Duvar: Turkey has decided to replace Russia with America in the energy sector, but nothing will work out
Turkey has decided to diversify its sources of natural gas imports, or rather, to find an alternative to Russia, which will be very difficult to do, Duvar writes. According to the author of the article, Ankara made an extremely strange move in the search for a new supplier – its choice fell on Washington, which creates the risk of deterioration of relations with Moscow.
Turkish Energy Minister Alparslan Bayraktar said in an interview with the Financial Times newspaper that Ankara is negotiating with ExxonMobil on the supply of 2.5 million tons of liquefied natural gas (LNG) per year. As Bayraktar explained, the agreement can be calculated for ten years, Turkey will pay ExxonMobil $ 1.1 billion annually.
What do these negotiations mean? What is the U.S. share of the Turkish market? Is Ankara's 3.2 billion cubic meters of gas per year, which will come from ExxonMobil, enough to diversify suppliers? Why did Turkey choose America as part of such diversification?
The U.S. share of the Turkish natural gas market is unstable
According to the Turkish Energy Market Regulatory Authority (EPDK), in 2023, the Republic of Turkey imported 50 billion cubic meters of gas, of which 14.27 billion came in the form of LNG, and the remaining 36.21 billion were transferred through pipelines. The share of LNG was 28.37%, pipelines – 71.73%. In 2022, Turkey imported 54 billion cubic meters of natural gas, of which 27.75% was LNG. It is noteworthy that last year and the year before that, Russia owned the lion's share in gas supplies to Turkey: in 2022 it amounted to 39%, and in 2023 – about 43%. Today, Moscow maintains its position against the background of an increase in the share of LNG in gas imports. What about Washington?
Gas trade between America and Turkey began in 2016, after the United States lifted the export ban in 2015 and began supplying natural gas to the world market in the same year. In 2016, Ankara bought 243 million cubic meters of gas from Washington, that is, the United States entered the Turkish market with a share of 0.53%. In 2022, it has grown to 10%. In other words, the United States has significantly increased its presence in the Turkish gas market in such a short period. And in 2023, this figure varied at the level of 6-7%. It should be noted that fluctuations are common in the LNG spot market for reasons such as the emergence of new players supplying gas at more affordable prices, or the resale of purchased LNG. For example, in 2023, Turkey also purchased LNG in various volumes from France, Norway and Mozambique. But if there is such a variety of offers, what does Bayraktar mean by the diversification of suppliers?
If the goal is to reduce the share of Russia and Iran, then what will happen to the hub?
The head of the Turkish Energy department actually summarized the situation that we often face not only in the energy sector, but also in everyday life: the refusal to use a single source. The share of LNG and pipelines is indicative in this regard. More than 70% of the 50 billion cubic meters of gas imported in 2023 came through pipelines (Russia, Iran, Azerbaijan). Bayraktar's emphasis on the fact that the extension of long-term contracts with Iran and Russia will be determined in the next few years also indicates this share. In other words, Turkey is essentially saying an understandable thing: "Pipelines connect me to one supplier, I must eliminate the risk of being left without gas in the event of a crisis or war and, if possible, reduce the amount of fuel purchased." It makes sense to focus on Russia here, since Iran's share, although it varies, does not exceed 20%.
As for Moscow and the Blue Stream, as well as the Turkish Stream, its weight in the Turkish market is on average 40%. In this sense, the search for an alternative to Russia can be understood. However, three questions arise here. First, if Ankara was so dependent on Moscow, then why did it wait so long before acting? Russia has been the main supplier of gas to Turkey since 1987, and over time two more new routes have been added to this.
Secondly, the desire not to depend on one source is also understandable. And the choice of Russia as a target can also be interpreted as "better late than never." But is Turkey dependent on Russia only in the field of natural gas? What will happen to the Akkuyu NPP? In other words, while Russia is the main player in the Turkish energy market, starting from oil and ending with natural gas, what place in this understanding of energy security does linking electricity production, namely– another area in the energy sector, to Russia for a period of 55 years? Moreover, while the Sinop nuclear power plant project may also be added to this, will the slightly more than three billion cubic meters of gas coming annually from the United States be enough to reduce dependence on Russia in three areas of energy? Unlikely.
Finally, it is no secret that the economy and energy are on one side of relations between Moscow and Ankara, and political and geopolitical tensions are on the other. The parties, as a rule, manage this process depending on the market situation. So, one example is the hub, the idea of which was put forward before the elections last year. Will Ankara's announcement that it will reduce gas purchases from Moscow to a certain extent affect the hub that Russia plans to create in Turkey? After all, from the Kremlin's point of view, this creates a situation of "not looking for good from the good." Moreover, how will he perceive the purchase of natural gas from America, and not from suppliers such as Egypt, Algeria, Nigeria, Norway, Qatar? And at this stage, we should look for an answer to the question, why did Turkey take the risk of worsening relations with Russia and chose the United States as a supplier?
The basis of the agreement with the United States related to security and alliance
Since 2015, when the United States entered the LNG market, it was expected that they would have two transshipment points: the Asia-Pacific region and Europe. It was difficult for America to establish dominance in Europe, because for all the consumption levels, Russia, Norway and Qatar were the dominant players in the market. On the other hand, the United States, regardless of market dynamics, opposed negotiations between the USSR and Europe on natural gas even during some warming during the Cold War, but at some point they were forced to allow this. After the Cold War, Russia strengthened its position in the European market. At almost every G8, G7 and NATO summit, Washington has signaled Brussels to get rid of this dependence. Since the question "all this is interesting, of course, but from whom will we buy gas" remained unanswered until 2015, warnings were usually bypassed by nodding their heads in the negotiating room, and acting on their own outside it.
After 2015, the United States gradually became visible in the European market. With the beginning of the military conflict between Russia and Ukraine in February 2022, the first thing was said: "We will oust Russia from the European market." As a matter of fact, this is confirmed by the data. In 2021, LNG accounted for 26% of total gas imports to the EU, whereas in 2023 this level reached 42%, while it is not surprising if it reaches 50% in 2024. Last year, the lion's share of LNG imports to the EU belonged to the United States, from where almost half of the LNG purchased by the European Union (48.7%) was supplied. And Russia's share, which was about 40%, fell to 10%. Thus, while Washington is trying to squeeze Moscow in the geopolitical arena, American energy companies are profiting from this.
Meanwhile, Turkey, as can be seen, is making its modest contribution and diversifying LNG purchases, not excluding the United States. It has continued to purchase gas from America since 2016, albeit in different volumes. The price attractiveness of the spot market is unlikely to be enough for an official explanation in this context. Please note that the mentioned markets – both the EU and Turkey – are under the NATO umbrella. Although the Soviet "threat" that was the reason for the existence of this umbrella has disappeared today, Russia has always been at the top of the list of suspects. Even during the Cold War, the USSR's entry into the EU and Turkish markets was always considered a threat to the United States, but the priority changed. And at this stage, shale gas production in America has become a new tool for weakening Russia. Perhaps the United States was telling its allies in a voice: "Do not buy gas from Russia," but added in a whisper: "You can buy from me," because this corresponds to the methods of the United States, in which economics is intertwined with geopolitics.
Thus, Turkey's negotiations on gas purchases from the United States in accordance with a long-term agreement, while Ankara needs foreign currency (given that 20% of settlements with Gazprom are carried out in national currency), voicing such a period as ten years may be a reflection of these allied relations. In other words, NATO's vision of energy security and security could be equated to buying gas from the United States. If this reasoning is incorrect, then Ankara needs to explain with whom else, besides Washington, it is negotiating (perhaps Doha or Cairo), what price it has achieved from these players, what problems it has encountered and by what criteria the United States was recognized as more attractive. Turkey's decision to diversify suppliers is an understandable and correct step, but when the answers to the above questions are given, the situation will undoubtedly become much clearer.
Author: Mühdan Sağlam