Diversify and expand: Turkey’s drive towards natural gas security

President Recip Tayyip Erdogan has sought to dramatically reorient Turkey’s role and relationships in the region. Gradually at first but then abruptly, he has pivoted from the Republic’s historical status as a key member of the transatlantic alliance towards new partnerships - including Russia. Erdogan has consistently aimed for freedom in executing his foreign policy agenda, of which energy concerns are pivotal. It remains to be seen whether this hard-sought autonomy will be limited or expanded by Turkey’s domestic energy needs and its prime position as a hydrocarbon transit state.

Turkey’s domestic energy supply is far outstripped by demand, making resource portfolio diversity key to the country’s energy security. Turkey overwhelmingly relies on energy imports to power its needs – approximately 75 percent of its total. Predominantly reliant on fossil fuels, natural gas provided for 28 percent of annual demand in 2018, much of which goes towards heating and electricity production. For the past several years, around one-half of this gas has been imported from Russia, leaving Turkey politically and economically vulnerable. 

President Vladimir Putin has effectively demonstrated that his Kremlin is quick to coercively politicize energy and trade to advance his foreign agenda. More memorable examples include the termination of natural gas supplies to Europe via Ukraine in the winter of 2008-09 and the punitive trade measures enacted against Turkey in reaction to the accidental SU-24 shootdown in 2015.

As a consequence, Erdogan feels justifiably exposed when Turkey’s agenda clashes with that of Russia. Just now, Erdogan and Putin’s marriage of convenience is being stress-tested in Syria and Libya, where conflicting Mediterranean interests have come to the fore at last. As the possibility of an unbridgeable rift intensifies, so too does Erdogan’s appetite for independence, maneuverability, and savings. (In 2018, energy imports comprised three-quarters of Turkey’s current account deficit).  

Are his ambitions realistic? Based on pre-pandemic data from energy market regulators, Turkey’s gas consumption trajectory for 2020 appeared similar to the previous two years – approximately 52 billion cubic meters (bcm). However, there were some noteworthy events in 2019. Russian gas imports were down 35.3 percent and Turkey hit a new record for liquified natural gas (LNG) imports in the first half of the year, with U.S. LNG comprising the lion’s share. Given storage expansion projects and new pipeline activity, can the state-owned BOTAS really claim Turkey has taken care of the natural gas supply problem for good?

“In the 21st Century, Anatolia will connect east and west through energy,” proclaimed Turkey’s Energy and Natural Resources Minister Fatih Donmez at the January 2020 launch of the much-touted Turkstream pipeline connecting Russian gas to Turkey and Southern Europe. This statement was more affirmable than declaratory. Turkey’s aim to reposition itself geopolitically includes reshaping Turkey as a natural gas hub – an enduring objective. From Erdogan’s “Vision 2023” goal to lower Turkey’s energy intensity by at least 20 percent to the hardball Ankara is playing for a coveted share of Eastern Mediterranean gas, his resolution to develop and remake Turkey’s energy sector has been persistent. Given 75.5 tcm (trillion cubic meters) and 66.7 tcm of proven gas reserves are located in the Middle East and Europe/Eurasia respectively, it is natural to leverage the country’s proximity to both gas-rich regions.

Yet Erdogan faces a raft of challenges in expanding Turkey’s gas resources, whether imported or drilled from seabed controversially claimed as Turkish territory. Last year, BOTAS drillships Yavuz and Fatih commenced exploration under the protection of Turkish naval warcraft despite the absence of legal grounds to do so. In response, several European capitals protested via the European Union’s cessation of certain financial aid to Turkey. More pointedly, the joint French-Italian-Cypriot naval maneuvers in Cyprus’ exclusive economic zone (EEZ) sent a clear message that French and Italian firms with exploration rights in Cypriot waters will not meekly watch from Adriatic sidelines. 

This jockeying was further complicated by Turkey’s November 2019 maritime agreement with the Government of National Accord in Tripoli. With it, Erdogan seeks to block the EastMed Pipeline that Israel, Cyprus, and Greece agreed to build for exporting gas to European markets. Indeed, Erdogan is risking a considerable amount of political capital throughout Europe – and the U.S., given certain legislation in Congress and investment in the Three Seas Initiative – to secure new gas sources. With no sign of negotiation or arbitration over these disputed waters, and increasing saber-rattling as Turkish drones are deployed and Israeli fighter jets buzz drillships, any secure share of Eastern Mediterranean gas deposits won’t be coming online for Ankara anytime too soon. 

Setting aside these drilling potentialities, Turkey’s energy security and hub ambitions are further being realized in the proactive development of its natural gas storage infrastructure. The Tuz Golu underground storage expansion was billed as “the largest storage project…currently under construction in the world,” with capacity expected to reach 5.4 bcm by 2023. Together with floating storage regasification units (FSRUs) and other expansion efforts, Turkey’s storage capacity could total as much as 10 bcm – approximately 20 percent of its annual consumption – in the next few years. 

The past year saw further developments on the gas pipeline front. The mighty Trans-Anatolian Natural Gas Pipeline (TANAP) was completed, set to bring 16 bcm of Azeri gas annually to Turkey and Southern Europe (via the soon-to-be completed Trans-Adriatic Pipeline), with approximately 6 bcm allocated for the domestic market. Taken together with 7.7 bcm in Iranian gas and the South Caucasian Pipeline’s comparable capacity, the three non-Russian pipelines combined stand to provide for roughly half Turkey’s annual demand. This leaves the remainder of Turkey’s gas needs met primarily by Russian pipelines, namely the BlueStream Pipeline and the recently launched TurkStream. With the latter replacing flows via Ukraine through the TransBalkan Pipeline, they are jointly capable of transmitting 31.5 bcm to the Turkish market annually. 

With these milestones in exploration and expansion, Ankara’s prospects for more diverse and secure energy resources look encouraging. Yet Turkey’s path forward is not without its challenges. Domestic demand looms large in this respect. Turkey’s drive for a dominant role as an east-west transit country is directly linked to a growing domestic market, one where demand was already slowing before the COVID-19 pandemic. In 2019, Turkey’s gas-fueled electricity production decreased and is poised to continue downward in the year ahead. Last winter, many Turks were struggling to pay bills, prompting banks to offer small consumer loans specifically for gas payments. Their collective plight will only deepen with economic contraction. 

Further complicating Turkey’s energy outlook has been the price of imported gas. Gas prices are significantly higher than elsewhere in Europe, in part because of the Turkish lira’s persistent weakness. And while Turkstream’s operational commencement aids supply, Russian gas remains even more costly given Gazprom’s pay-or-take contractual terms. For the long-term benefit of its people and economy, Turkish authorities will need to effectively reposition its energy sector before the renegotiation of Russian and Azeri contracts in the next few years.

Will Ankara succeed? As the COVID-19 virus throttles the global economy, Turkey’s energy vision is clouded with uncertainties. Setting those aside, the determined strides taken by Turkey in 2019 demonstrate real resolve. Nonetheless, even with a significant reduction in Russian gas dependence, Turkey will remain reliant on Gazprom and the political exposure incumbent on its government – albeit to a potentially manageable degree. 

To that end, Turkish energy sector leadership should take note of neighboring Georgia’s success in achieving greater energy independence. The gas crisis of 2006 followed by the Russian invasion in 2008 compelled Georgia to effectively diversify its import portfolio, as was seen with Georgia’s shunning of Russian gas in 2018. Georgian-Russian energy dealings continue nonetheless as Gazprom and Tbilisi negotiate pipeline transit fees for gas to Armenia, as well as some domestic demand. While the location of wells and pipelines keep geography king in the region’s energy politics, Georgia has demonstrated keen maneuverability within its parameters, strengthening its negotiating stance as a result. 

Turkey’s march towards greater energy independence has been on track. It’s near certain that pandemic economics will slow or disrupt its progress - less so the extent. Vociferously excepting Erdogan’s most dangerous brinkmanship in the Eastern Mediterranean, the West – and the U.S. in particular – should politically and commercially support Turkey’s efforts to diversify and expand where feasible. “A man’s as good as his options,” a wise friend once told me. With anxieties raging from Turks’ pocketbooks to their country’s disconcertingly dubious stance in the transatlantic community, let’s collectively champion Turkey’s crusade for greater gas options.  

Richard Kraemer is President of the US-Europe Alliance and a Fellow of the Foreign Policy Research Institute (FPRI) Eurasia Program. Prior to this, Richard was a senior program officer for Afghanistan, Iran, and Turkey at the National Endowment for Democracy. He also previously oversaw projects in the aforementioned countries and the Levant at the Center for International Private Enterprise. Richard has a particular interest in the role that democracy assistance plays in the maintenance of U.S. national security. He holds a BA from William and Mary and a JD from American University. The views expressed in this piece are his own.