Why Turkey election outcome is crucial for world energy

In 718 AD, the Byzantine Empire used Greek fire, a petroleum-based weapon, to destroy an Arab fleet besieging Constantinople. That is perhaps the last time that what is today Turkey has played a leading role in global energy politics. But Sunday’s elections, which are set to go to a run-off , could change all that. Turks went to the polls to decide between long-time leader Recep Tayyip Erdogan of the Justice and Development Party (AKP), and his main challenger, Kemal Kilicdaroglu of the six-party Nation Alliance centred on the Republican People’s Party (CHP). However, by Monday morning, since neither of the candidates had cleared the 50 per cent threshold needed, there will be a second round of elections on May 28. The vote hinges on several crucial issues: blame on the AKP for high inflation and poor economic conditions, and the devastating impact of February’s earthquakes , hostility to Syrian refugees, concerns over Mr Erdogan’s alleged authoritarianism and corruption, women’s rights, and complaints of Russian interference. Energy is not directly one of these. Yet the outcome is suddenly crucial for world energy in a way that previous Turkish votes were not. That change comes from three major developments of recent years. First, Ankara’s relations with Moscow and the impact of the war in Ukraine. Second, its complex involvement with Iraq. And third, the emergence of the East Mediterranean as an important gas-producing area. Interactions with Russia are multifaceted and often contradictory. Mr Erdogan has clashed with President Vladimir Putin, particularly over Syria , but he has also worked with the Russian leader on that country, as well as in mediating issues from the Ukraine war, such as grain exports. Mr Kilicdaroglu would probably follow a more traditional pro-Western course. Turkish energy policy has long been oriented to reduce its import bill, which soared to $80 billion last year, worsening the perennial trade deficit and weakening the lira. Russia is a key part of both problem and solution. State-owned Rosatom is building what will be Turkey’s first nuclear power plant, at Akkuyu on the southern coast, which will provide 10 per cent of the country’s electricity. Turkey is heavily dependent on imports of Russian gas itself, and is now virtually the only operating route for gas from Russia to reach Europe by pipeline. The new TurkStream pipeline, which connects to Bulgaria, Serbia and Hungary, is flowing at essentially pre-war rates. Turkey has long sought to become a gas hub, profiting as an intermediary by moving gas from Azerbaijan and Iran as well as Russia to European markets. On Wednesday, Moscow agreed to defer a $600 million gas bill until next year, creating a poison pill for a new administration. Turkey has also made its own large gas discoveries in the Black Sea, finally providing some measure of self-sufficiency. Gas is expected to begin flowing from the Sakarya field imminently, helping to bring down consumers’ bills. Earlier this month, Turkish Petroleum said it had also unearthed a billion barrels of oil in the south-east, the largest find in national history, though this may be pre-election propaganda. After India and China, Turkey has emerged as the main alternative market for Russian crude oil, which is now mostly banned from Europe, and it benefits from discounts. It is also attractive to Russia as its proximity means much lower freight costs than to Asian buyers, and it is the critical transit route for oil through the Black Sea and south Caucasus from Russia itself, Kazakhstan and Azerbaijan. The victory in late 2020 by Turkish-backed Azerbaijan over Russian-allied Armenia, prophetic in some ways of the Ukraine war, reconfigured power and transport links in the strategic area. Mr Kilicdaroglu has said that he would abide by Western decisions on sanctions. Turkey also plays a complex part in Iraq’s energy politics. In March, an arbitral tribunal in Paris ruled against Ankara in a case brought by the federal government in Baghdad, complaining of a breach of the treaty governing operations of the Iraq-Turkey oil pipeline. Turkey had allowed the semi-autonomous Kurdistan region to use the pipeline for its exports. Though the financial damages awarded were relatively modest, Turkey has closed down the pipeline since then, awaiting resolution of a second case and blaming “technical” grounds for not restarting, even though Baghdad and Kurdistan have reached an agreement on how to handle the exports. Turkey is apparently waiting until after its election — keeping some 450,000 barrels per day off world markets, and putting severe pressure on Kurdistan, with which it had developed strong economic and political ties. Turkey would also be the key route for any gas exports from the Kurdistan region to Europe. And, via its dams on the headwaters of the Tigris and Euphrates, it controls Iraq’s lifeline. Finally, there have been large gas finds over the last decade in the offshore areas of Israel, Cyprus and Egypt, and potentially Lebanon. Turkey has chased off drilling and survey vessels from areas it claims as its own or on behalf of the Turkish Republic of Northern Cyprus, which only Ankara recognises. It has not apparently found gas itself here. But its difficult relations with Nicosia and Athens hamper plans for a pipeline to Greece and on to Italy, or even a route direct to Turkey itself. So there are several areas in which Turkey could be a key energy partner of Europe and help build its resilience against Russia. These are not necessarily prevented by the re-election of Mr Erdogan, but he will certainly extract a political price for any realisation. A new government would take a fresh approach, but still would find its room for manoeuvre constrained by domestic realities and Moscow’s economic leverage. A period of political uncertainty or interregnum could bring chaos. The eyes of energy policymakers from Brussels to Baghdad and Baku will be trained on the Bosporus this week. Robin M. Mills is chief executive of Qamar Energy and author of The Myth of the Oil Crisis

Why Turkey election outcome is crucial for world energy

Turkey has long sought to become a gas hub, profiting by moving gas from Azerbaijan and Iran as well as Russia to Europe