FacebookTwitterGoogle+RedditEmail

Turkey’s Energy Challenges

by DANIEL WAGNER AND GIORGIO CAFIERO

Ankara will soon be confronted with some difficult foreign policy decisions that could affect its long-term energy interests. The discovery of vast reserves of natural gas off the coasts of Cyprus and Israel could oblige Turkey to resolve longstanding disputes with its neighbours.

Turkey has managed to maintain impressive growth rates over the past decade in spite of a lack of indigenous sources of energy. Ankara has pursued a foreign policy aimed at diversifying the country’s energy imports while simultaneously positioning itself as a major energy hub. Turkey’s geostrategic position makes achieving this dual objective challenging, but it has managed to strike a balance between being assertive and deferential in acquiring and managing its energy supply. While the Turkish government’s power to influence events in the region is of course limited, it will be compelled to make some difficult foreign policy decisions in the near term that could substantially impact its long-term energy interests.

Turkey imports 91 percent of its oil and 98 percent of its natural gas. In 2011, approximately 51 percent of its oil came from Iran and 55 percent of its natural gas from Russia. Iraq’s resurrection as a major oil and gas exporter to the world offers Turkey an opportunity to become an increasingly influential energy hub between the Arabian Gulf and European markets. However, the tense triangular relationship between Turkey, Iraq and the Kurdish Regional Government has greatly complicated the energy trade with Iraq. This has also cast doubt about the long-term reliability of the Iraqi-Turkish pipeline that exports nearly 400,000 barrels per day to the important port of Ceyhan in southern Turkey. Turkey’s perennial battle with Kurdish separatists has served to ensure that the relationship with Iraq remains problematic and uncertain.

The discovery of an estimated 122 trillion cubic feet of natural gas off the coasts of Israel and Cyprus could lead to another major regional energy source that could challenge Turkey’s ambition to become a major energy hub, while likely denying it an additional potential source of oil and gas. The prospect of the formation of an energy partnership in the eastern Mediterranean that excludes Turkey will not be well received in Ankara. Turkey’s logistical advantage is that any pipeline that transfers gas from Cyprus to Greece would be far less expensive if it entered distribution via Turkey’s (disputed) offshore territory. A direct Cyprus/Greece pipeline would need to be significantly longer and installed in water as deep as 1.2 miles before reaching the Dodecanese Archipelago. Greece may ultimately be pressured to cooperate with the Turks due its economic constraints and what is arguably in their own long-term interest.

The Cypriot conflict further complicates the picture for Ankara, which signed an exploration deal with the Republic of Northern Cyprus following news that the Greek Cypriot administration began exploratory offshore drilling. Whether the recent discovery of Cypriot natural gas reserves pressure Athens and Ankara to resolve these lingering territorial disputes or leads to greater friction remains an open question. If history is any guide, Turkey’s rise and Greece’s troubles will only lead to greater conflict between them.

Other unresolved territorial disputes imply that the bonanza of natural resource wealth within the Levantine Basin is more likely to spur conflict than cooperation in the future. As Israel and Lebanon remain in a technical state of war, no maritime boundaries have been agreed by either state regarding their shared offshore gas reservoir. Unless some accommodation is reached, it will be problematic for either state to develop the reserves in the near future. Given their current state of bilateral relations, the chronic state of affairs between Israel and Iran, and the ongoing morass in Syria, there seems little reason to believe that the plethora of conflicts in the region will be resolved or gas will begin to flow any time soon. Turkey’s ability to become a major energy hub would likely be undermined by a new Israel-Cyprus-Greece energy triad.

The Tabriz-Ankara pipeline offers Turkey opportunities to capitalize on the exportation of energy resources from Kazakhstan, Uzbekistan and Turkmenistan to markets in Europe. Given Turkey’s limited domestic energy resources, growing demand for energy, the proximity of Iran’s gas and oil reserves, and its aspirations to become a Eurasian energy hub, it is reasonable to conclude that Ankara will continue to place immense value on its energy partnership with Iran – its largest source of foreign oil and second largest source of natural gas.

It is within this context that Turkey has refused to participate in the West’s campaign to isolate Iran economically. Ankara’s acknowledgment in November 2011 that its skyrocketing gold exports to Iran were related to its payment for Iranian gas is indicative of the Turks’ interest in maintaining energy ties with Iran, despite Western pressure. Tehran already views Turkey as an important partner in its quest to counter isolation and sanctions. Bilateral trade increased sixteen-fold between 2000 and 2011. By 2011, Turkey was home to more than 2,000 privately-owned Iranian firms – a six-fold increase from 2002. A variety of Iranian industries depend on Turkey to provide their link to the global economy. The flip side to that is that an eruption of greater Middle Eastern turmoil, or indeed a military strike against Iran, could severely undermine Turkey’s energy and commercial interests – as occurred during and following the Gulf War in 1991.

The Syrian crisis has created tension between Iran and Turkey, which have hedged their bets on opposite sides of the conflict. Additionally, the prospect of Iran becoming increasingly connected with Asian energy markets has created unease for the Turks, who are determined to maintain a close energy trading relationship with Iran. That said, Turkey’s announcement in March 2012 that it would begin importing more Libyan and Saudi Arabian oil, while decreasing oil imports from Iran by 20 percent, suggests that Turkey may already be seeking alternative sources to Iran, given the political ramifications of continued energy dependence on Iran.

Iran’s standoff with the West, and the continuing mayhem in Syria, will force Ankara to make some difficult decisions regarding its relationship with Tehran in 2013. However, in the short-term, Turkey and Iran are unlikely to take actions that would jeopardize their partnership with respect to energy, commerce, or regional security.

Turkey is currently the world’s 17th largest economy, and is determined to expand its strategic depth among its neighbors. If Ankara can balance its security and energy interests wisely, while acting as a force for regional stability, Turkey has real potential to satisfy its domestic energy demands while maintaining substantial leverage over regional energy markets. But if Turkey misjudges its balance of power and hedges its bets poorly, or if other states find alternative energy routes that exclude Turkey, the Turks may find themselves subject to the influence of larger powers’ ambitions. Thus far, Turkey has deftly balanced its interests with the plethora of challenges that confront it, which implies stability in the regional and global energy markets as 2013 begins.

DANIEL WAGNER is CEO of Country Risk Solutions, a cross-border risk management consulting firm, and author of the book “Managing Country Risk”. GIORGIO CAFIERO is a research analyst with CRS. 

February 09, 2016
Andrew Levine
Hillary Says the Darndest Things
Paul Street
Kill King Capital
Ben Burgis
Lesser Evil Voting and Hillary Clinton’s War on the Poor
Paul Craig Roberts
Are the Payroll Jobs Reports Merely Propaganda Statements?
Fran Quigley
How Corporations Killed Medicine
Ted Rall
How Bernie Can Pay for His Agenda: Slash the Military
Kristin Kolb
The Greatest Bear Rainforest Agreement? A Love Affair, Deferred
Joseph Natoli
Politics and Techno-Consciousness
Hrishikesh Joshi
Selective Attention to Diversity: the Case of Cruz and Rubio
Stavros Mavroudeas
Why Syriza is Sinking in Greece
David Macaray
Attention Peyton Manning: Leave Football and Concentrate on Pizza
Arvin Paranjpe
Opening Your Heart
Kathleen Wallace
Boys, Hell, and the Politics of Vagina Voting
Brian Foley
Interview With a Bernie Broad: We Need to Start Focusing on Positions and Stop Relying on Sexism
February 08, 2016
Paul Craig Roberts – Michael Hudson
Privatization: the Atlanticist Tactic to Attack Russia
Mumia Abu-Jamal
Water War Against the Poor: Flint and the Crimes of Capital
John V. Walsh
Did Hillary’s Machine Rig Iowa? The Highly Improbable Iowa Coin Tosses
Vincent Emanuele
The Curse and Failure of Identity Politics
Eliza A. Webb
Hillary Clinton’s Populist Charade
Uri Avnery
Optimism of the Will
Roy Eidelson Trudy Bond, Stephen Soldz, Steven Reisner, Jean Maria Arrigo, Brad Olson, and Bryant Welch
Preserve Do-No-Harm for Military Psychologists: Coalition Responds to Department of Defense Letter to the APA
Patrick Cockburn
Oil Prices and ISIS Ruin Kurdish Dreams of Riches
Binoy Kampmark
Julian Assange, the UN and Meanings of Arbitrary Detention
Shamus Cooke
The Labor Movement’s Pearl Harbor Moment
W. T. Whitney
Cuba, War and Ana Belen Montes
Jim Goodman
Congress Must Kill the Trans Pacific Partnership
Peter White
Meeting John Ross
Colin Todhunter
Organic Agriculture, Capitalism and the Parallel World of the Pro-GMO Evangelist
Ralph Nader
They’re Just Not Answering!
Cesar Chelala
Beware of the Harm on Eyes Digital Devices Can Cause
Weekend Edition
February 5-7, 2016
Jeffrey St. Clair
When Chivalry Fails: St. Bernard and the Machine
Leonard Peltier
My 40 Years in Prison
John Pilger
Freeing Julian Assange: the Final Chapter
Garry Leech
Terrifying Ted and His Ultra-Conservative Vision for America
Andrew Levine
Smash Clintonism: Why Democrats, Not Republicans, are the Problem
William Blum
Is Bernie Sanders a “Socialist”?
Daniel Raventós - Julie Wark
We Can’t Afford These Billionaires
Enrique C. Ochoa
Super Bowl 50: American Inequality on Display
Jonathan Cook
The Liberal Hounding of Julian Assange: From Alex Gibney to The Guardian
George Wuerthner
How the Bundy Gang Won
Mike Whitney
Peace Talks “Paused” After Putin’s Triumph in Aleppo 
Ted Rall
Hillary Clinton: the Good, the Bad and the Ugly
Gary Leupp
Is a “Socialist” Really Unelectable? The Potential Significance of the Sanders Campaign
Vijay Prashad
The Fault Line of Race in America
Eoin Higgins
Please Clap: the Jeb Bush Campaign Pre-Mortem
FacebookTwitterGoogle+RedditEmail