Turkey Energy Deals: Moscow’s Increased Intervention In Syrian War Is Putting Economic Accords With Ankara At Risk

International Business Times
October 17, 2015
By Christopher Harress

The European Union on Monday scheduled talks with Russia to press for the speedy resolution of a dispute with Ukraine that has hit gas supplies to countries in eastern and southern Europe facing freezing temperatures. Turkey has increased gas delivered from Russia via the Blue-Stream pipeline under the Black Sea to compensate for a slight decline in supplies arriving via Ukraine, an official said. Pictured: A worker checks the valve gears in a natural gas control center of Turkey’s Petroleum and Pipeline Corporation, 35 km (22 miles) west of Ankara, on Jan. 5, 2009. Umit Bektas/Reuters
They say never bite the hand that feeds you. In the case of Turkey and Russia, who share a multibillion-dollar economic relationship that is quickly deteriorating due to geopolitical disagreements over Syria, it’s still unclear who will suffer the most.

A year after Moscow and Ankara agreed to establish an important gas hub in Europe, Russian intervention in Ukraine and Syria, which has seen Moscow’s jets enter into Turkish airspace twice over the last two weeks, has put at risk economic relations between the two nations, including a $15 billion gas pipeline, a deal to build a nuclear power station and a $100 billion trade plan.

“The pipeline gas deal is currently on ice over the Russian intervention in Syria and violations of the Turkish airspace,” said Ariel Cohen, senior fellow at the Global Energy Center of the Atlantic Council, an international affairs think tank based in Washington, D.C. “On top of that, Turkey is unhappy over a disagreement on gas price, while Russia is upset about the European Union-led sanctions. Those issues could really hurt trade between Ankara and Moscow.”

Turkey and Russia have had a successful and pragmatic economic relationship since the end of the Cold War in 1991, often setting aside their political differences when hard cash is at stake. But Russia’s relationship with Turkey has been increasingly strained since Moscow annexed Crimea in March 2014 and then became heavily involved in supporting rebel groups in the 18 month-long war in eastern Ukraine. Compounding that are violations of Turkey’s sovereign airspace in which Kremlin jets and drones have crossed over from Syria into Turkey; such violations have infuriated leaders in Ankara who have said that Russia is creating unnecessary tension between the two countries.

Turkish President Tayyip Erdogan has already made it clear to Russia that if it continues its aggressive approach in Syria and Europe, Ankara’s relationship with Moscow would suffer. The president followed through with a threat to shoot down any unauthorized aircraft in Turkish airspace in dramatic fashion Friday when a drone, believed to be deployed by the Russian Air Force, was taken down on the Turkish side of the border with Syria. It’s not yet clear what country deployed the drone.

What’s At Risk?

Russia alone accounts for about one-fifth of Turkey’s energy consumption, more than any other country. It also provides around 57 percent of Turkey’s natural gas, according to a Bloomberg report. All in, Turkey has a serious reliance on energy supplied by Moscow. On the flip side, Turkey is Russia’s second biggest natural gas customer after Germany, which is also not happy with Moscow over its actions in Europe. The problem for Russia is that it desperately needs customers to buy its gas, coal and oil to keep vital revenue pouring into its recession-hit economy, which shrank 4.6 percent in the second quarter this year.

That energy reliance between Turkey and Russia is seen nowhere more acutely than in the $15 billion gas pipeline deal that was proposed at the end of 2014. The Turkish Stream, as the new pipeline is known, is more complex to build than land-based pipelines because it will have to run on the seabed of the Black Sea, but it is far simpler politically since it avoids crossing the E.U., where sanctions hang heavily over Russia for its interference in Ukraine. Starting in southern Russia, the pipeline will run the length of the Black Sea before arriving in Turkey, transporting about 2.2 trillion cubic feet of gas per annum. Turkey would take roughly 490 billion cubic feet of that, while the rest would pass into existing pipelines leading into Europe.

Turkey has also signed a $22 billion deal contracting Russia to build a nuclear power plant in Mersin, which is in southern Turkey. While construction had already begun on the new reactor, Moscow is already looking to secure a deal to build another. Turkey will be tied to Russia for decades to maintain, replace and dispose of any nuclear materials used. This will pose a significant risk for Turkey moving forward if relations between the two should continue to deteriorate, said Cohen.

A meeting between Erdogan and Russian President Vladimir Putin in Moscow last month resulted in significant progress in the area of bilateral trade. Erdogan said that the two countries would develop a $100 billion trade relationship by 2023, improving significantly on its current trade of $30 billion. However, this economic vision was before Russia began providing weapons to Bashar Assad’s authoritarian regime in Syria, where its ultimate aim is to keep Assad in power and defeat Syrian rebels and fighters with the Islamic State group.

While Turkey supports attacking ISIS and rebel groups inside Syria, it doesn’t want to see Assad remain in power because he is allied with Iran, Ankara’s regional rival in the Middle East, and Russia, which needs Assad to remain in power so it can continue to influence Russian foreign policy in the Mediterranean and the Middle East. If Assad were to fall, any incoming government would very likely expel Russia from the country because of its relationship with Assad.

“If necessary, Turkey can obtain gas from very different places. Russia should think well,” claimed Erdogan in the aftermath of Russian strikes inside Syria that began more than two weeks ago.

What Can Turkey Do If Relations Sour?

The stark truth for Russia is that Turkey does have other options. It currently takes around 20 percent of its natural gas from Iran, which it can increase using a pipeline in the east of the country. However, this may be difficult for Turkey because of Iran’s relationship with Russia and Syria.

One other potential option is Israel. Turkey and Israel have historically had a poor political relationship, made worse in 2010 when Israeli commandos boarded a Turkish-flagged ship that was attempting to take humanitarian supplies to Gaza. In the melee, nine people died. Despite the almost nonexistent political ties, economic relations have strengthened between the two countries in recent years.

Statistics released by the Israeli government earlier this year show that trade between Israel and Turkey increased by 11.5 percent to $5.5 billion from 2013 to 2014. That framework has laid the foundation for a possible gas deal between the two. In August, Israel began the process of extracting gas from the Leviathan natural gas field in the Mediterranean Sea, which is thought to hold 620 billion cubic meters. Currently, the easiest way to get that gas to Europe is through Turkey, which offers the closest pipeline leading to the Continent, according to Daily Sabah.

While it remains to be seen how the war in Syria will ultimately affect Russia’s energy relationship with Turkey, it could well be the case that neither is willing to sacrifice successful economic ties in a fight against Syria’s dictator.

There’s “a very strong interdependence between the two countries,” said Altay Atli, a lecturer at the Asian Studies program of Bogazici University in Istanbul. “Neither Turkey nor Russia would be willing to sacrifice the economic prospects just because they have different ideas about the future of Bashar Assad.”