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Turkey’s energy-hub plans at risk

The coup has not affected oil and gas flows, but the purge and new instability will expose the Iraq-Turkey Pipeline to more danger and hurt Ankara’s broader import-export project

TURKEY has spent the past decade pushing its claim to be the main bridge between East and West and a link between the northern and southern worlds. It has had some success: Istanbul’s Ataturk airport, for example, struggles to cope each day with tens of thousands of passengers transiting to destinations across four continents, with Turkish Airlines serving more cities than any other carrier.

The country’s ambitions in energy are similar. Turkey sits on the doorstep of major producers of oil and natural gas. Logic dictates that energy-hungry Europe should meet a large part of its gas needs via a Turkish hub.

But hubs – for energy as much as air travel – need stability and security, and the failed military coup on 15-16 July and the mass purges that have followed suggest Turkey is struggling.

Energy is a sensitive topic in Turkey because the country depends overwhelmingly on imports. Of natural gas consumption, 99% comes from abroad – 51bn cubic metres in 2015, with Russia (58%), Iran (18%) and Azerbaijan (12%) the main suppliers. In the same year, Turkey imported 89% of its oil.

Political relations with key supplier nations are critical for the Ankara government. Early indications in the aftermath of the coup attempt suggest that Turkey will strengthen ties with two of them, Iran and Russia – Presidents Recep Tayyip Erdogan and Vladimir Putin ended their tiff shortly before the failed coup (and indeed Russian security services may have helped it fail). The strain had resulted from the shooting down of a Russian fighter jet in November 2015. Continuing tension with Washington over the presence in the US of exiled cleric Fethullah Gulen, accused by Ankara of instigating the military uprising, is likely to encourage Ankara’s rapprochement with both Moscow and Tehran.

This should secure political support for energy imports from both Iran and Russia. Likewise, as yet there are no indications that supplies from Azerbaijan (for domestic consumption and re-export) via the 1m-barrel-a-day Baku-Tbilisi-Ceyhan oil pipeline, or the similarly routed 25bn-cm-a-year South Caucasus gas pipeline will be affected. But the continued free flow of hydrocarbons into and around Turkey assumes that forces loyal to President Erdogan successfully purge all those associated with the coup attempt and no further military uprising or violence ensues. Even before the events of 15-16 July, Turkey was facing terrorist attacks perpetrated both by the Islamic State group and Kurdish separatists. Today, the army and security services have been weakened by mass arrests.

Moving threats

The threat to energy infrastructure is greatest in southeast Turkey, through which the Iraq-Turkey Pipeline (ITP) passes. This has been targeted several times by the Kurdish Workers’ Party (PKK) since the breakdown of the truce with the Turkish government. These incidents have disrupted the 0.5m b/d flow of oil from Kirkuk and other Kurdish Regional Government (KRG) fields to Ceyhan, though throughput was unaffected by the coup. The arrest of almost all Turkish army commanders in southeast Turkey, along with key figures in the intelligence network, will inevitably undermine military capability there.

The survival of Erdogan, who has a strong personal interest through family connections to the energy trade with the KRG, ensures the Iraqi Kurds will not lose their sole export outlet. But much Turkish capital was to have underpinned further upstream development in the KRG’s upstream, including in gasfields that would have supplied Turkey. Raising this money in Turkey could now be difficult.

Indeed, Turkey’s greatest concern today should be less about current energy networks and more about future ones – in particular those on which hinge its plans to become a major oil and gas hub. Work on pipelines for the planned Southern Gas Corridor, linking Azerbaijan, Georgia and Turkey, then continuing via the Trans Adriatic Pipeline to Greece, Albania and Italy, will continue. But the 2013 decision to proceed with the construction of the Turkish section, the 1,850km Trans Anatolian Pipeline, was taken when Turkey was assessed as one of the most stable countries in the region. First gas is targeted to reach Turkey in late 2018 and Europe two years later. Few will put bets on those deadlines being met.

And what of plans to transport gas from the giant Leviathan field in Israeli waters and smaller ones there and off Cyprus via Turkey to Europe? Erdogan’s success in ending his feud with Israel days before the coup plot encouraged optimism that this long-mooted scheme might proceed. Growing hope that a peace deal was close between the Republic of Cyprus and the Turkish Cypriot breakaway northern part of the island contributed to the upbeat mood. Such an agreement would be necessary to allow the planned pipeline to pass through Cypriot waters en route to Turkey. But in the aftermath of the failed coup and the oppressive measures ordered by the president the optimism has faded. The fate of Cyprus is no longer high on Ankara’s agenda; and even Greek Cypriots supporting the idea of a deal needing Turkish blessing are no longer in the mood to trust the Erdogan regime.

Turkey has changed, and it is still far too early to know exactly how. Even if things do not fall apart and the centre manages to hold, Ankara may well be forced to reassess its ambition to become an energy hub on which Europe can depend.

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