Analysis

April 19, 2013

Summary: Energy issues are leaving an imprint on Turkey’s foreign policy agenda in surrounding regions. Energy Minister Taner Yildiz has been handling a heavy portfolio filled with projects that are by no means related to energy alone. Almost all the major projects Yildiz has been working on to realize Turkey›s energy aspirations have direct ramifications on the country’s far-from-smooth relationships with some of its neighbors, as well as the EU and other international actors. This assertive diplomatic agenda has been driven by two complementary motivations: to meet Turkey’s soaring energy needs, and to assert itself as a hub that will help increase its clout in the international system.

Energy in Turkey’s International Affairs and the Race for Southern Corridor
by Şaban Kardaş

Despite the overwhelming focus on the challenges presented by the conflict in Syria in analyses of Turkey’s external affairs, energy issues are also leaving an imprint on the country’s foreign policy agenda in surrounding regions. Energy Minister Taner Yildiz has been handling a heavy portfolio filled with projects that are by no means related to energy alone. Almost all the major projects Yildiz has been working on to realize Turkey’s energy aspirations have direct ramifications on the country’s far-from-smooth relationships with some of its neighbors, as well as the EU and other international actors. Motivations Behind Energy Diplomacy This assertive diplomatic agenda has been driven by two complementary motivations: to meet Turkey’s soaring energy needs, and to assert itself as a hub that will help increase its clout in the international system. Firstly, with the limited proven recoverable national reserves, Turkey is heavily dependent on imported fossil fuels, which accounts for a major portion of the chronic trade deficit. The dependence on foreign hydrocarbons is viewed not only as a strategic liability, as Turkey overwhelmingly conducts

this trade with Russia and Iran, countries with which it has lukewarm relations, but increasingly also as a threat to Turkey’s ambitious plans for economic development. It has been increasingly emphasized by Turkish officials that Turkey cannot reach its target of becoming one of the top ten economies by 2023 if it fails to bolster its energy security by gaining access to cheaper energy supplies through greater utilization of domestic sources, diversifying suppliers, and operating new fields abroad. Hence, there is a ceaseless urge for exploration at home and the signing of new contracts for international operations. Turkey, thus, accelerated its efforts to explore oil and gas both on its territory and also in the Black Sea and Mediterranean, raising the budget for these projects. Given its own limitations, however, Turkey faces financial and technological limitations and is forced to develop joint-ventures with other worldwide players to achieve its objectives. Recently, Yildiz announced that through partnerships with international companies such as Chevron, Exxon, BP, and Petrobras, Turkey has conducted six exploratory drills in the Black Sea. Though no positive findings have been achieved so far, total cost of

Offices

Washington, DC • Berlin • Paris Brussels • Belgrade • Ankara Bucharest • Warsaw • Tunis

Analysis
those drills reached US$2.5 billion, which was paid for by international corporations. Turkey also bought a seismic research vessel from Norway for $130 million. In addition, Turkish energy companies have been in search of licenses to explore oil in several foreign fields, ranging their operations from Iraq to Columbia. Turkey is also believed to have good prospects for shale gas, oil shale, or tight gas. Secondly, Turkey has been working to capitalize on its geopolitical position between the producers in the Caspian Basin, Central Asia, and Middle East and the European and international energy markets, so that it could emerge as a major energy hub. Turkey wants to assume such a role both in the sense of hosting major physical transportation networks and their meeting points and serving as a genuine market where oil and gas trade take place and their prices are set. This drive to gain a pivotal place in energy transportation and trade is behind much of Turkey’s activism in recent years, for it has to bring on board the producers, consumers, transit countries, and investors to commit to long-term, multi-billion dollar energy exploration and transportation projects. To the extent that Turkey can realize new pipelines that will allow multiple input and output options, whereby its territory serves as the crossroads with substantial storage capacity, it can claim to be a genuine hub. Moreover, to achieve the status of a trading hub, Turkey realizes that it has to develop a well-integrated domestic energy market and a liberal transit regime, which pressures it to reform energy laws. In that regards, a new draft Petroleum Law, which has been approved by a parliamentary sub-committee, seeks partly to achieve those objectives, but it has already come under criticism on the grounds that by opening the way for privatization of the Turkish Petroleum Corporation or facilitating foreign investments, it will undermine Turkey’s national interests. Obviously, these two motivations largely overlap. In order to both realize its supply security concerns and increase its standing in energy geopolitics, Turkey feels the urgent imperatives to forge new partnerships, develop national champions, and improve the functioning of its energy market. Turkey seems to be doing just that lately, but sometimes these various objectives contradict each other. Its proactive energy policies, therefore, have been hardly devoid of criticism, as Turkey’s energy-related considerations seem to play a role in not only dampening but also, in some cases, heightening regional tensions. Can Energy Bring Peace to Regional Tensions? For one, the flourishing ties between Ankara and Kurdistan Regional Government (KRG) in Erbil, Iraq, have been given a further boost by several energy deals. Since the initiation of KRG’s exports to Turkey of small volumes of crude on trucks, new avenues for cooperation have opened. But it also sparked international reactions, as the central government in Baghdad threatened retaliatory action, deeming the exports illegal. Ankara’s determination to continue an energy partnership with Erbil, which includes the trade in oil, development of some oil fields by Turkish energy companies, the exploration of natural gas reserves, and even construction of new pipelines, has recently put it on a collision course with Baghdad. Raising concerns about the implications of Turkey’s direct dealings with the KRG for Iraq’s territorial integrity, the United States has made apparent its uneasiness with Ankara’s new moves. Yildiz, however, insisted that Ankara would stand ready to support the existing arrangement whereby 17 percent of Iraq’s revenues from oil exports would go to the north, and Turkey was justified in its energy dealings with the KRG. Though Yildiz continuously reiterates Ankara is interested in furthering energy projects in Iraq as a whole, the future direction of Turkey’s partnership with Northern Iraq and its increasing involvement in the Erbil-Baghdad row will continue to be a matter of contention in regional geopolitics, especially considering the lingering tensions between Ankara and the government of Nouri al-Maliki over a host of other issues. Granted, efforts are underway to reach an understanding between Turkey and Iraq that might open the way for a South-North Corridor. At the same time, energy issues have occupied a central place in the discussions about Turkey’s policies in the Eastern Mediterranean, forcing Ankara to revisit its policies toward Israel and Greek Cypriots within a new frame-

This drive to gain a pivotal place in energy transportation and trade is behind much of Turkey’s activism in recent years.
2

Analysis
work. In recent years, Israel’s discovery and plans for the development of off-shore natural gas deposits, similar news about the presence of vast reserves in Cyprus’s territorial waters, and the deal reached by Tel Aviv and the Nicosia government pertaining to the delineation of the exclusive economic zones have altered the geopolitical dynamics in Eastern Mediterranean. Giving a harsh reaction to Nicosia government’s plans to proceed with the exploration plans without waiting for the resolution of the dispute on the island, Turkey also initiated its own exploration work in partnership with the Cypriot Turkish government, increased its naval presence in Eastern Mediterranean, and threatened to retaliate against energy companies entering into an agreement with Nicosia. Recently, Yildiz’s expression of the potential suspension of Italian energy company ENI’s ongoing projects in Turkey, most notably the SamsunCeyhan by-pass oil pipeline project, due to ENI’s January 2013 agreement with the Nicosia government to develop some offshore gas blocks in zones whose status has been a matter of overlapping claims has reheated the debate about how far Ankara can go in its rhetoric of retaliation. Interestingly, the Eastern Mediterranean has also been thought to be at the heart of the recent Turkey-Israeli thaw. According to many analysts, a Turkey-bound pipeline will emerge as the most feasible option to export the natural gas to be developed in Israel’s offshore exploration blocks by a seabed-connection to the Turkish coast. Many analysts claim that such prospects, in addition to other considerations, have played a facilitating role in the process leading to Israel’s official apology to Turkey for the Mavi Marmara incident. One even hears speculation that the prospects of exporting gas from Cyprus’s offshore deposits through Turkey could lead to a triangular peace dividend in Eastern Mediterranean. Attending an energy conference in Turkey soon after the apology, an Israeli Ministry of Foreign Affairs official responsible for energy affairs maintained that the transmission of Israeli gas through Turkey would be a profitable investment and the two countries should use energy as a vehicle to solve regional problems. Yildiz, too, notes that, for Israeli projects to be economically feasible, Turkey would have to be involved, while a senior Turkish diplomat maintained that Turkey observes closely the discovery of new natural gas deposits in the region, together with Israel’s apology, as they might be harbingers of the new things to come. Private Turkish companies also maintain talks with their Israeli counterparts. However, caution is warranted before reaching hasty conclusions about the pacifying effects of natural gas pipelines in the region. Defying expectations of a rapid progress in energy projects, indeed, Yildiz ruled out full scale energy cooperation with Israel before full normalization in political affairs is achieved. Overall, however, Turkey leaves open the possibility that a regionwide integrated approach could be developed for Eastern Mediterranean gas. To those potential projects, one can add several other initiatives that Turkey is pursuing aggressively, which Yildiz sometimes labels proactive energy diplomacy. Overall, energy-related considerations, both in the sense of diversifying suppliers and gaining access to new fields for exploration, play a significant role in Turkey’s search for multi-dimensionality in foreign affairs beyond the cases mentioned here. Turkey strives to develop closer relations with the hydrocarbon rich Central Asian and Caspian Basin countries, especially Azerbaijan, Turkmenistan, and Kazakhstan, as well as adding an energy dimension to its new diplomatic openings in the African continent. Southern Corridor: Will the Stars Align? Especially in the context of natural gas, the broader context for Turkey’s activism is formed by the Southern energy corridor discussions, which is an EU-initiated project to tap into Caspian Basin — and eventually Middle Eastern — reserves independent of the Russian-controlled networks. As it envisages construction of new pipelines through Turkish territory, the Southern Corridor illustrates the compatibility of Turkey’s twin objectives of enhancing its energy security and realizing its ambitions to be a hub country on one hand, and overlapping of Turkey’s interests with those of Europe on the other. With the fall of the original Nabucco pipeline, Turkey, together with Azerbaijan, has taken the initiative to develop Trans-Anatolia Pipeline

The Eastern Mediterranean has also been thought to be at the heart of the recent Turkey-Israeli thaw.
3

Analysis
(TANAP), which, as things stand, will form the backbone of the Southern Corridor. TANAP, projected to run from Azerbaijan to Turkey’s western border, will be a dedicated pipeline to carry significant volumes of gas to European markets. The Turkey-Azerbaijan energy relationship has been built on a solid platform owing to numerous joint projects realized so far. Turkey is a shareholder in the extraction of Azerbaijani reserves, developed joint energy transportation projects — Baku-Tbilisi-Ceyhan crude and Baku-TbilisiErzurum natural gas pipelines — and has not only invested in Azerbaijani economy but also attracted a significant amount of investment from Azerbaijan’s growing energy revenues. But to turn this partnership into a magnitude of strategic importance for Europe, TANAP has to evolve into a larger platform and other components of Southern Corridor need to be realized. First, the successful conclusion of the ongoing talks as to which project —NabuccoWest or Trans-Adriatic Pipeline — will be chosen in order to connect to TANAP for the transportation of Azerbaijani gas onwards will be decisive. 2013 is seen as the make-orbreak year to work out the remaining details and to ink a deal. Second, additional suppliers beyond Azerbaijan will be needed to diversify sources and increase the strategic dividends of Southern Corridor vis-à-vis alternatives, most notably South Stream. For its part, through its ambitious energy diplomacy visà-vis Iraq, the Caspian Basin, or Iran, Turkey has been working to increase the viability of the Southern Corridor, by enlisting other suppliers and seeking to reduce strategic uncertainty about the feasibility of the project. By largely resolving the transit terms for Azerbaijani gas through its territory and committing to TANAP, Turkey already has made a vital contribution to the emergence of a viable Southern corridor. Aware that the realization of such projects relies on some strategic thinking and cannot be left to market forces and commercial considerations alone, Turkish officials, including Prime Minister Recep Tayyip Erdoğan and Yildiz, have pointed out the Europeans’ strategic blindness to these vital projects. As the discussions for revamping Turkish-EU relations talks are underway, it might be high time to reopen the talks on energy chapter, which might then go a long way toward starting a meaningful dialogue on energy cooperation.

About the Author
Dr. Şaban Kardaş works as an associate professor of international relations in the Department of International Relations at TOBB University of Economics and Technology in Ankara.

About GMF
The German Marshall Fund of the United States (GMF) strengthens transatlantic cooperation on regional, national, and global challenges and opportunities in the spirit of the Marshall Plan. GMF does this by supporting individuals and institutions working in the transatlantic sphere, by convening leaders and members of the policy and business communities, by contributing research and analysis on transatlantic topics, and by providing exchange opportunities to foster renewed commitment to the transatlantic relationship. In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 as a non-partisan, non-profit organization through a gift from Germany as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has offices in Berlin, Paris, Brussels, Belgrade, Ankara, Bucharest, Warsaw, and Tunis. GMF also has smaller representations in Bratislava, Turin, and Stockholm.

About the On Turkey Series
GMF’s On Turkey is an ongoing series of analysis briefs about Turkey’s current political situation and its future. GMF provides regular analysis briefs by leading Turkish, European, and American writers and intellectuals, with a focus on dispatches from on-the-ground Turkish observers. To access the latest briefs, please visit our web site at www. gmfus.org/turkey or subscribe to our mailing list at http://database. gmfus.org/reaction.

4

Sign up to vote on this title
UsefulNot useful