- Turkish demand for energy will keep rising as the country industrializes, leaving Turkey reliant on energy imports for the foreseeable future.
- Turkey will leverage its substantial negotiating power in TurkStream talks with Gazprom to secure significant discounts on Russian natural gas.
- Turkey will continue to pursue other pipeline projects as part of its longer-term strategy to position itself as a regional energy transit hub to gain influence with its neighbors.
Editor's Note: Stratfor closely monitors the ebbs and flows of world energy. Aside from production, the transportation of crude oil, natural gas and petroleum products is of paramount concern for oil-producing nations. For energy consumers, transit routes are indispensible lifelines. A huge amount of the world's energy is transited through pipelines, across the Eurasian landmass in particular. In this periodic series we will examine some of the most geopolitically significant pipelines running through Europe and Asia. In this installment, Stratfor examines TurkStream, the successor to South Stream, from the Turkish perspective.
Europe and Russia continue to spar for political influence in Eurasia in the latest battle over Russia's TurkStream pipeline project, formerly known as Turkish Stream. But as the two major powers pursue loftier goals of power and containment, Turkey — a country with regional aspirations of its own — is quietly maneuvering to secure its position as a crucial energy transit hub at the crossroads of the Middle East, Europe and Asia.
A Growing Need for Energy
Turkey's position on Russia's TurkStream pipeline is far more straightforward than that of Europe or Russia. In short, Turkey lacks energy resources and has always relied on significant imports to meet the demands of its economy. As Turkey continues to industrialize and take its place as a regional power, its energy needs will only grow, and perhaps quite rapidly.
Russia maintains a comfortable hold on its position as Turkey's largest supplier of natural gas. In 2014, Russian natural gas accounted for 55 percent of Turkish natural gas consumption. Ankara is uneasy about Turkey's heavy reliance on Russian natural gas, particularly in light of the two countries' greater competition for influence in the Black Sea and the Caucasus. These concerns are only deepened by the fact that Turkey lies at the end of the supply chain routing Russian natural gas through Ukraine, putting it at risk of supply shortages in the event that Russia cuts off flows to Ukraine. But no alternative supplier currently exists to satisfy Turkey's domestic consumption.
Given its lack of options, Turkey will most likely choose to support the TurkStream project in the end. Still, it will probably hold out on finalizing any deal until it can pressure Gazprom, Russia's state-owned natural gas company, into granting Turkey heavy discounts on Russian natural gas in exchange for its backing.
Larger Goals Drive Ankara's Strategy
Beyond the immediate benefit of guaranteeing cheaper natural gas for Turkish consumers, the TurkStream pipeline will play into Turkey's longer-term aspirations of establishing itself as a key energy transit hub at the intersection of Europe, Asia and the Middle East. Turkey hopes to then use its newfound role to reshape its partnerships and reassert its influence in the wider region.
With this objective in mind, Ankara has long promoted the majority of energy transit projects that would pass through Turkey. Some of these projects include the Blue Stream II, which would have transported Russian natural gas to the Levant; the ill-fated Nabucco pipeline, which would have sent Azerbaijani natural gas to Central Europe; and most recently, the Trans-Anatolian Pipeline (TANAP) and Trans-Adriatic Pipeline, which will send Azeri natural gas to Europe. In each case, Turkey stood to benefit by collecting both transit fees and natural gas supplies from the pipelines running across its territory.
The TurkStream pipeline would offer a similar opportunity at a time when Turkey is gaining a greater ability to take advantage of its strategic location. In previous years, a number of geopolitical constraints have undermined Turkey's value as a potential energy transit state. Western sanctions against Iran, for example, have tabled the option of sending Iranian natural gas to Europe, while the state of relations between Moscow and Brussels has largely determined the success or failure of several proposed routes. But the recent agreement between Iran and the West could pave the way for exporting Iranian natural gas to Europe by the mid-to-late 2020s, while Moscow and Brussels have begun to put their full political thrust behind the TurkStream and TANAP projects, respectively. With these developments, Turkey may now be in a better position to leverage its location to push for pipelines that traverse its borders.
With several alternative pipeline routes to Europe in play, Russia is seeing its own options narrow. The European Union is continuing to push forward with all of its Southern Gas Corridor projects, for which Turkmenistan has long been viewed as a potential source of natural gas. Although the controversial issue of piping natural gas across the Caspian Sea historically has been a deal-breaker for any Trans-Caspian route, Moscow has signaled that the Caspian countries may well sign a deal establishing maritime rights during the upcoming 2016 Caspian Summit. Meanwhile, the possibility of Iran emerging as a new European supplier in the wake of Russia's South Stream failure has left the Kremlin scrambling to find a viable transit alternative to Ukraine, and quickly. Turkey may be the only logical partner Russia has left.
None of this is to say Turkey will not be taking a risk by backing the TurkStream project. Turkey remains heavily dependent on Russian natural gas, although it has asserted that TurkStream will not increase its reliance on Russian supplies. Ankara has argued that it will merely be swapping Russian natural gas imported via Ukraine with imports sourced from TurkStream and that Russia's increased dependence on Turkey as a transit state will balance their energy relationship somewhat.
But the TurkStream project also will not prevent Turkey from seeking other alternatives, and it has not affected the construction of the TANAP project. Ultimately, the power in the TurkStream negotiations lies with Ankara, which will use its advantage to pursue its own regional ambitions. Meanwhile, Russia, lacking any other southern corridor options, will have little choice but to meet Turkey's demands.