transparent manner.” Responding to the same question, Lavrov said that if Turkey decided to join the project, the Russian side would prepare the necessary groundwork. He added that the Turkish energy minister will discuss the details with the Russian officials (Anadolu Ajansi, July 2).

    Indeed, Yildiz also visited Moscow at the same time, at the invitation of the Russian Deputy Prime Minister Igor Sechin. As the co-chairs of the joint Turkish-Russian economic council, Yildiz and Sechin discussed bilateral economic relations. Yildiz raised issues relating to Turkish investors operating in Russia, particularly the “customs crisis.” Cooperation in energy issues occupied a large part of Yildiz’s itinerary. Energy related topics included the Russian offer to build Blue Stream II beneath the Black Sea, the current status of Turkey’s first nuclear power plant tender which was awarded to a Russian consortium, preliminary negotiations for additional gas purchases from Russia, and the South Stream project (Milliyet, July 1).

    Sechin told Yildiz that Moscow has studied the feasibility of various possible projects to diversify energy supplies to Europe. He claimed that South Stream outperforms Nabucco in terms of its efficiency and economic feasibility, and invited Turkey to join the project. In particular, he claimed that Russia has enough proven gas reserves to feed South Stream. Nonetheless, the Russian delegation did not elaborate any specific role envisaged for Turkey in South Stream, which in its current form would not cross Turkish territory.

    Yildiz repeated Ankara’s frequent argument that Nabucco and South Stream are not necessarily competitors: “This is a strategic package. It includes important projects that concern the two countries, our regions and our neighbors.” The Turkish government will evaluate all offers on the table, and choose the project that satisfies both countries’ interests, Yildiz added (Cihan, July 2).

    These developments led to speculation that Nabucco was in crisis (www.cnnturk.com, July 2). On his return to Turkey, Yildiz dismissed Russian media reports that Moscow asked Ankara to withdraw from Nabucco. Moreover, Yildiz said that the negotiations on Nabucco were well advanced and the parties were close to signing a deal, though avoiding specifying a date. He added that the talks were being carried out by the foreign ministry and prime minister’s office (Hurriyet, July 3).

    On the same day, European Commission officials announced that Turkey extended an invitation to its Nabucco partners to attend a ceremony in Ankara to sign the long-delayed intergovernmental agreement on July 13 (Anadolu Ajansi, July 3). The commission spokesman and Nabucco officials provided no further details as to whether Turkish demands were met to ensure its supply security, especially the controversial 15 percent clause, which had been stalling the negotiations (www.euobserver.com, July 3).

    Davutoglu flew from Moscow to Bucharest at the invitation of his Romanian counterpart Cristian Diaconescu, where he met the Romanian president and other officials. He discussed bilateral partnerships and regional cooperation in the Black Sea. After emphasizing the flourishing ties between the two countries, Davutoglu praised their cooperation in the context of the Nabucco project. Though he noted that Nabucco and South Stream were not mutually exclusive, Davutoglu maintained “Nabucco is a strategic project for us. This will continue to remain our main priority” (Cihan, July 3).

    Both Davutoglu and Yildiz declined to set a date but affirmed that the intergovernmental agreement will be signed soon. Sources close to Prime Minister Recep Tayyip Erdogan’s office, however, reportedly confirmed that the government plans to hold a ceremony on July 13. If the schedule of the heads of state from the other Nabucco partners, Bulgaria, Romania, Austria and Hungary permits, then the agreement will be signed in Ankara (Hurriyet, July 4).

    What led to this turnaround in Turkey’s position and whether it secured concessions from its partners will be clarified if Ankara hosts the intergovernmental agreement next week. However, last week’s heavy diplomatic traffic, combined with Erdogan’s earlier contacts in Brussels, shows the extent to which Turkey wants to maximize its political and commercial gains by pitting the rival pipeline projects against each other.

    https://jamestown.org/program/ankara-approves-nabucco-following-high-level-visit-to-moscow/