Forging a new ‘EU-Turkey gas initiative’ in the aftermath of the Ukraine crisis?

17:54 23 September in ARTICLES, In English, PUBLICATIONS

Hürriyet Daily News | 23 September, 2014 |Hurriyetdailynews

 

MEHMET ÖĞÜTÇÜ / SIMONE TAGLIAPIETRA |

The ongoing game-changers in energy and geopolitics will likely force Ankara and Brussels to consider a joint strategy over how to achieve gas supply security, particularly in view of what’s happening in the Black Sea region, the Western sanctions against Russia and the re-opening of the Pandora’s Box in the Middle East.

With Russia’s annexation of Crimea heightening tensions with Europe, there have been renewed calls to reduce dependence on Russian gas. However, it would be difficult for the EU to quickly achieve this goal. The total consumption of the share of Russian gas used in the 28 EU countries jumped by 4 percentage points to 27 percent last year, making it the EU’s top foreign supplier.

Likewise, Turkey is Russia’s second largest customer (after Germany) for gas exports. 56 percent of its around 47 bcm of gas comes from Russia. Most of Turkey’s gas imports are transported via pipelines, including those from Russia, Iran and Azerbaijan. Turkey also imports liquefied gas (LNG), particularly from Algeria and Qatar.

Over the last two decades, energy has emerged as an increasingly important component of the overall EU-Turkey relations. In particular, the Southern Gas Corridor (SGC) and its flagship project, Nabucco, soon became the pivotal element of this relationship. With the long delays and bureaucratic/legal battles going nowhere, Turkey decided to change its approach in 2011 in favor of a robust Trans-Anatolian Pipeline project, together with Azerbaijan and investor IOCs.

If, in the aftermath of the 2014 Ukraine crisis and its continuing fallout, the EU will finally decide to seriously embark on a gas supply diversification path, the SGC could gain a new momentum, with the gas reserves of other Azerbaijani fields, the Kurdistan Regional Government (KRG) of Iraq and Israel as primary short-term targets. Turkey figures prominently in all these new suppliers.

However, the support of Turkey should not be taken for granted by the EU, as Ankaramight prefer to secure its own energy supply on a bilateral basis with gas producing countries and deal with the EU in a way to maximize its own commercial and political gains.

Therefore, if the new “EU-Turkey Gas Initiative” will be a viable one, it should be grounded on a win-win proposition that will incentivize the Turks to be an equal partner, rather than Brussels mandarins seeing Turkey as a precious real estate through which pipelines crisscross to serve the “European energy security.” Turkey is, on its own, a major (and fast growing) center of energy consumption, upstream and midstream investor, transit and security provider along the energy routes. Their own energy security comes in the first place.

A successful “EU-Turkey Gas Initiative” could be structured on two key short-term axes, in addition to the existing collaboration:

i) A joint effort of energy diplomacy aimed at unlocking the gas reserves of the KRG and at allowing gas exports from the region to Turkey by early 2018 and to the EU (via Turkey) by 2020.

ii) A similar effort aimed at allowing Israeli gas exports to Turkey (via pipeline) and the EU (via Turkey) by 2020. There will also be need to work together on gas market reforms and new energy infrastructure investments.

Two longer-term axes should also complement these two short-term axes:

i) A renewed collaboration targeting the resolution of the legal and commercial barriers (and Russian obstruction) blocking Turkmenistan’s potential gas supplies to both Turkey and the EU.

ii) A new coordinated political and commercial effort aimed at allowing Iranian gas to reach the EU via Turkey once sanctions will be fully removed and the Iranian investment regime will be made friendly for IOCs.

With such an Initiative, the SGC might be practically tripled to a supply level (30 bcm/year) already by 2020, practically to a level equal to the one currently covered by Qatar, the fourth gas supplier of the EU after Russia, Norway and Algeria. More volumes are likely to come if a strong demand in the European market is available.

Energy has always a multiplier effect in rejuvenating relations. Today, Turkey’s EU accession process is stagnating and the energy chapter seems to be far from being opened. Moreover, Turkey has declined to become a member of the Energy Community, thus excluding the only alternative of energy cooperation outside the EU accession process.

A new “EU-Turkey Gas Initiative” could thus also represent a new way to rebuild the much-needed trust between the EU and Turkey, the fundamental prerequisite not only for the energy co-operation between the two players, but also for the overall EU-Turkey political, economic and social relations. This will also be in keeping with the new government’s policy declaration to renew the EU-Turkish relations at a time when domestic and external dynamics require an anchor of stability and security, and when the EU needs Turkey’s support in tackling the current challenges vis-à-vis Russia.

What is needed is a phone call from Brussels to sit down for a brainstorming with Ankara.

Mehmet Öğütçü, chairman, The Bosphorus Energy Club, and Simone Tagliapietra, researcher, Istanbul Policy Center.