Don't Fear Turkey's Energy Power Play
In the next decade, Turkey will become a major transit country for natural gas into Europe. In a region where almost every country wants to become an energy hub in order to raise its geostrategic profile, Turkey’s elevated role is causing widespread alarm. Yet such concerns are misplaced: Turkey has little to gain and much to lose by abusing its position as a transit country for gas into Europe. Rather than engage in meaningless rivalry to become hubs, countries in the region should recognize that a new pipeline from Russia to Turkey could be a blessing in disguise if they can strengthen the market forces that will really deliver energy security for the region.
The European Union already gets a sliver of its gas needs via Turkey: a modest amount of Azerbaijani gas flows via Turkey into Greece, meeting 20 percent of that country’s demand in 2014. But within a decade, two pipelines will turn Turkey into a more significant transporter: the Trans-Adriatic pipeline (TAP) that will carry (at least) 10 billion cubic meters (bcm) a year into the Balkans and Italy; and the newly proposed and tentatively named Turk Stream pipeline that will establish a second link between Russia and Turkey and will allow Moscow to ship gas to southeast Europe via Turkey rather than (or in addition to) Ukraine.
We do not know enough about Turk Stream to gauge its full importance yet (nor can we be sure it will be built). After all, South Stream, the pipeline that Turk Stream replaced, changed much from its inception until it was abandoned in November 2014: its proposed size doubled, its route and end-point changed, and so did the companies involved in it. Yet, we know that Russia would ship through Turkey natural gas that now transits Ukraine. This is what happened when Nord Stream, the pipeline connecting Russia to Germany, came online in late 2011: it served as an alternative route for gas that had previously crossed Ukraine. The amount of natural gas Russia will ship through Ukraine this year is roughly half of what it shipped in 2005, in part due to Nord Stream. Turk Stream would deliver another blow to Ukraine, as Turkey becomes the conduit for Russian gas into the Balkans and possibly Italy.
What would such a re-routing mean? These mega-pipelines tend to be couched in geopolitical terms, but they usually have a commercial logic to them as well. Half of Russia’s gas exports to Turkey transits Ukraine, Moldova, Romania and Bulgaria (the Trans-Balkan pipeline). Paying transit to intermediaries raises prices for Turkey and/or lowers profits for Gazprom. Avoiding them makes strong commercial sense depending on the cost of the new pipeline. And exporting gas to southeast Europe via Turkey rather than the Trans-Balkan pipeline could bring lower prices to other countries such as Greece and Bulgaria as well (insofar as Gazprom faces competitive pressures).
What about the broader political repercussions of these changes? Even though countries like to talk up their prospects of becoming energy corridors, they usually refer to abstract benefits that are rarely fully enunciated. In the simplest terms, countries receive transit fees for the service they provide. Increased flows can also lead to lower prices, but only under the right conditions like competition: the border price for Russian gas in Slovakia, for instance, is higher than in the Czech Republic, even though the former transits more Russian gas than the latter.
The idea that being an energy corridor confers some political benefits is doubtful as well. If we exclude Ukraine and Belarus, Slovakia is the largest transit country for gas in Europe, followed by Austria, Belgium, Poland and the Czech Republic. All these countries transited well over 20 bcm in 2013, which is a volume that Turkey could aspire to transit by the mid 2020s. What geopolitical benefits were these countries able to extract through their transit status? Probably none. The reason is simple: transit countries only survive if they are reliable; if they try to abuse their position, their partners will find alternatives.
Several examples attest to this fact. When the relationship between Russia and Ukraine deteriorated, Gazprom found a work-around by constructing Nord Stream. Similarly, when Russia proved an unreliable transit country for Turkmenistan in 2009 (when an explosion cut the flow of gas north), Turkmenistan boosted its ties with China, and soon thereafter China displaced Russia as the largest importer of Turkmen gas. Today, more than half of Turkmenistan’s natural gas exports go to China. And when Algeria decided to double down on its pipeline strategy, it choose to build two pipelines that reached Spain and Italy directly, rather than expand the existing lines that crossed Morocco and Tunisia (only the pipeline to Spain has been built so far).
The history of the Russo-Ukrainian gas relationship should also shatter any illusions that either the sender or the transit country has any political control over the other. These countries are like prisoners that have been handcuffed to one another—they rise and fall together, at least until one of them becomes such a burden that the other takes drastic measures to sever the ties. The stronger might bully the weak, or the weak might slow down the stronger. But the relationship only lasts as long as it has to.