Posted by meb at September 2nd, 2008

Turkey has grown increasingly concerned that a crisis over customs procedures between itself and Russia may spread to gas and petroleum commerce. Natural gas demand in Turkey spikes in the winter and has been met by Russia every year.

At the moment, 60 percent of Turkey’s natural gas and about half of its crude oil demand are supplied by Russia. Any possible disturbance in crude oil needs can be supplied from other countries and the international spot market. However, a similar solution for a natural gas crisis is not available. Experts do not think Russia would cut gas imports completely, but they worry that Russia may not provide more gas than already promised. In such a case, Turkey would likely be faced by a serious energy crisis.

Turkey has signed two deals with Russia over natural gas. The first deal was signed in 1986 for a 25-year period. The deal, which will expire in 2011, let Turkey buy 6 billion square meters of natural gas per year. The second deal was the Blue Stream, again for 25 years. With this deal, Turkey buys 16 billion square meters of natural gas per year directly. Last year the Turkish Pipeline Corporation (BOTAÅž) bought 36.4 billion square meters of natural gas from Russia, 23.1 billion square meters of which were a result of the contracts.

Apart from the natural gas, crude oil imports from Russia are increasing exponentially. In the given period, 9.3 of 23.4 million tons of crude oil Turkey exports are purchased from Russia. The increase in the natural gas and crude oil trade has changed the commerce balance between the countries rapidly, to the disadvantage of Turkey. In 2007 the total amount of Turkey’s exports to Russia amounted to $4.7 billion whereas imports came out to $23.5 billion.

Former BOTAŞ President Gökhan Yardım thinks the current customs crisis may not affect the natural gas trade. According to Yardım, the arrangements between the countries are international ones and have penal sanctions and any country that transgresses the rules set out in these arrangements has to pay indemnities.

Yardım, however, thinks there may be some problems with the natural gas flow from Azerbaijan and Iran. He said this year Turkey will import 5 billion square meters of natural gas from Azerbaijan. “In previous years, Georgia used the Azerbaijani natural gas passing through Georgia when Russian gas was insufficient. If this repeats, Turkey may face problems. Moreover, Iran sometimes cuts natural gas flow in the winter. The deficiency was met by Russia before. Extra gas sales are out-of-contract and depend on bilateral relations. But Russia needs money and so needs to sell natural gas. So I do not expect a serious crisis.”

Few alternatives to natural gas

Former Treasury Undersecretary and Minister Ekrem Pakdemirli, who signed the first natural gas deal with Russia, thinks the problems between Turkey and Russia should be solved through negotiation. He said whether the cause of the latest crisis was political or economic should be noted. “It seems that the cause of the problem is political. So the solution should be through negotiations,” he said. About the payment of some of the natural gas bought as trade goods and services in the first deal, he said: “Yes, at the early stages some of the payments were paid as goods and services, and that was an important benefit for us. Then this term was abolished. Now natural gas is widespread. Turkey does not have many alternatives.”
source: Today’s Zaman