May 10 2018

Turkish economy threatens government’s plans in energy

Turkey’s president Erdoğan plays a complicated game in energy geopolitics, yet all those energy plans may fall apart in case of an economic crisis in the country, analyst Dimitar Bechev said in the American Interest on Wednesday.

According to Bechev, Turkey’s energy plans are complicated for several reasons. First of all, the fate of second line of TurkStream, which marked the start of the Turkish-Russian partnership in energy in 1990s, is uncertain, since the second line is built for the Europe market but there is dispute between the European Commission and the Russian Gazprom over the application of EU rules. Turkey has still not granted the permits for the onshore sections of the second line, while there is no clarity about where Russian gas will be heading after crossing Turkish borders.

In April 2018, Turkey announced that the Trans-Anatolian Natural Gas Pipeline Project (TANAP), which will deliver Azeri gas to Turkey, would be opened on June 30 this year, while the government is also diversifying its energy plans by investing into liquefied natural gas (LNG), which will increase Turkey’s leverage against Russia in the future and consolidate the country’s alliance with Qatar. Moreover, the Akkuyu nuclear plant, being built by Russian Rosatom may decrease Russia’s share in the Turkish market, after it starts operating in 2013.

Bachev notes that Turkish government’s claims to be a rising power in energy geopolitics are substantiated to a certain extent, but economic problems may put them under threat. Increasing inflation and depreciation of Turkish lira make energy imports more expensive, while in the domestic market private companies are bound to sell energy to consumers at regulated prices. 

“That creates uncertainty in the market and puts pressure on the government to step in as guarantor of investment by the business sector, robust economic growth notwithstanding. But if Turkey succumbs to a crisis such as the one in 2001 that propelled Erdogan to power, its grand energy plans might fall apart. Then dependence on Russia will be the least of its problems,” Bechev said.