Putin’s ‘gas hub’ plan aims to boost Erdogan’s image

Russian President Vladimir Putin’s offer to create a “gas hub” in northern Turkey made the headlines following his meeting with Turkish President Recep Tayyip Erdogan, but the viability of the offer, which has been under discussion for more than a decade, is little more than window dressing.

Russian gas exports to Europe have fallen to a fraction of normal levels, and with Moscow warning, or more accurately threatening, further cuts, much of Europe faces the likelihood of widespread gas cuts and of electricity.

Turkey, however, not only does not face such cuts, but has also been hailed by Putin for being the “most reliable partnerfor Russian gas exports to Europe as a reward for being offered the opportunity to host a gas hub.

The idea of ​​making Turkey a hub for gas exports from regional gas producers has been under discussion for more than a decade.

At the time, efforts to transit gas from countries like Azerbaijan, Iraq, Iran and Israel to Turkey for possible onward transit to Europe coincided with plans to open the Turkish market. long-talked about energy – which now operates under the name EPIAS.

It’s not hard to see why the issue should suddenly come back on the agenda.

Russia has cut off or drastically reduced its gas exports to countries that have imposed sanctions in response to its continued invasion of Ukraine, while continuing to supply countries that have not – Hungary, Serbia and Turkey.

Meanwhile, Turkey faces twin legislative and presidential elections next year at a time when high inflation, a weak Turkish lira and other issues have sent Erdogan and his ruling party, the Justice and Development Party (AKP) to a level where, for the first time in twenty years, a victory for the opposition seems possible.

When Iran, which supplied just 16.1% of Turkey’s gas last year, cut exports without warning in January, it resulted in widespread gas and power cuts for the sector. Turkish industrialist and record ratings for Erdogan.

Last year, Russia supplied 44.8% of Turkey’s gas, and any disagreements with Putin that lead to gas cuts over the winter would certainly impact next year’s elections.

Conversely, good relations with Moscow offer the promise of none of the gas shortages facing Europe, and the offer of a hub suggests that Turkey will gain some control over the gas it transits. to Europe and on gas prices.

“This hub proposal is designed to appeal to Turkish voters who think that having a hub will bring money to the country and make it a bigger player, which is not the case,” said Arif Akturk, former head of Turkey’s gas department. Botas, a state-owned gas importer and transit pipeline operator.

The question is: what exactly constitutes a hub?

Physically, a hub is a place where pipelines carrying gas from different sources and owned by different companies converge, allowing gas to be transported to other locations.

In this regard, Turkey is already, to some extent, a hub. The pipelines bring gas from Russia via the TurkStream pipeline and from Azerbaijan via the TANAP and South Caucasus pipelines, which is then transported to buyers in Europe via pipeline links to Greece and Bulgaria.

At the commercial level, a hub is a point in a gas transit network where gas pipelines converge and diverge, creating a fixed point where gas can be exchanged – otherwise known as a virtual exchange point, whose Europe already has many of them.

However, not all gas is traded in the hubs, which is the case with Russian and Azeri gas which transits through Turkey to customers who have already contracted to buy it with the gas producing companies – a fact which makes Putin’s hub offer somewhat meaningless.

“They say they will transit gas to Turkey and sell it from here to European gas traders, but that is exactly what they are already doing,” Akturk told Al-Monitor, pointing out that the existing TurkStream pipeline carries Russian gas through Thrace to Bulgaria and on to buyers in Southeast Europe without any Turkish commercial involvement being required.

Even if Russian gas producer and exporter Gazprom were to change its sales strategy to use a new hub in Turkey, there would still be a major obstacle.

“To be a hub, you need excess volumes, storage and a competitive local gas market,” said David Tonge, director of Istanbul-based energy consultancy IBS, pointing out that Ankara is currently subsidizing domestic prices. Turkish gas, there is no “competitive market”. – a situation that may appeal to voters but excludes Turkey from becoming a gas trading hub.

What hasn’t been so clearly spelled out in statements about the hub plans is the fact that Putin’s offer also envisions significantly increasing the volume of Russian gas to transit through Turkey to Europe. .

TurkStream currently consists of two lines, each capable of carrying 15.75 billion cubic meters per year. One supplies gas to Turkey; the other to Europe.

In an interview on October 14, Russian Deputy Prime Minister and former Energy Minister Aleksandr Novak pointed out that the initial plan called for “four lines with a capacity of about 63 billion cubic meters”, suggesting that an expanded TurkStream could supply more European consumers. through Turkey.

On paper, this could be possible if European countries still trusted Russia enough – following its invasion of Ukraine – to allow a new, expanded TurkStream to deliver gas and, crucially, to end the gas pipeline. current sanctions regime.

“Laying two additional TurkStream lines would require specialist steel pipes and pipelaying equipment which the sanctions would make difficult to obtain,” Tonge said.

Doubling the capacity of TurkStream would also take up to five years and, if achieved, would create a potentially bigger problem.

“The increase in the volume of Russian gas reaching southeastern Europe makes it more difficult for Caspian gas producers to compete,” Akturk said.

Such a development is unlikely to please Turkey’s closest ally, Azerbaijan, which already exports gas to Europe through Turkey and plans to export more to European countries desperate to diversify. their dependence on Russian gas.

Edward N. Arrington