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Since the outbreak of the conflict in Ukraine, the European Union has been looking for solutions to replace the Russian gas imports on which so many European countries were dependent. On the other hand, the Russian Federation also wants to continue selling its gas production to European countries that no longer want to buy directly from it because of EU economic sanctions on Russian products. However, to get gas at a reasonable price, EU countries need an intermediary. In this context, Turkey’s value as a partner in triangular energy cooperation with European countries and Russia has increased considerably recently. Turkey’s geostrategic position has made it the ideal candidate to be co-opted into a Kremlin-initiated project from which, at least at first glance, all three parties stand to gain. But the success of a Russian gas hub in Turkey, announced by Russian President Vladimir Putin, depends on Turkish President Recep Tayyip Erdogan’s ambitions to become the “new gas tsar” as his country enters a new “energy era” with Turkey’s recent discovery of huge oil fields in the Black Sea.
Shortly after the explosions that damaged the Nord Stream gas pipeline linking Russia to Germany via the Baltic Sea, Russian President Vladimir Putin proposed in October 2022 the idea of creating a gas hub in Turkey. Although Russian Deputy Prime Minister Alexander Novak recently announced that Moscow and Ankara are expected to reach an agreement “in the near future”. For the moment, there are no concrete, official deadlines advanced in this project.
Who will control the management of the gas hub in northern Turkey?
The Russian side gives assurances that the project will go ahead, saying that Russia’s Gazprom Group and Turkey’s Botas Group “are cooperating closely and have discussed the project roadmap”. Earlier, a Kremlin official claimed the project was complex and would take time to complete. According to him, there are issues to be resolved, such as setting up a joint working group, developing a legal framework and “schemes for trading and transferring purchased gas”. Although officially the parties involved in building a gas hub in northern Turkey have blamed the delays on the devastating earthquake that struck southeastern Turkey and Syria on the 6th of February 2023, the international press has reported, through sources, that the disagreement over the competences of the parties in the project, or more precisely who should control the management of the hub, is to blame.
Some Western capitals have expressed concern that this project could allow Moscow to evade economic sanctions for its military actions in Ukraine and to disguise gas exports by using the Turkish state as an intermediary. According to Moscow’s official explanations, the gas hub in Turkey involves the creation of an electronic gas trading platform, which could become a place to set the final gas price for European consumers, which would exclude politicisation of the issue. But some energy analysts argue that the Turkish gas hub project, by creating a gas supply and pricing platform at the EU border, could become an alternative to other gas pricing hubs in Europe.
With the creation of the Turkish hub, the Russian Federation intends to transfer to the Black Sea region the volumes that previously passed through the Nord Stream pipelines, and to facilitate the creation of a supply infrastructure through Turkey for countries that express interest. Of course, Bulgaria, Serbia and Slovakia will play an important role in this project. Russia supplies gas to Turkey through the Black Sea via the Blue Stream and TurkStream pipelines, the latter of which is also intended for exports to southern and eastern Europe, including Hungary, Greece, Bosnia and Herzegovina, Romania and Serbia. It is known that from the 1st of January 2020 , Gazprom has started to deliver gas via TurkStream, including to Bulgaria and North Macedonia, replacing deliveries via the Trans-Balkan pipeline through Ukraine and Romania. The pipeline was inaugurated on the 8th of January 2020 by Presidents Putin and Recep Tayyip Erdoğan.
By 2022, Russia’s total pipeline gas exports have almost halved to 100.9 billion cubic metres, a post-Soviet low. Last year, many countries, including the vast majority of EU members, pledged to end or limit imports of oil and gas from Russia. The EU target was two-thirds of imports in a year. Instead Britain has eliminated them completely.
While working on the project with the Russian Federation, Turkey is promoting its own gas export agenda. Against the backdrop of volatile energy developments, Ankara is planning to set up a financing centre for gas export projects, following the example of financial centres in London and Hamburg.
“The world price of natural gas will be set in Turkey. About 40-50% of the natural gas coming to Thrace will cover Turkey’s needs, but Europe now expects natural gas from us,” Erdogan said in mid-September, according to Greek EnergyPress journalists.
Already, the Turkish president has identified where this will happen: the business hub in Istanbul’s Atasehir district, which would become a hub for both energy resources and metals trading. In mid-year, Turkey launched natural gas production from a huge reserve discovered in the Black Sea. For a country that until yesterday was dependent on gas imports from Russia, this is a major step towards independence and lower prices for Turkish consumers.
Turkey could block Caspian gas supplies to Europe at any time
Turkey discovered its first large reserves of natural gas in the Black Sea in 2020. On top of this, Turkey is nearing completion of its first nuclear power plant and floating LNG terminal in the Saros Gulf and is developing numerous other green energy projects (hydro, wind) to rapidly reduce its dependence on energy imports. But it has also announced ambitions in gas exports. What’s more, Turkey has shown it can block gas deliveries from the Caspian region to Europe whenever it wants. Turkey is in close proximity to gas-producing countries (Azerbaijan, Iran, Russia) and gas-consuming countries that are members of the European Union.
Like other EU countries, after the outbreak of the Russian-Ukrainian war, Romania sought alternatives to gas imports from the Russian Federation. One solution – gas from the Caspian Sea, i.e. along the Azerbaijan – Georgia – Turkey – Greece – Bulgaria route. The interconnector between Greece and Bulgaria was completed last autumn, and the first non-Russian gas imports were made by Romgaz through a contract with Socar, the Azerbaijani oil and gas company. But the contract was concluded several months late because it was blocked by Turkey, which demanded exorbitant transit fees. Ankara has thus demonstrated that it can block gas deliveries from the Caspian region to EU countries at any time by imposing additional charges.
Three weeks after the meeting between Putin and Erdogan in Sochi last September, OMV Petrom announced that it had signed an agreement with the Turkish company Botas. The Romanian-Austrian company will supply 4 million cubic metres per day from Turkey, almost 10% of Romania’s consumption on a typical winter day. According to OMV Petrom management, “the main destination market for gas is Romania”. It should be noted that Romania ranks 3rd among EU member states in terms of gas reserves.
However, Turkey is already exporting not only to Romania and through Romania to Europe. For the first time this year, the Turkish company Botas signed an agreement with MVM in Hungary to sell around 300 million cubic metres of gas, the first time Turkey has exported gas to a neighbouring country.