M-RCBG Associate Working Paper No. 66
Turkey in the Geopolitics of Natural Gas
Ole Gunnar Austvik and Gulmira Rzayeva
This paper outlines the role of Turkey as an increasingly more important natural gas consuming country while at the same time strategically located as a transit country between major consuming areas in the EU and suppliers in the Middle East, Central Asia and Russia. Turkey’s ability to import additional volumes of gas to meet the growing demand as well as to renew the contracts after their expiration in the 2020s is fraught with daily send out capacity constraints of the BOTAŞ system entry points and legal limitations in its Natural Gas Market Law. The long-term contracts with all its current pipeline gas suppliers - Russia, Azerbaijan and Iran - expire in the 2020s. Contract renewals could be beneficial for all parties, but price uncertainty and concerns with the ongoing Turkish market liberalization, new gas suppliers, LNG and political developments make the import picture more open. As a transit country Turkey may transport additional volumes of natural gas from Iran and other Middle East countries (especially Iraq), from the next wave of production in Azerbaijan, or from new gas production in the Eastern Mediterranean (Israel/Cyprus) to Europe in the TANAP pipeline operational from 2018. Commercial and financial, infrastructural, and political situations and relations constrain this potential. A realization of TurkStream might increase dependence on Russian gas but also minimize risks of interruptions in gas flows through Ukraine. The largest potential for an increased role for Turkey as an east-west transit country is when the entire domestic market continues to grow, and legal and infrastructural constraints resolved.