Putin, Erdogan seal 'grand bargain'
By Saban Kardas
Russian Prime Minister Vladimir Putin's visit to Ankara last week marked a new
era for "enhanced multi-dimensional partnership" between Ankara and Moscow.
Putin and Prime Minister Recep Tayyip Erdogan signed some 20 agreements
covering energy, trade and other fields.
Italian Prime Minister Silvio Berlusconi also attended part of the talks
between Erdogan and Putin, reflecting the involvement of Italian companies in
some of these projects. The most remarkable dimension of the various joint
projects concerns energy cooperation, most notably Turkey's expression of
support for Russia's South Stream project.
In oil transportation, Russia committed to participate in the planned
Samsun-Ceyhan crude oil pipeline (SCP), connecting the
Turkish Black Sea city of Samsun to the Mediterranean terminal of Ceyhan.
Moscow had proven reluctant to involve itself in the SCP, which will bypass the
congested Turkish Straits, and instead promoted another bypass option through
Burgas-Alexandroupolis between Bulgaria and Greece. Meanwhile, Turkey took
steps to make the SCP attractive for the Russian side, by linking this project
with the Turkish-Israeli-Indian energy partnership.
Erdogan expressed his pleasure with the Russian decision to commit its crude.
Ankara can consider this development as its greatest success in this grand
bargain, given that Turkey has worked to convert Ceyhan, where the
Baku-Tbilisi-Ceyhan pipeline also terminates, into a global energy hub.
However, Putin did not rule out interest in Burgas-Alexandroupolis, and instead
emphasized that the two pipelines might be complementary in meeting the growing
demand for export routes. This statement raises questions about how committed
Russia will be to the SCP, given that Russian companies own the majority of
shares in the other Burgas-Alexandroupolis option.
In terms of gas cooperation, Turkey will allow Russia to conduct explorations
and feasibility studies in the Turkish exclusive economic zone in the Black
Sea, as part of Russian plans to construct South Stream - a gas pipeline
traversing the Black Sea from Russia to landfall in Bulgaria. Since this move
comes against the background of Turkey's decision to sign the rival Nabucco
pipeline agreement last month, it raises many questions, as to how it will
affect Nabucco, which traverses Turkey and which the country considers a
"strategic priority", as well as European energy security issues.
Despite the questions surrounding its feasibility and high costs, as well as
its negative implications for Nabucco, Erdogan maintained that both projects
contribute to diversification efforts.
It appears that the "grand bargain" was between the SCP and Blue Stream,
carrying gas from Russia across the Black Sea to Turkey. Ahead of the meeting,
Yuri Ushakov, the deputy head of the Russian government staff said that "Turkey
made concessions in South Stream and we made concessions in SCP," but added
that he had doubts over the SCP's feasibility. A statement from Berlusconi's
office also claimed that he had helped broker a rapprochement between both
countries on these two issues.
However, domestically, there are concerns that in this "exchange" of
concessions, Turkey did not gain much. The SCP's importance was inflated
because it was developed by business interests close to the government.
Another gas deal concerned Ankara's request to renew the contract under which
it purchases Russian gas through the Western pipeline via the Balkans. Erdogan
announced that the contract (which expires in 2011) will be renewed for 20
years. Turkey had complained about the high prices and the leave-or-pay
conditions in its gas deals with Russia. Putin said it was renewed on favorable
terms to Turkey, but the contract's details are unclear.
Erdogan also said that they discussed the extension of Blue Stream II to
transport Russian gas south from Turkey to Israel, Lebanon and even Cyprus.
Blue Stream, running underneath the Black Sea, is the second route carrying
Russian gas to Turkey. Moscow previously raised the possibility that it could
use Blue Stream II in order to transport gas to Europe, but this option was
rejected, since it contradicted Nabucco and Russia sought to use Turkey only as
a transportation route.
Now, Ankara wants to revive it as part of a North-South corridor. Based on the
leaders' statements, it appears that the existing capacity of Blue Stream might
be improved and gas could be transferred to the Mediterranean through this
pipeline.
However, although Erdogan praised this development as another major success,
there is no guarantee that Russia will grant "re-export rights", which
indicates that if Blue Stream II is implemented, Moscow will continue to view
Turkish territory as a mere conduit for its gas, which raises the question: how
will Turkey benefit from the agreement?
Russian priorities also involve Turkey's first nuclear power plant tender,
which has been awarded to a Russian-Turkish consortium. As the original price
was too high, the tender has long awaited cabinet approval. Meanwhile, the
Russian side lowered the price, and offered a compromise.
Prior to Putin's visit, it was expected that with further "bargaining" a final
deal might be reached, but apparently it failed. Nevertheless, Ankara and
Moscow signed protocols regarding energy cooperation, including the use of
nuclear energy for peaceful purposes, early notification of accidents, exchange
of information on facilities, and to continue talks on the nuclear tender.
The most controversial development is perhaps Ankara's support for South
Stream. Erdogan reiterated his belief that Nabucco and South Stream are
complementary, yet turned a blind eye to several Russian officials' (including
Putin's) statements to the contrary. It is assumed in Ankara that growing
European energy demand will accommodate both projects; but this ignores the
competition between both projects over the same downstream markets.
Moreover, the Turkish side fails to appreciate the challenges Russia is facing
in investing in its domestic gas industry and acts on the assumption that
"Russia has enormous reserves" while failing to realize that Russia is also
planning to tap into the same upstream producers, namely Central Asian and
Caspian gas, just as the Nabucco project envisages.
Putin also added that a consensus was reached on Russia building gas storage
facilities in the Salt Lake, or Lake Tuz, in central Turkey. Taken together
with the announced joint investments between Turkish and Russian firms,
including Gazprom, it is unclear whether the Turkish government recognizes the
consequences of these decisions. Russia has effectively used the practice of
co-opting the gas infrastructure of transport and consumer countries as part of
its efforts to monopolize downstream markets. It is unclear how this
penetration into the Turkish grid might affect Ankara's future energy policies.
Saban Kardas is an associate instructor at the Political Science
Department, University of Utah, USA.
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