A new turn with the Turkish hub: Ankara is knocking money out of Moscow

How much Russia will have to pay Turkey for circumventing Western sanctions

The commissioning of the Turkish gas hub, which allows Russia to circumvent European sanctions on the export of “blue fuel”, seems to be delayed for a long time. Turkish President Chagry Erhan, a member of the Council for Security and Foreign Policy, said that Ankara will need Russian investment to complete the project. Independent experts are surprised: all the production and transport capacities of the system being created, capable of soon becoming the main energy hub of Europe, have long been built. It remains only to establish digital supply chains, which does not require significant investments.

According to Chagra Erkhan, most of his country’s economic priorities that had existed until recently have changed due to the dramatic consequences of the recent powerful earthquake. Therefore, the gas hub, although extremely financially beneficial to Ankara, is far from the most important current task against the background of the fight against the consequences of the earthquake. In fact, a Turkish high-ranking official formulated something like an ultimatum to Moscow: if Russia now has the opportunity to invest in the project, you are welcome! If not, we postpone it until better times. How the change in Ankara’s position will affect Moscow’s plans regarding the creation of a gas hub in Turkey, Director of the Institute of National Energy Sergei Pravosudov told MK.

– Ankara is going to build a gas hub on its territory at the expense of Russian investments. What exactly should be built there and what should be invested in?

– There is no need to build anything radically new to start the operation of the gas hub in Turkey. Formally, a hub is an exchange where contracts are concluded, the cost, terms and volumes of hydrocarbon supplies are agreed. In fact, it is necessary to develop and connect software, and bidders will be able to sign transactions through transnational payment systems. Four international pipelines converge in Turkey: the Trans-Anatolian TANAP from Azerbaijan, Tabriz-Ankara from Iran, and two strings of the Turkish Stream from Russia. Construction of additional branches or terminals is not required here. It is necessary to create a reliable trading platform for customer relationships, appropriate software and work out logistics issues, after which the work of a new exchange can be opened.

– How much money will be needed for this and when can the project be launched?

– This question should be addressed, rather, to our colleagues from Ankara. It should be taken into account that Turkey will soon have presidential elections. I don’t want to guess how the energy policy of the country will change if the power in the country changes. So far, the attitude towards Moscow in terms of long-term supply of energy resources remains stable, which can serve as another positive factor in favor of completing the creation of the largest European gas hub. How much money the completion of the project will require is not exactly known, but let’s talk. How much investment is required to provide software for a large business center? Probably millions of dollars. And how much will have to be spent on debugging a serious international trade and financial system? Apparently, tens and even hundreds of millions. But in any case, these are not billions or, moreover, tens of billions required for the construction of new multi-kilometer highways. So there is reason to believe that investors will find funds.

– What can be discussed at the talks between Moscow and Ankara on the resumption of the implementation of the Turkish hub?

– Turkey urgently needs to find considerable financial resources to compensate for the losses caused by the devastating earthquake: the bill could go to tens of billions of dollars. Last year, Ankara already asked Moscow for a 25% discount on imported “blue fuel”, and also insisted on postponing the payment of part of the debt for previously delivered energy resources. Now the Turkish side has another argument to bargain for benefits. Given the special interest in the gas hub project from Moscow, but also pedaling the theme of its tragedy, Ankara is quite capable of negotiating additional preferences from Russia.

Also, Turkey could involve the Russians in the development of the large Sakarya gas field, located on the Black Sea continental shelf, whose resources could later also be connected to the exchange trading of the hub. But so far, such an idea, which is interesting for all parties, unfortunately, is not officially considered.

– Does this mean that Moscow can accept the Turkish “ultimatum” and take over the financing of the hub in the near future?

– It is beneficial for Moscow to participate in the supply of gas and the management of the Turkish hub. Azerbaijani, Russian and Iranian gas can enter the territory of this trading platform. In the further sale of hydrocarbons, the buyer does not need to know where exactly the raw materials came from, which reduces the risk of future sanctions claims against us. Learning how to competently use the opened trading niche will be an important task in the light of the restoration of Russia’s gradually lost positions in the international energy market.

Dossier “MK”:

The proposal to create a Turkish gas hub was announced by Russian President Vladimir Putin in October 2022, two weeks after the explosions on the Nord Stream gas pipelines in the Baltic Sea. Soon the idea was supported by Turkish President Recep Tayyip Erdogan, stressing that the hub would become a transport and distribution network for redirecting hydrocarbon flows from the damaged Nord Streams to Turkey, and would make the Black Sea region the main export route for Russian “blue fuel” to Europe. A series of recent large-scale earthquakes in Turkey has made adjustments to plans to create a gas hub. Turkey, which does not currently have enough of its own financial resources to complete the project, is trying at the expense of its allies, the closest of which is Russia, to find an opportunity to implement its ambitious plans in the energy sector.