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Turkey: Neighbourly ? 16 février 2009

Posted by Acturca in Economy / Economie, Energy / Energie, Russia / Russie, Turkey / Turquie.
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Economist Intelligence Unit

16/02/2009

Turkey’s deliberations over whether to go ahead with a controversial nuclear plant look set to impose further strains on relations with Russia

Turkish plans for the construction of the country’s first nuclear power station, a 4,800-mw plant to be located near the village of Akkuyu on the country’s east Mediterranean coast, have never been less than controversial. Most recently, the government has been widely criticised for allowing last year’s tender to go ahead despite calls by twelve of the thirteen prequalified consortia for the deadline to be postponed as the global credit squeeze was making it difficult for them to put together their financial bids. The result was a single bid from a consortium led by Russia’s state-run Atomstroyexport.

This has proved even more controversial given that Turkey already relies on Russia for around 60% of the gas it imports—imported gas, in turn, accounts for about half of Turkey’s electricity generation. Accepting the Atomstroyexport bid, which includes the supply of nuclear fuel from Russia, would leave Turkey dependent on Russian primary energy for over half its power generation. The Russian bid also appeared relatively expensive, as it was based on minimum wholesale rate of €0.212/kwh for the power it would produce—compared with current market prices of between €0.04 and 0.14/kwh.

With local elections looming and high energy prices already rankling, any moves that might further raise electricity prices are certain to be unpopular.

In light of this, it might be expected that the prime minister, Recep Tayyip Erdogan, would be quick to cancel the tender and schedule a new one ahead of polls. However, such is the complexity of Turkish-Russian trade relations that few expect such a simple result

Juggling

That complexity has been amply demonstrated over the past three winters when Russia has been able to supply Turkey with extra gas to cover for unscheduled cuts in supply from Iran. This winter Russia should have had no difficulty in boosting supplies through Blue Stream, as it has been curbing its supplies to Ukraine. However, commentators were left wondering why supply was raised only from 30m cu metres/day to around 40m cu metres/d, making up for only one quarter of the loss from Iran, when Blue Stream is known to have a maximum capacity of up to 82m cu metres/day, with no technical explanation being offered.

Instead many point to the difficult political balance between the two countries, caused by Turkey’s rejection of a Russian proposal to allow the extra capacity in Blue Stream to be used to export gas to southeastern Europe and its support instead for the EU backed Nabucco pipeline across Turkey With its planned cluster of suppliers Nabucco will offer Caspian gas producers a alternative route to Europe from Russia as well as allowing the transit of gas from the Middle East—a possibility that has not gone down well in Moscow.

In response, Turkey has offered Moscow the chance to extend Blue Stream south across Turkey and on to Israel. However, with Israel having discovered gas reserves of its own few see this project as viable in anything but the long term (BME Feb 1st-15th 2009).

Oil transit

At the same time Turkey and Russia are at odds over the transit of Caspian oil through the Black Sea. With Turkey’s Bosphorus straits too crowded for more tanker traffic Turkey is backing a project to construct a by-pass pipeline from its Black Sea coast to its Mediterranean oil hub at Ceyhan. However, to date the project has failed to attract sufficient volumes of crude to ensure viability, and a rival Russian-backed project for a pipeline across Bulgaria and Greece now looks more likely to go ahead.

With much of the Caspian oil arriving in the Black Sea still uncommitted to either line, all is still to play for. Russia could allow some of its oil to use the Turkish route in return for concessions elsewhere.

Similarly complex are Turkey’s relations with Russia over Georgia, through which the South Caucasus Pipeline (SCP) carries Azeri gas to Turkey and on to Greece, as well as the Baku Tbilisi Ceyhan (BTC) oil pipeline which carries Azeri oil to Ceyhan. Last year’s mini war between Russia and Georgia over South Ossetia coincided with a sabotage attack on the BTC line which left both it and the parallel SCP line closed for a month. Russia’s Georgian adventure also coincided with a crackdown by Russian customs on Turkish trucks at the border. For two months trucks carrying fresh fruit and vegetables were forced to wait up to two weeks before being allowed to enter, during which time their cargoes spoiled. More recently Turkish trucks carrying ready to wear textiles have been delayed for up to ten weeks. To date Russia has afforded no clear explanation for either imposed delay.

All these factors must weigh heavily on Mr Erdogan’s mind as he considers his options as regards Russia’s bid to build his country’s first nuclear plant.

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