Russian gas by any other name

Despite the economic and security benefits associated with the EU’s shift away from Russian energy imports, it is entirely likely that we haven’t heard the last of the long-time-Gazprom-connected, “it’s just a commercial deal” bloc, who will undoubtedly be clamouring for a return to energy business as usual with Putin’s Kremlin before long. There’s just too much money at stake and Russia will as ever be willing to offer tempting discounts for a return to dependence.

Take, for example, Putin’s announcement in October, of Russian aid to establish a gas hub in Turkey, just weeks after the Nord Stream pipelines were sabotaged (possibly by Russia itself). And as usual, Putin just couldn’t help but state the quiet part out loud, saying in televised remarks that “it is easier for us to work with Turkey [...] President Erdogan is a man of his word [...] and it is easier for us to control the Black Sea.”

Putin then put the icing on the cake by spelling out his plan to get European nations hooked on Russian gas again, this time via Turkey, emphasising that he “ha[s] no doubt that in Europe there are many who want to.” The ‘many’ would no doubt include Hungary, which has defiantly continued importing Russian gas and even sealed a deal with Gazprom earlier this year to potentially increase imports.

And of course, there remain many Gazprom-aligned former senior European officials like former German Chancellor, Gerhard Schröder (who shamelessly attended a Russian Victory Day party in May) and former Austrian Foreign Minister, Karin Kneissl, who recently said she’d happily dance again with Putin, as she had at her wedding.

While the temptation of Russian gas ‘relabeled’ as Turkish might be welcomed in some corners of the EU, Ankara has a role to play as well. The recent appointments of Mehmet Simsek as Turkey’s new Finance Minister and Hafize Gaye Erkan at the helm of the central bank have gone some way to reassure jittery global markets. But investors remain deeply nervous about so-far limited attempts to roll back the unorthodox economic policies of newly re-elected President, Recep Tayyip Erdogan.

Getting back into bed with Putin hardly sends a message of geopolitical calm. Turkey is one of Europe’s largest buyers of pipeline gas and LNG and could, theoretically, provide access to LNG importing capacity to satisfy demand in central and eastern Europe. Nevertheless, historically, the Turkish gas market has been heavily politicised.

Artificially suppressed energy prices have repeatedly been used to earn votes, and natural gas imports earned the ruling elite a seat at negotiating tables with regional powers, Russia and Iran. The market never fully opened to investors and is likely to come under even closer political control as Turkey negotiates with Russia to establish a hub for onward gas sales to Europe.

There are further problems. Years of heavy subsidies combined with last year’s soaring energy costs have pushed the gas incumbent BOTAS into debt. The exact size of Turkey’s gas-related arrears is not known, but it sparked Turkish media claims that BOTAS might in fact be managed by Russia’s Gazprom. The reports were promptly dismissed by BOTAS and Gazprom.

Nevertheless, the Turkish government did acknowledge it had agreed with Russia to defer payments for Russian gas supplies until 2024 (reports suggest the overall value of the deferred payment is around US$4 billion). Apart from supplying around 22 billion m³ of gas to Turkey and building a 4.5 GW nuclear power plant, Russia has also been exporting over 1 billion m³ of LNG since November 2022, making Turkey one of its biggest LNG customers in Europe.

When asked at a recent Atlantic Council event in Washington about the threat that a Turkish gas hub could in fact be used to facilitate increased Russian gas volumes into Europe, thus circumventing Brussels’ push to diversify away from dependence on Gazprom, Ambassador Berris Ekinci, Director General for Energy and Environment at the Turkish Ministry of Foreign Affairs, downplayed the possibility. In her remarks, Ambassador Ekinci said that “it will be for the market to decide” whether Russian gas will be imported through the Turkish hub, adding that “if there is no business as usual, and if there is no demand for the Russian gas, then it will not find its place” at the hub. If that sounds abstruse, it’s because it is.

There are clear opportunities here for Russia and its friends. Gas molecules don’t come emblazoned with national flags of origin. Once merged at the hub with Turkey’s other sources of gas, including from Azerbaijan, the Middle East, and global LNG supplies, no one will be sure of its source. This is raising serious concerns, from the European expert community to the US State Department.

To minimise these risks, the EU must consider adopting strict energy regulatory measures on the transparency of energy sources, as well as deploying Third Energy Package safeguards like those that had been considered for the Nord Stream pipelines.

Given Europe’s progress in weaning itself away from Russia, a malign and unreliable energy producer, backsliding can’t be an option. Turkey should be helped to understand that.

Article by Aura Sabadus and Benjamin Schmitt.

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Read the article online at: https://www.worldpipelines.com/special-reports/29062023/russian-gas-by-any-other-name/