Turkey benefits from Russia’s weak economy

 

Turkey protest

Turkey seeks to take advantage of Russia’s economic situation – burdened by Western sanctions – and to grow its role as an energy hub, say experts, according to Turkish news agency Anadolu.

“Russia is trying to look for friends everywhere at the moment,” Liza Ermolenko, an economist at London-based Capital Economics, told The Anadolu Agency.

Sanctions were first levied against Russia in March by the U.S., the EU, and several other nations in response to Russia’s annexation of the Crimean peninsula.

Other measures followed, targeting Russian banks, arms industry, oil companies, and prohibiting Western companies from providing high-tech equipment and expertise to the Russian energy sector.

“Russia is speaking to China, Turkey, and other countries,” Ermolenko said. “This is a big shift for Russia to diversify its trade and links to other regions.”

In May, Russia agreed on a 30-year, $400 billion deal to supply 38 billion cubic meters of natural gas annually to China, from fields in eastern Siberia.

During Russian President Vladimir Putin’s visit to Turkey early December, Moscow scrapped the construction of the South Stream natural gas pipeline, which was planned to carry gas from Russia, through Bulgaria, to reach European markets.

Instead, Russia offered a new natural gas pipeline route that would carry gas from Russia through Turkey’s northwestern Thrace region to reach its Greek border, where a natural gas hub would also be established.

“South Stream was an outgrowth of the difficult relationship between Europe and Moscow because of the sanctions and the invasion of Ukraine,” says David Merkel, a senior fellow at Dinu Patriciu Eurasia Center of the Atlantic Council, a Washington-based think tank.

“It would be very good to learn from China’s experience in negotiating great deals with Russia,” he adds.

Energy experts believe that China had taken advantage of Russia’s predicament during the May negotiations to force Moscow to settle for a lower gas price than what Europe pays for similar imports.

Turkey aims to benefit from a 15 percent discount for Russian natural gas imports, while Putin announced a 6 percent discount rate.

“From Moscow’s standpoint, there is a value to developing a relationship with Turkey,” Merkel said, highlighting the difficulties the Russian economy was currently facing.

The Russian ruble took a major fall Tuesday, losing more than 20 per cent of its value in a single day. Although the currency has since managed to make modest gains, it still remains at lows not seen since 1998.

“Turkey is growing in its role as an energy hub and learning from Russia’s tactics,” says Sijbren de Jong, a strategic analyst at The Hague Centre for Strategic Studies.

De Jong adds that Putin’s negotiating position was weak because his alternative options were limited.

“Turkey knows Azerbaijan is ready to supply the TANAP pipeline, so it just plays Russia off against Azerbaijan,” he says. “Turkey knows that Russia really wants to build South Stream but Russia is running on empty with Europe.”

Trans Anatolia Natural Gas Pipeline, TANAP, plans to transport natural gas from the Azerbaijani Shah Deniz 2 field on the Caspian Sea, and from other Azerbaijani fields as well, through Turkey to Europe.

“It is yet just another MOU that has no legal consequences for any side,” says Ilya Zaslavskiy, a Robert Bosch fellow with the Russia and Eurasia program at the London-based think tank Chatham House, referring to the new gas route that Russia proposed.

“There is nothing binding or concrete about the new South Stream route,” he says, reminding that MoU documents between Russia and China had been signed several times, without achieving much progress in the last 10 years.

- Anadolu Agency

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