Recently, Turkish President Erdogan and Russian President Putin met in Sochi.
In the statement made by the Kremlin just before the Wagner rebellion in June, it was stated that Erdogan invited Putin to Türkiye and that preparations were being made. But the meeting was held in Russia, not in Türkiye as expected. The focus of the meeting was the Black Sea Grain Corridor Agreement.
Of course, energy was also discussed. Both leaders touched upon current issues related to natural gas and nuclear. However, just like in the meetings between Putin and Chinese President Xi Jinping in Moscow last March, the party in trouble regarding energy in Sochi was the host.
RUSSIA IN TROUBLE
Faced with the harsh embargo of the West following the Ukraine war, Russia’s revenues from fossil fuels are gradually decreasing. Since the beginning of the war, these revenues have decreased by almost a third. Moreover, even if the Ukraine crisis is resolved, imports from Russia will most likely never reach their previous levels due to the transition from fossil fuels to renewable energies in Europe. In addition, Europe’s trust in Russia in energy trade has been seriously shaken and it is not easy for Russia to rebuild it.
Due to all of these reasons, the energy equation for Russia is now very different from what it was before 2022, and it must develop new strategies to adapt to this new reality. If this is not done, it may face serious problems in the coming years due to a decrease in its energy revenues.
Aware of the situation, Moscow is trying to fill the void left by Europe with customers in the East, especially China and India. However, it seems difficult to achieve transformation in the short or medium term due to the incompatibility between the export infrastructure, which is largely established for the West, and new customers. Therefore, in my opinion, the advantage in energy after the Russia-Ukraine war seems to have shifted from Russia, which is now struggling to sell its goods, to buyer countries.
As sanctions become more severe and revenues decline, we can predict that Russia may have to make concessions to customers in order to overcome them. Especially if the customer does not seem very enthusiastic, as in the case of China, it is also likely that Russia will develop unexpected ideas. It seems that the idea of establishing a gas center in Türkiye is also among them.
THE SHARE OF TÜRKİYE IN RUSSIAN ENERGY TRADE IS GROWING
In recent years, Türkiye, which is one of the countries with which Russia has the most comfortable communication, is increasingly becoming a decisive player in the fossil fuel trade. Since the start of the war in Ukraine, Türkiye has been by far the leading importer of petroleum products and LPG from Russia, second only to the European Union in pipeline gas imports, fourth in coal and oil imports, and eighth in LNG imports. In July 2023, Türkiye was the third largest importer of fossil fuels from Russia after China and India, and its imports were more than that of the entire European Union.
Therefore, considering both its trade volume and geopolitical position, Türkiye has become one of the priority countries that Russia can benefit from in alleviating the negative impacts it is experiencing. The project to establish a gas center in Türkiye, which has been mentioned from time to time by President Erdoğan and has been supported by Putin and brought to the agenda at every opportunity, should be evaluated in this context.
Putin did not neglect to emphasize this plan, which he first mentioned about a year ago after the sabotages on the Nord Stream gas pipelines, in Sochi as well. Additionally, he announced that Gazprom had provided BOTAŞ with a roadmap for the establishment of the center. In the months leading up to the Erdoğan-Putin meeting, this issue was constantly on the agenda of Russian officials. It was also raised by Russian Foreign Minister Sergey Lavrov, who met with his Turkish counterpart Hakan Fidan just before the meeting.
RUSSIA’S PUSH FOR A GAS HUB IN TÜRKİYE
It is clear that Russia’s strong desire to create a gas center in Türkiye is motivated by its intention to enter the European market through the back door, which it has lost. Given the European Union’s negative stance on Russian gas, it is also likely that the origin of the gas flowing through the pipeline will be made ambiguous by including other gas producers in the project. However, the roadmap sent by Gazprom is still unknown to us in its entirety. Considering Russia’s overly enthusiastic attitude towards the project, it would not be surprising if there were other opportunities or threats beyond the map.
The embargo on Russian gas imposed by Europe could be seen as an opportunity for Türkiye to establish a gas hub on its own territory. As a result, Türkiye can collect gas from the region and transport it to the West, thus providing both significant income and strategic advantage. Indeed, it appears that the Turkish energy management is targeting a physical natural gas center in Thrace and an electronic natural gas trading center within the Istanbul Finance Center, and that work is ongoing towards this goal. However, it is clear that the realization of the center idea will not be easy.
According to the recent statements made by the Minister of Energy and Natural Resources, Alparslan Bayraktar, Türkiye will have an annual gas intake capacity of 150 billion cubic meters by 2028, with the entry into service of the Black Sea gas. Taking into account that its annual consumption is in the range of 50-60 billion cubic meters, we can predict that Türkiye is aiming to make a very large amount of gas shipments through its own territory. As part of the efforts to find customers in Europe for pipeline gas, agreements were signed with Bulgaria for an annual shipment of 1.5 billion cubic meters and with Hungary for 275 million cubic meters in January. Based on this, we cannot say that there is yet a strong demand from Europe.
The idea of creating a gas hub in Türkiye is not new to us. However, no significant progress has been made on this issue to date. Now, it seems that Türkiye, which is not very lucky in terms of energy resources, has seized an important opportunity with the support of its five-hundred-year-old rival. We will all wait and see to what extent this opportunity can be utilized.