Energy in Turkey and Russia's roller-coaster relationship.

• Author: Ediger, Volkan S.
• Position: ARTICLE - Essay

ABSTRACT Energy relations between Turkey and Russia provide an excellent example of how energy and politics interrelate in countries with a historically up-and-down relationship. Having started in the 1960s, the two countries' energy relations gained a new dimension after 1991 with the intensification of pipeline politics. In the 2000s, energy relations gained impetus owing to the leadership of Erdogan and Putin, and reached an apex with the establishment of a cooperation council in 2010. Since 2011, Turkey's demands for gas price reduction and volume increase have dominated the agenda of the countries' energy talks. While Turkish-Russian relations have remained on shaky ground lately, the signing of the Turkish Stream agreement in 2016 might be perceived as a positive step for closer energy relations.

Introduction

Energy relations between Turkey and Russia provide an excellent example of how energy and politics interrelate in countries with a historically up-and-down relationship. Located in a unique trans-continental geography, both Turkey and Russia have remained in between the East and West politically throughout their history. Even though they are not particularly defined as Western powers, both have tried to make reforms to adjust to western values. In the meantime, relations between Turkey and Russia have undeniably been bumpy. Historically, the two countries have fought at least 12 times; during the war of 1877-78, Russian troops managed to come as close as the capital of the Ottoman Empire prior to the signing of the Treaty of San Stefano. As history unfolded and Tsarist Russia became the Soviet Union, relations between the two countries started to recover from past hostilities. The closed-door diplomacy between Tsarist Russia, France and Britain was exposed to the public in Izvestia and Pravda on November 23, 1917 by the Bolsheviks, spoiling the Sykes-Picot Agreement - the secret Anglo-French pact that proposed the splitting up of the Ottoman territories in the Middle East into zones of control. Moreover, Bolshevist Russia was the first to sign a friendship treaty on March 16, 1921 with the Grand National Assembly of Turkey, which had recently been established under the leadership of Mustafa Kemal.

The contributions of the Soviet Union at the peace treaty negotiations in Lausanne in 1923 and during the establishment of the Turkish Republic afterwards were also remarkable. Although the two countries followed two exact opposite paths for economic development in the following decades, they maintained economic relations at a decent level during the early stages of the Turkish Republic. A year after he became Turkey's Prime Minister for the sixth time in 1931, Ismet Inonu visited Moscow and secured credit from the Soviet Union for the establishment of Turkish textile factories, which was perceived as a vital step towards the development of the country.

The energy dimension of the two countries' economic relations started to gain impetus after the signing of the first economic and technological cooperation agreement in 1967. This agreement made possible the establishment of seven important industrial complexes, including the Seydisehir aluminum facilities and the Aliaga Petroleum Refinery, which were actually the first energy complexes in Turkey built completely by Russian labor, know-how, and technology. After the construction of the refinery was complete in 1972, Nikolai Podgorny, the Chairman of the Presidium of the Supreme Soviet of the Soviet Union, visited Istanbul to evaluate developments, marking the very first time a Soviet leader visited Turkey. As a result of this successful visit, a second agreement on economic and technological cooperation was signed in 1975, which enabled the construction of lignite-fueled thermal power plants in Can and Orhaneli. On the same date, an agreement for the construction of a hydroelectric power plant in Arpacay, which was planned to flow on the border of the two countries, was ratified in the Turkish parliament.

In 1986, after the signing of the first natural gas agreements between the two countries, a new era began. Ever since then, Russian gas imports have been a very important component of Turkey's energy mix, bringing natural gas to the forefront of energy relations between the two countries.

East-West vs. North-South: Baku-Tbilisi-Ceyhan and Blue Stream

Energy relations between Russia and Turkey gained a completely new dimension after 1991. The new geopolitical setting that emerged in the region after the collapse of the Soviet Union intensified competition for the use and transportation of the Caspian's hydrocarbon resources. Energy resources in the Greater Caspian had previously been developed under the control of the Soviet Union. After the Cold War, the newly-emergent hydrocarbon-rich states, namely Azerbaijan, Kazakhstan, and Turkmenistan, started to cooperate with the West in the development of their resources and their transportation to the world's markets. Turkey and Iran, which share ethnic and religious ties with these countries, were the two possible transit countries for the transportation of the Caspian oil and gas to the West. After the United States passed the Iran and Libya Sanctions Act of 1996, Turkey remained the most likely transit country located on the route to the west.

The first example of geopolitical competition for energy resources in the region could be observed in the rivalry between the Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline and the Blue Stream natural gas pipeline. The BTC project was the first step towards the realization of the East-West Energy Corridor, sometimes referred to as the energy version of the Silk Road in the 21st Century. (2) Efforts to open such a corridor were mainly aimed at diversifying the European Union's (EU) energy sources by linking the hydrocarbon riches of the Caspian states to Europe. The corridor was intended to export the oil and gas of Azerbaijan, Turkmenistan, and Kazakhstan to Turkey and from there to the European markets.

On March 1-2, 1998, the Foreign Ministers of Turkey, Georgia, Azerbaijan, Kazakhstan, and Turkmenistan gathered to discuss the production and transportation issues of the hydrocarbon resources of the Caspian basin. In their joint communique, they declared their support for the development of the East-West Energy Corridor. (3) Apart from agreeing to conduct a feasibility study of the Baku-Tbilisi-Ceyhan oil pipeline project, the foreign ministers also expressed their views on the possibility for the transportation of Kazakh and Turkmen gas to international markets. Later, the Ankara Declaration was adopted on October 29, 1998 by the Presidents of Azerbaijan, Georgia, Kazakhstan, Turkey, and Uzbekistan, and the signing ceremony was witnessed by the United States Secretary of Energy Bill Richardson. An intergovernmental agreement was signed by Azerbaijan, Georgia, and Turkey on November 18, 1999 in Istanbul, and the project gained momentum after the establishment of the Baku-Tbilisi-Ceyhan Pipeline Company (BTC Co.) in August 2002. Construction began in April 2003 and the pipeline was inaugurated in July 2006.

The project was fully supported by the U.S. and the EU. The motivation behind their support was the belief that the establishment of alternative routes would strengthen these countries' and also Georgia's independence vis-a-vis Russia, and help them attract investment in other sectors too, thus boosting their economies. (4) Not surprisingly, for the most part Russia opposed the pipeline as it would enable the transportation of Azerbaijan's hydrocarbon resources to world markets without Russia's involvement. Igor Ivanov, Russia's then-Minister of Foreign Affairs, stated that Russia was ready for cooperation but would not tolerate "attempts to crowd Russia out of regions in which we have historic interests." (5)

The Baku-Tbilisi-Ceyhan Pipeline was an important part of the East-West Energy Corridor, but not the only part. The corridor was also planned to transport Turkmen gas first to Azerbaijan via a trans-Caspian pipeline, and then to bring Azeri and Turkmen gas to European markets through Turkey. Half of the 32 billion cubic meters (bcm) of gas would be used in Turkey, and the rest would be transported to Europe. Considering the tremendous dominance of Russia over regional natural gas production and transportation, the establishment of such a pipeline would threaten the interests of Russia much more than the Baku-Tbilisi-Ceyhan pipeline. Therefore, the Blue Stream pipeline proposed by Russia could be perceived as a rival of the East-West Energy Corridor. It should also be noted that the gas component of the corridor was more important than oil for the EU. Unlike the U.S., the EU became actively involved in the East-West Energy Corridor projects only when natural gas became a part of it, since it was perceived as a way to diversify the gas supply to European markets. (6)

Russia's efforts to promote its pipeline started with the signing of an agreement with Turkey in 1997 to construct a subsea pipeline between the two countries. This new pipeline would be established in the north-south direction and transport Russian gas to Samsun via the Black Sea. According to Gazprom, the main aim of this pipeline was to support the already existing gas route to Turkey (the West Route), which transits through Ukraine, Moldova, Romania, and Bulgaria. Through the planned pipeline, Russia could avoid transit costs while at the same time preventing any illegal siphoning of gas by the abovementioned transit states. In February 1999, Gazprom and ENI signed a Memorandum of Understanding (MOU) to build a pipeline (today known as the Blue Stream) to transport Russian gas to Turkey. In November 1999, Gazprom and ENI established the Blue Stream Pipeline Co. B.V., which started the construction of the pipeline in September 2001; gas flow started in February 2003.

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