U.S. waiver refusal could spell trouble for Turkey - Al Jazeera
Washington’s decision to refuse to grant Ankara a new sanctions waiver for Iranian oil could further undermine Turkey’s economy and regional relations, Al Jazeera reported on Wednesday.
Last November, the U.S. State Department issued 180-day waivers to eight countries, including Turkey, Greece, China, and India. On Monday, the United States announced that as of May 2, when that waiver is set to expire, it would no longer grant sanctions waivers to any country importing Iranian crude.
“Turkey rejects unilateral sanctions and impositions on how we conduct relations with neighbours," Turkish Foreign Minister Mevlüt Çavusoğlu tweeted in response, warning of risks to regional peace and stability.
Lacking significant hydrocarbon reserves, Turkey gets more than 90 percent of its energy needs from abroad, spending $43 billion on energy imports last year, according to Al Jazeera.
According to Al Jazeera, in 2017, the last full year before the United States pulled out of the nuclear deal, Iranian supplies accounted for 45 percent of Turkey's crude oil imports. “Ankara has also looked to Iran as relations with other regional powers such as Saudi Arabia and the UAE have soured, particularly following the murder of Saudi journalist Jamal Khashoggi in Istanbul last year,” Al Jazeera said.
The U.S. Secretary of State Mike Pompeo has said Iran's regional rivals Saudi Arabia and the United Arab Emirates would offer oil supplies to offset any unfulfilled demand.
“Iranian oil isn’t cheap but there is a big difference” with the price of Saudi and UAE crude, Çavusoğlu said on Tuesday at a reception in Ankara, according to state broadcaster TRT.
Because of its dependency on oil imports, Turkey's economy, which entered a recession late last year, is particularly vulnerable to price increases, said Al Jazeera, warning that the lira, which has been steadily losing value in recent years, could plunge further.
"Apart from Iraq, no other country relies so much on energy imports from Iran like Turkey," said David Jalilvand, chief executive of Berlin-based Middle East consultancy Orient Matters. "An end or a significant reduction of oil imports from Iran would increase Turkey's import bill substantially, resulting in further inflationary pressure on the Turkish economy."
Facing the threat of multibillion-dollar fines and being excluded from the U.S. financial system, many Turkish oil companies appear to have slowed their business with Iran of late, said Al Jazeera.
Last February, 144,000 barrels of crude a day were sent from Iran to Turkey, compared with an average of 244,000 barrels in 2017, according to the Oxford Institute for Energy Studies.
After visiting Ankara last week, Iran's Foreign Minister Javad Zarif suggested setting up a financial mechanism with Turkey to circumvent U.S. sanctions.
"Sharing a land border, Iran and Turkey could arrange payments physically, avoiding the international financial system," said Jalilvand, suggesting bartering or using gold. "Local companies will, nevertheless, tread carefully. Even if they are not using the international banking system to settle trade with Iran, they will continue to rely on it for other transactions."
Confronting the United States over Iran would be a risky strategy for Turkey, which is already embroiled in several disputes with Washington, in particular regarding its planned purchase of a Russian missile system.
Ali Bakeer, an Ankara-based political analyst, outlined Turkey’s delicate position.
"If Turkey defies Washington, it will be in a very critical position because, economically, it cannot handle sanctions,” said Bakeer. “Privately, Turkey will try to negotiate and officially they will refuse to comply, but this is rhetoric. According to Bakeer, Turkey will probably cut its imports if the United States and other countries are able to offer alternatives.
The targeting of Iranian oil comes when the world market faces restrictions on supply, threatening price increases, according to Al Jazeera.
"It will be a challenge for Turkey to replace Iranian oil," Jalilvand said, pointing to the higher costs of importing from Saudi Arabia or Russia. “Commercial merits aside, there is little political appetite in Turkey to substitute Iranian oil for barrels from Saudi Arabia."