Hub in exchange for discounts: Ankara asked Moscow for gas preferences

Türkiye bargains for increased purchases of Russian energy resources

On the eve of Vladimir Putin’s visit to Turkey, local diplomats have already outlined issues that they are going to discuss with the Russian delegation. One of the main topics will be discounts on gas coming from our country. In return, Ankara will most likely promise to speed up the creation of a distribution hub on its territory, which will allow Russia to increase supplies of “blue fuel” to Europe, bypassing Western sanctions.

The main topics of the upcoming meeting between Vladimir Putin and Turkish President Recep Tayyip Erdogan, scheduled for February 12, will most likely be political problems, in particular the situation in the Gaza Strip and Syria, but there will also be a discussion of economic aspects. According to diplomatic sources, the focus of the energy agenda of the negotiations will be the project of creating an international gas hub on the Turkish coast of the Black Sea. Moreover, Ankara is going to present Moscow with further conditions for the implementation of the organization of a new shopping center on its territory, and specifically, to demand additional discounts on “blue fuel” from Russia.

The idea of ​​creating a hub on Turkish territory through which the lost volume of transit of Russian raw materials through the partially destroyed Nord Stream export system can be redirected was proposed in October 2022 and agreed upon at the highest level – between the heads of both states. As Ankara later asserted, from a technical point of view, including with regard to infrastructure, the completion of the project does not require serious labor costs, and for its final turnkey delivery it is only necessary to amend the legislation.

True, since then the topic of a Turkish hub, although it has constantly arisen in Russian-Turkish economic and political circles, has not resulted in any specific agreements or treaties. “Apparently, to complete the phase of negotiations on the hub issue, a meeting is necessary not even at the ministerial, but at the presidential level,” believes Sergei Suverov, investment strategist of Arikapital Management Company, associate professor at the Financial University under the Government of the Russian Federation. “Now, apparently, the process of finalizing the gas hub deal will speed up, although there is a suspicion that Moscow will one way or another have to make financial concessions to Ankara.”

The head of the Turkish Ministry of Energy, Alparslan Bayraktar, previously reported that his country expects to receive a discount on Russian gas. Moreover, Ankara has every reason to insist on a discount. The gas hub will become a new transport route for the supply of “blue fuel” from our country to Europe. It will be based on the existing Turkish Stream pipeline, passing through the Black Sea and reaching land on the border with Greece. This is a convenient place for expanding transport infrastructure, which, even without serious investments, can increase the supply of hydrocarbons from Russia to the EU. The pipe’s capacity promises to grow from the initial 32 billion to 64 billion cubic meters.

Moreover, in fact, fundamental changes will not be required to start operating a gas station in Turkey. The gas hub will only serve as a formal platform for the sale and redistribution of raw materials, that is, a virtual exchange where counterparties will agree on the price, timing and volumes of supplies.

“After the severance of relations with the European Union, Gazprom needs to find somewhere to place its pipeline gas – besides China, the EAEU countries and the domestic market. Türkiye is a major buyer of “blue fuel”. It’s no secret that Ankara loves to bargain, and most often on favorable terms,” notes economist and communications director at BitRiver Andrei Loboda. The Turkish economy is in a good situation, but one of the acute problems remains very high inflation, which amounted to almost 60% in 2023. It is possible that, due to cheap gas, Ankara intends to prevent prices from accelerating, and in exchange, supply Russia with goods and equipment from unfriendly countries through parallel imports and export agricultural products to us at an acceptable cost.

All that remains is to agree on the size of the discount. According to Freedom Finance Global analyst Vladimir Chernov, the discount could reach 15%. “This year Turkey intends to sell up to 40 billion cubic meters of gas abroad. With average January prices for “blue fuel” in Europe at $319 per thousand cubic meters, it turns out that supplies from Russia will cost $12.7 billion, and its re-export will bring Turkey up to $2 billion,” the expert calculated.