Türkiye reduces purchases of Russian gas

Türkiye is rapidly reducing gas purchases from Russia. According to Russian President Vladimir Putin, Russia supplied more than 10 billion cubic meters of gas to Turkey via Turkish Stream and Blue Stream in the first eight months of 2023, while last year deliveries reached 21.5 billion cubic meters of gas. Such a low level of supplies to Turkey has not been observed since 2019, when the Russian Federation supplied 15.2 billion cubic meters to the country. According to analysts, by the end of 2023, gas supplies to Turkey may break this anti-record, amounting to 15 billion cubic meters.

Deliveries of Russian gas to Turkey in January-August exceeded 10 billion cubic meters, Russian President Vladimir Putin said on September 4 at a press conference following talks with Turkish President Recep Tayyip Erdogan. “Our countries closely cooperate in the gas sector. Last year, Russia delivered 21.5 billion cubic meters of gas to Turkey via the Turkish Stream and Blue Stream gas pipelines, and over 10 billion cubic meters in January-August of this year,” the president said.

Thus, deliveries to Turkey in January-August could fall by 39%: last year they amounted to 16.3 billion cubic meters in eight months.

The smallest volume of Russian gas exports to Turkey was recorded in 2019, when it amounted to 15.2 billion cubic meters.

Gazprom has signed contracts for the supply of gas to Turkey with the state-owned Botas – for 16 billion cubic meters via the Blue Stream and for 5.75 billion cubic meters via the Turkish Stream – until 2026. There are also contracts with private importers through the Turkish Stream for 3.25 billion cubic meters. Türkiye also buys pipeline gas from Azerbaijan and Iran and LNG from Nigeria and Algeria.

The main reason for the decline in Russian gas supplies to Turkey is its relatively high price (the pricing in the Blue Stream contract provides for an oil peg, in other contracts it is peg to spot gas prices in Europe). In addition, the devaluation of the lira makes it difficult for local consumers to import gas in foreign currency. Demand for gas in Turkey has been declining overall this year, and LNG imports fell by 10% in January-July, said Yevgenia Popova from Implementa.

The reduction in the withdrawal of Russian gas may lead to problems for Botas in fulfilling the take-or-pay condition (mandatory payment of 80% of the contract volume).

Unselected volumes may be carried over to future years, but in the future, given the economic situation in Turkey, it may be difficult to select these volumes.

Ankara has already secured a deferment of payments for Russian gas in the amount of $600 million until 2024 due to rising energy prices.

Sergey Kondratyev of the Institute of Energy and Finance estimates that in 2023 gas supplies from Russia to Turkey are consistently below 2022 levels, partly due to an overall decline in gas demand and a switch to buying LNG and cheaper gas from Azerbaijan (up 16% year by year). “Given the dynamics of recent months, I think that the anti-record of 2019 may be repeated – at the end of the year, deliveries may amount to less than 15 billion cubic meters,” he said. He estimates the minimum withdrawal within the framework of take-or-pay to Turkey at 19 billion cubic meters, adding that, probably, Turkish Botas may encounter certain problems with its implementation.

Evgenia Popova also believes that if supplies via Blue Stream remain at the level of May 2023 (645 million cubic meters), and via Turkish Stream at the level of June 2023 (350 million cubic meters), supplies to Turkey will amount to only 15 billion cubic meters. results of the year. But she clarifies that such a development of the situation is still unlikely, since demand for gas in the country increases in autumn and winter. In the event of an increase in supplies in September-December to the levels of 2022, the volume by the end of the year may reach 17 billion cubic meters. Ms. Popova also notes that Turkey’s participation in the gas hub project and its potential role as an important intermediary for “depersonalization” of gas supplies from the Russian Federation gives Ankara arguments in negotiations on the status of unselected volumes by take-or-pay.

Tatyana Dyatel