Is Turkey back in the game?: New deal with Iran and Nabucco - analysis

Int’l Relations

In today's world, competitiveness and sustainability are among the most important issues of the world economy. In this sense, energy security with its two crucial components: diversity and finding reliable, sustainable and affordable energy sources has a vital role to play in a country's welfare and growth structure. – analysis by Hasan Selim Ozertem. Turkey to invest $3.5 billion in Iran gas, Turkish energy ministry officials told Reuters on Wednesday.  

Being located in a region that is between the richest energy resources and energy demanders, Turkey plans to be an energy terminal between the East and the West. In this context, Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline and Baku-Tbilisi-Erzurum gas pipeline are two projects –up to a point- helps Turkey to diversify its sources and increase its geopolitical importance. Moreover, these two also help Azerbaijan and Georgia in political and economical sense.
Turkey's political ambition to become an energy terminal mostly relies on the projects like Samsun-Ceyhan crude oil pipeline that links Turkey's northern coast to southern coast, Nabucco and surely on BTC. (There are also other projects like Turkey-Greece natural gas pipeline etc.)

These projects basically aim to transfer Caspian region's rich hydrocarbon resources via Turkey to the Western markets. Moreover, being mostly dependent on Russia, the EU also sees the route that would pass via Turkey as a good alternative for Russia. Liam Fox states the critical role of Turkey by saying “No energy security strategy can work without the support and cooperation of these two states [Norway and Turkey].”

However, being aware of this fact, beginning from this year's Q2 Russia has begun to take an aggressive initiative in this energy game:
Firstly, signing an agreement with Greece and Bulgaria for the construction of Burgas- Alexandropoulos crude oil pipeline, Russians made their first strike to Turkey's Samsun-Ceyhan project. After that Calik Group has started to the construction of Samsun-Ceyhan with its Italian partner ENI just before Putin's unexpected visit to Kazakhstan and Turkmenistan. After this visit the future of the pipeline was a big dilemma, however this week three licenses were given to both national and international companies for the establishment of new refineries in Ceyhan; the final destination both for Samsun-Ceyhan and BTC. It can be said that these three refineries while meaning $15 billion of investment and new employment opportunities for about 3000 people; in the final analysis would also contribute to the attractiveness of western route for the countries in the Caspian region.

Following Putin's visit to Central Asia everybody thought that Russia's new deals with Kazakhstan and Turkmenistan were big strikes that would deeply damage Turkey's ambition to become an energy corridor between East-West and North-South directions. In his visit, Putin made a deal that strengthens the existing supply agreements between Russia and the other two countries. In addition, they agreed to rehabilitate existing oil pipelines between Russia and Kazakhstan and build a new gas pipeline beginning from Turkmenistan that would pass via Kazakhstan and then reach to Russia. However, energy wars are not that simple. It is important to eliminate the others if you do not want any substitutes that could weaken your monopolistic position. In this framework, Russia, in a way to fully by-pass Turkey announced a new project of hers; South Stream. This was a big shock for Turkey, because it was targeting directly the potential consumers of Nabucco.

After these developments Turkey decided to give impetus to her energy policy and has begun to look for new suppliers that can feed Nabucco pipeline. In this framework, the new Memorandum of Understanding signed with Tehran, which makes it possible for Turkey to turn back to the game. According to new deal, Turkey will operate three gas phases in South Pars region of Iran with National Iranian Oil Company. Furthermore, Iran agreed to the transportation of exploited gas via Turkey to Europe and will permit Turkmen gas to pass via Iranian territory and then to join Nabucco pipeline. It is assumed that exploited oil would be equal half of Turkey's natural gas consumption.

The possible outcomes of this MoU would be multi-dimensional. Laciner, head of ISRO, claims that for Turkey Iraqi, Iranian and Russian gas has economic importance, but the transportation of Caspian Region's hydrocarbon reserves via Turkey also has political aspects.


Today, the primary natural gas supplier of Turkey is Russia and she is highly dependent on Russian gas in this respect (about 60% of consumed gas came from Russia in 2006). Thus, this deal would help Turkey to decrease her energy dependence on Russia. On the other hand, -apart from political disruptions- having the world's 15.5% of total natural gas reserves and being geographically so close to Turkey, Iran might become a reliable, economic and sustainable center for both Turkey and in the long term for the EU. Also, reached agreement makes Iranian route possible for Turkmenistan and this might be a big step for the integration of this country to Nabucco; transportation of Turkmen gas via underneath the Caspian is a big problem due to unresolved status of this sea. Russian route is also not possible due to obvious reasons.

For the Western world, beside its advantages on diversification of energy resources, this new deal with its possible projections in the future like transporting gas via Turkey to Ukraine will help Ukraine’s democratization and integration process with the EU. As known, recently Russia used her energy card as a leverage on Ukraine’s politics and caused economic problems in this country. Moreover, a new area of cooperation between Ukraine and Turkey can be created. Last but not the least, these new projections can serve the US and the EU interests by decreasing Russian influence on aforementioned countries in the Eurasian region. In Iranian perspective this MoU has various advantages. First of all, there is a policy of isolation that is being implemented against Iran by the US. Especially, the ILSA sanctions prohibit making investment in Iran that exceeds $20 million.

Moreover, from time to time the US government warns the countries -as it warned India in 2005 - who would like to cooperate with Iran particularly in energy sector. After these sanctions and due to lack of investment, today, Iran is in a situation that it could not exploit its rich hydrocarbon reserves in adequate terms. Latest agreements and Memorandum of Understandings are vital steps that Iran could survive from this vicious circle and the Foreign Direct Investment (FDI) that would come to the country might have positive economic impacts. As can be recalled, recently Iran has started fuel rationing and this caused big reactions in the society against Ahmedinejad administration. Moreover, selling gas to Europe Iran would politically gain a stronger position.

Even though this deal is a good score against Russia's recent moves and might have positive repercussions in the future, the success of it depends on several variables. Firstly, it is known that both Turkey and the EU attach utmost importance to diversification of their energy resources and the Nabucco project is high on their energy security agenda. The main problem is to find the necessary gas to feed the pipeline. On the other side of the medal, finding the required financing is another challenge.


Even if the EU and the consortium of the Nabucco project could find the necessary capital to carry on, the attitude of the US would be an important indicator. The first impression is that the US is really disturbed with this new cooperation between Iran and Turkey and closely follows the developments. Moreover, the political will and determination of the both sides would directly affect the destiny of the project. As stated before Russia plays the game so aggressive and getting late would make all these efforts meaningless. If Turkey and the EU succeeds to integrate Turkmenistan, Iraq and may be Kazakhstan to the project, Nabucco and western route might represent a good alternative for both suppliers and demanders and decrease their dependence on Russia and help western world to regain its power of influence in Central Asia. Lastly, it should be stated that the dispute going on between Iran and the US is a delicate issue for the future and the security dimension of the project. (turkishweekly.net)

Hasan Selim Ozertem is the editor of USAK's Energy Review

Turkey will invest $3.5 billion in Iran's South Pars gas field starting from 2008, two senior Turkish energy ministry officials told Reuters on Wednesday. The sources, who declined to be named, said that Turkey could also set up a partnership with a European Union member state that is already doing business in Iran.Turkey will invest $3.5 billion in Iran's South Pars gas field starting from 2008, two senior Turkish energy ministry officials told Reuters on Wednesday. The sources, who declined to be named, said that Turkey could also set up a partnership with a European Union member state that is already doing business in Iran. Late last week Turkey announced that it had signed a deal to use Iran as a transit route for Turkmen gas and that it would also develop Iran's South Pars gas field to transport gas on to Europe. (arabianbusiness.com)

 

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