Turkey's energy strategy: synchronizing geopolitics and foreign policy with energy security.

• Author: Bilgin, Mert
• Position: Report

Introduction

This article elaborates Turkey's recent energy strategy with regard to market characteristics, geopolitical issues and foreign policy priorities. It points to Turkey's growing energy demand as one of the most significant factors that affect the country's policies. The increase in domestic energy demand raises energy security not only as an urgent matter that awaits affordable and sustainable solutions, but also as an important issue that is highly effective in building regional and global relations.

The link between: (1) the tangible characteristics of energy security (amount, price, timing, location and sustainability); and (2) foreign policy priorities that simultaneously embrace tangible (e.g. bilateral and multilateral relations and agreements concerning trade, military and cooperation) and intangible parameters (e.g. ideals, principles, identity politics and soft power instruments), emerges as an important problematic that deserves further elaboration.

To do this, the following sections analyze Turkey's energy strategy and elaborate how it responds to current challenges by striking a compromise between market characteristics, and geopolitics and foreign policy. The main assumption of this article is that the tangible parameters of energy security are highly linked to the increase in domestic demand which in turn must be balanced with geopolitics and foreign policy issues; and channel cooperation with the concerned actors despite short-term or long-term political problems.

The first section, with conceptual and figurative highlights, gives a brief picture of the energy security challenges that Turkey faces. The second part focuses on Turkey's official energy strategy (Turkey's Energy Strategic Plan 2009-2014, as introduced by the Ministry of Energy and Natural Resources, MENR) to understand how, and to what extent, the policies respond to Turkey's challenges and support the main hypothesis of this article. (1) The conclusion discusses the findings and conceptual highlights of the article in order to provide an insight as to how energy security balances geopolitical motives and foreign policy goals on behalf of international cooperation.

The Calculus of Turkey's Energy Security

Energy security is meant to guarantee a sufficient amount of resources at affordable prices whenever and however the demand arises. In this regard, Turkey's energy security is based on the availability of resources at affordable prices and sustainable processes. (2) Turkey's geographical features encourage international oil and gas transport projects. However, it is not possible to identify Turkey's energy strategy as if it merely stems from a geopolitical agenda. Instead, Turkey's energy strategy arises from policy priorities as much as market characteristics. On the policy side, economic concerns and trade opportunities appear to be effective motivators behind Turkey's strategy. On the market side, the growth of Turkey's domestic energy demand leads to initiatives to diversify supplies and suppliers. (3) As shown in Box 1, Turkey's energy policies and investments are highly responsive to domestic demand as well as to international oil and gas pipeline projects. (4)

The increase in domestic demand puts pressure on Turkey's need to guarantee supplies from an energy security perspective. (5) Although state and governmental institutions remain important actors in the arena of domestic supply, it should be acknowledged that Turkey has entered an era of liberalization. The state, indeed, considered liberalization and privatization as an important means to accelerate infrastructure investments and support supply security. (6)

Box 1--Energy in Turkey: Fast Growing Market with Transit Infrastructures Turkey's importance in the energy market stems from its status as a regional transit hub, given its location between the oil-rich Middle East, the Caspian region, and Europe. Turkey is the home of the Bosporus and Dardanelles, connecting the Black Sea to the Mediterranean. In 2013, approximately, 2.8 to 3.0 million barrels of crude oil and petroleum products passed per day through the straits. In addition to the straits, Turkey has two international crude oil pipelines Carrying oil from Iraq (Kirkuk-Ceyhan) and Azerbaijan (Baku-Tbilisi-Ceyhan) to the Ceyhan oil terminal in the Iskenderun Bay, as well as four international natural gas pipelines. In 2012, Azerbaijan and Iraq exported a combined 900,000 barrels of oil per day through the Ceyhan oil terminal. Currently, a new natural gas pipeline project colloquially termed "Turkish Stream" is being discussed with Russia. Turkish Stream would be an alternative to the cancelled South Stream line. Besides becoming a growing transit hub, Turkey is also a major energy market itself with a rapidly growing demand for energy. According to the Turkish Statistics Institute, Turkey's population was estimated to be 77.7 million in 2014. Turkey is the 17th biggest economy in the world by GDP. According to the Turkish Ministry of Energy and Natural Resources (MENR), the demand for energy has been growing by 5.7 percent yearly on average in the last 12 years and is expected to grow by about 6 percent per year until 2020. The increase of demand is driven by the power generation sector, which depends highly on imported natural gas. Turkey's energy strategy for 2015-2019 focuses on securing the energy supply for the coming years, decreasing Turkey's dependence on imported energy sources, and improving energy efficiency. Turkey also aims to improve the investment environment with planed reforms, as significant investments are needed in the energy sector. In order to keep up with the increasing demand, Turkey needs to invest more in electricity, natural gas, and renewable energy. Turkey has an installed power generation capacity of 69,681 MW with a projected capacity of 100 GW by 2023. Although the market is still highly regulated, Turkey has made significant attempts to liberalize the sector in recent years, primarily in the areas of electricity and natural gas. Turkey is steadily decreasing the share of the state in power generation. In 2014, 6 thermoelectric plants and 10 hydroelectric plants were privatized, mainly attracting local investors. At the end of 2014, the share of energy produced by the private sector reached 72 percent, up from 57 percent in 2003. Source: TCK Attorneys, 2015. The 2001 Law No. 4628, and the secondary legal framework as designed by EMRA, resulted in the transformation of Turkey's state-centric monopolistic structure into a competitive market, paving the way for further deregulation characterized by the engagement of the private sector in power generation. "The private sector contributed to more than three-fourth of the capacity additions made and played a key role in increasing the installed capacity from 31 846 MW in 2002 to 49 524 MW in 2010, and 53 211 MW at the end of 2011 " (7) Electricity production (228.4 billion kWh in 2011) and consumption (229.3 billion kWh) seem to be balanced. This remains costly, since 74.8 percent (171 billion kWh) was generated by thermal plants mainly fueled by natural gas, hard coal and lignite including asphaltit, while allocating a limited share of 25.2 percent (58 billion kWh) to renewable sources such as hydro, geothermal and wind. (8)

Having acknowledged this awkward structure, Turkish energy strategy attributed a special significance to gas, nuclear and renewable energy to balance the economic and environmental risks that may arise from the excessive use of coal and oil in the next two decades. The environment, carbon emissions in particular, is an important factor affecting Turkey's energy security priorities. To state this in terms of numbers, Turkey's primary energy and electricity demand are expected to almost double and triple respectively by 2030. It is likely for fossil fuels, if the current trend remains, to account for more than 80 percent of the primary energy demand (exceeding 60 mtoe according to the business-as-usual scenario) and resulting in the doubling of carbon emissions from 300 million tons in 2010 to 600...