Connect with us

Energy

India’s energy supply security: prospects and challenges

Published

on

Authors: Sanjay Kumar Kar and Prajit Goswami

India is one of the fastest growing economies in the world. It had been growing at a rapid rate of 7 percent for the last 10 years. Further, it is expected to grow over 7% percent in the coming decade. To fuel projected economic growth and cater growing energy needs, India requires a lot of energy.

With an area of 1.26 million square miles with diverse landscape and difficult terrain, India comprises around 1.2 billion people and their ever increasing needs. Currently India imports 70-80% of its oil and 30-40% of its natural gas requirements. Historically India’s energy import dependency rests on Middle East.

Coal is the most important and widely available fossil fuel in India. It supplies 55 percent of the country’s primary energy needs. According to BP Statistical Review, 2016 at the end of 2015, India had 60600 million tons of coal reserves with a global share of 6.8% and R/P ratio of 89 years. Compared to other fossil resources like oil & gas, India is better placed with coal resources for future production and use.

India intends to reduce coal imports by exploiting its own reserves. Import of coal has already decreased, by around 19 percent to 16.38 million tons in the month of May 2016 as compared to around 20.29 million tons in May 2015.

India’s current renewable energy capacity, 45 GW, is just about 14.7% of total installed grid connected electricity generation capacity of 306 GW in the country. Some of the major challenges faced by renewable sector are lower capacity utilization, lack of evacuation infrastructure, and funding for large scale expansions. Coal still the cheapest source for power production with per unit tariff in the range of Rs. 2.3-4.00. However, renewable sources like wind and solar are competing well to achieve grid parity. Current wind tariff is in the range of Rs. 3.39-Rs.5.92/kWh and recently solar tariff reached as low as Rs.4.34/kWh. In the beginning Government encouraged feed-in tariff but now the market is moving towards competitive bidding tariff. Therefore, renewable tariff is moving closer to grid parity.

Despite all kind of limitations the Government targets to achieve renewable installation capacity of 175 GW by 2022. Further, multiple initiatives are being taken by the Government to promote off-grid or captive renewable energy along with decentralized renewable applications. The Government is actively pushing installation and production of renewable energy through schemes like accelerated depreciation, generation based incentives (GBI), and viability gap funding. The Government already funded Rs. 25075 million under the GBI scheme for solar and wind power production.

Decentralized renewable applications are expected improve livelihood of millions of Indians in the rural as well as urban India. Because holds will have access to energy which would be helpful for enhancing scope of economic activity, thereby improve economic productivity and revenue generation. Further, affordable energy accessible to all citizens could improve situation of primary education in the country.

As India needs to diversify its energy mix and reduce dependence on imported fossil fuel nuclear energy could play a very important role in ensuring energy security of the country. Application of nuclear for electricity generation needs to be actively pushed forward. Media reports suggest that nuclear power cost is in the range of Rs.9-12/kWh.

India’s largely indigenous nuclear power program resulted in capacity installation of 5780 MWe. With the support of Russia and many other partnering countries India is expected to achieve 14.6 GWe nuclear capacity by 2024. It is high time for India to intensify strategic measures to address its energy security challenges like: making energy accessible, affordable, and available to all its citizens.

At least, India could aim to manage energy supply security if not complete energy security. One of the important source of energy could be natural gas as a transit fuel for meeting emerging energy needs. Natural gas can gradually reduce: (i) use of diesel and petrol in the transport sector, (ii) use of coal in the power sector, (iii) use of liquefied petroleum gas (LPG) in the domestic cooking, heating, and cooling; and (iv) use of coal and liquid fossil fuel in various industries like ceramic, textile, steel, etc. Further, natural gas could be used to produce hydrogen used in the refineries and in the transport sector.

India’s domestic natural gas production remains a big concern and future addition of new gas reserves provide no better comfort. As a result India’s import dependency continue to grow and we believe that the import trend may very much continue in future too. Unless domestic unconventional sources of gas offer some surprise, import of liquefied natural gas (LNG) would continue to play a critical to bridge the demand-supply gap.

For the time being India’s over dependence on Middle-East for fossil energy is not a concern from supply point of view. However, India should expand its energy sources basket carefully and strategically to avoid any future supply constraints. Considering the current supply glut of fossil fuel, this is the right time to expand the range of sourcing destinations. In the recent past, India actively searched for alternative or complementary destinations for sourcing natural gas. In the process, emerging destinations like the US and Australia were added.

India’s domestic gas production fallen from about 51 billion cubic meter (BCM) in 2010-11 to 31 BCM in 2015-16. As a result the gap between demand and supply has been widening. As results natural import dependency has been increasing which is evident from increase in LNG import from 12.9 BCM in 2010-11 to 21.3 BCM in 2015-16.

Natural gas is certainly tipped as the transition green fuel especially in the transport in sector. It has comparatively lower carbon footprint-thus more environment friendly compared to coal and oil. The uses of gas in cooking, heating and power generation stand to benefit millions of stakeholders. Apart from the above purposes use of natural gas for mobility sector addresses many concerns including the environmental concerns faced by urban cities. So, city gas distribution is poised to offer green energy solution to many struggling cities and upcoming smart cities.

In the present scenario India imports gas only through LNG carrier. It is believed that transporting natural gas through pipelines is found be cost effective over LNG carriers. For example, in 2013 China received pipeline gas imports at an average price of US$ 9.78 per MMBtu compared to average price of LNG import price of US$ 13.8 per MMBtu. LNG is costlier because the gas has to be liquefied to reduce its volume and transported using specially designed cryogenic tanks. Also at the receiving end specialised LNG terminals have to be built to store and re-gasify. Essentially the countries which import natural gas through pipelines enjoy cost advantage over import of LNG.

India has been pushing for transnational pipelines with limited success. However looking at India’s strategic location it would be viable for India to take gas from gas rich Iran, and Turkmenistan through pipelines. India already has agreed upon much talked about Turkmenistan–Afghanistan-Pakistan-India (TAPI) pipeline which starts from Turkmenistan and passes through Afghanistan & Pakistan before reaching India. TAPI pipeline with a length of 1124.68 miles passes through terror affected areas of Kandahar and Herat. Thus this makes it a very risky project to operationalize. Although NATO forces stationed in Afghanistan would ensure to protect the part of the pipeline passing through terror prone territories but future sabotage and attack may not completed ruled out. The project is due to be completed by 2019 and India would receive 1341.78 million cubic feet per day of gas. Operationalization of TAPI would certainly improve gas supply security for India.

Another transnational pipeline project namely Iran-Pakistan-India couldn’t happen due to very many reasons including sanctions on Iran, geopolitical pressure, and security concerns. In a report published in the Indian Express on 22nd April 2016 the Iranian Ambassador was stated saying that this project should be forgotten.

Discussions with Iran is on for a deep sea 868 miles pipeline via the Oman Sea and Indian Ocean. Iran-Oman-India pipeline from Iranian port of Chabahar to India’s Gujarat Coast would transport 1098.141 million standard cubic feet of gas per day. This might compensate for the almost failed IPI project and also there would be no issue of any other transit country conflict.

India has also invested for the development of the Chabahar port and also funding a rail link between Chabahar and Zahedan in Iran. The completion of the rail link would connect Chabahar to North South Transport Corridor (NSTC). These investments are moulding the bilateral ties of India and Iran. This deep sea pipeline will not only connect India to Iran’s Gas fields but Oman is also slated to join the pipeline at a later stage. This would give India a strong foothold to the Gas trade in both Iran and Oman. Also it would boost India’s stand in comparison to China’s One Belt One Road Program (OBOR).

Besides Iran, Oman and Turkmenistan, India also has a potential import source towards its north-eastern side which is Myanmar. The main advantage with Myanmar is its proximity to India and that it shares its borders with North-eastern part of India. Myanmar large untapped reserves. According to BP statistical review report 2016 Myanmar has 18.7 trillion cubic feet of natural gas with an R/P ratio of 27 years. But until now the investments that India has made in Myanmar although substantial are very less in comparison to China. According to a report in Journal Of Energy Security India’s investment in Myanmar Oil and Gas sector is around US $1.6 billion while Chinese investments is around US$ 8 billion. The 1.04 US$ Sino-Myanmar gas pipeline has been functional since 2013 transporting 423.72 billion cubic feet (bcf) gas to China annually. Lack of proper funding and coordination between public and private owned firms has resulted in India loosing important bids to other countries. Therefore, impacting India’s intention to secure long term energy supply.

Further, India failed to bring to table Myanmar-Bangladesh-India transnational pipeline because of Bangladesh’s unwillingness to act as a transit country. Although an alternative to this route was by bypassing Bangladesh and building a pipeline through North-East India that could connect to pipelines of East India. This deal also never came to reality due to multiple reasons including lack of funding. And thus China took advantage of this situation and entered into the gas pipeline market of Myanmar and built a similar transnational pipeline to China’s comparatively less developed Yunnan province.

However, an agreement with Myanmar through North-eastern states may increase the pipeline costs but it would also give India long term gas sourcing from Myanmar. The problems that India faces on its north-western part because of hostile relationships with Pakistan and with issues of pipeline security in both Pakistan and Afghanistan. This however is not the case with Myanmar. Therefore having a gas trade relationship with Myanmar is much secure and mutually beneficial. In-case any problem occurs in the north-western side this may act as a contingency plan. This also has another benefit; the gas pipeline from Myanmar via North-East India can be used to develop the region which otherwise due to its difficult terrain is not easy to develop. Development of North-East provides a major strategic advantage to India in dealing with China in terms of monitoring and also preparing required infrastructure to handle any unforeseen situation.

To ensure long-term energy security for its all citizens India should continue to actively pursue multi-pronged strategies. Currently, the Government is focussing on exploiting domestic fossils fuel and renewable energy resources to address ever increasing demand. Simultaneous, New Delhi’s energy diplomacy with energy resource rich countries like the US, Russia, Qatar, Saudi Arabia, Iran, and Australia has been unfolding. Even Prime Minister Mr. Modi’s look Africa energy policy adds new dimensions to India’s interest in securing energy equity in Africa and enhancing India’s energy security. Further, clean coal technologies are being pushed to improve supply of much greener energy.

So in order to secure India’s energy future it is necessary for India to explore and exploit domestic fossil resources but seriously acquire fossil resources outside India. To improve energy supply security emphasis should be given to energy diplomacy, international collaborations, and efficient trade partnership. Building necessary energy infrastructure like LNG terminal and pipeline should be pursued with utmost priority. India should take advantage of global supply glut to improve accessibility, affordability, and availability of energy for its citizens. Further, creating investment climate for renewable energy should be facilitated at all levels to bring renewable energy revolution at the earliest.

Decontrol of petroleum product pricing especially petrol and diesel prices takes energy pricing toward market determined pricing. Even gas pricing is more market oriented than ever before. Direct cash transfer on use liquefied petroleum gas (LPG) for domestic cooking purpose is a step forward to address energy accessibility and affordability. Judiciary and environment regulatory authorities are seriously pushing use of natural gas or green fuels to improve air quality in metro cities. Within a decade the Government intends to increase city gas distribution to 200 geographical areas from current level of 70 geographical areas.

India is certainly capable of addressing existing and future challenges to improve its energy security in the long-run. Moreover, green and renewable energy would play an important role to improve future energy security in the country.

Continue Reading
Comments

Energy

Analyzing China Solar Energy for Poverty Alleviation (SEPAP) Program

Published

on

photo:Xinhua

In 2014, China deployed a large-scale initiative named as Solar Energy Poverty Alleviation Program (SEPAP) to systematically alleviate poverty in poor areas including underdeveloped regions of western China. In recent years, moving the country toward technological leadership and making China the largest solar investor has been on Government’s central Agenda. While having environmental benefits associated, SEPAP is a multi-purpose project which aims to reduce poverty, promote jobs and income in rural areas, boost China’s solar market, and improve rural lives. It is noteworthy that SEPAP is a program that has harmonized the social, developmental, and industrial goals. SEPAP acquired the highest level of political endorsement after Xi Jinping pledged to eradicate poverty from China by 2020, which resulted in its ascension from the pilot program to a nationwide campaign. According to World Bank, China has lifted 800 Million people out of poverty by 2022 and contributed to the Global reduction of people living in poverty as close to three-quarters. China has become able to achieve this milestone by adopting targeted poverty alleviation strategies and by providing economic opportunities to the unprivileged people to raise their income level.

Through this initiative, China aimed to add 10GW of solar capacity by 2020, which will benefit over 2 Million people. The program targeted 35,000 poverty-stricken villages which were located in 471 counties in 16 Provinces. According to an evaluation study conducted in 2020, this program has resulted in an increase of 7%-8% in the per-capita disposable income of the county. Chinese Government investment in solar energy and using it as a strategy for poverty eradication has brought out positive results and the effects are twice as high in the subsequent two to three years, especially in Eastern China.

Three different contexts contributed to making SEPAP a priority on Government’s agenda, making a historical conjuncture. First was the political push to eradicate prolonged rural poverty in China. To combat the higher rural-urban income gap, China adopted an “industrial” approach that emphasized developing innovative industrial facilities in the unprivileged region to make them self-sufficient in the long run. The second was the significant demand for rural electrification, where former technological preferences, especially small hydropower, were no longer feasible. The third driver was the overcapacity and shrinkage of the country’s solar energy sector and the subsequent necessity to stimulate distributed solar PV installation. Before 2013, China’s solar energy sector was mostly export-oriented with a dominant share of exports in overseas markets in Europe. During 2008 Trade disputes in the EU and US combined with the financial crisis lead Chinese solar manufacturers to the brink of Collapse. So, opening the domestic market for solar consumption was launched as a rescue strategy. The officials favored the installation of the distributed, small-scale solar system that can generate energy that may be utilized locally. By 2013, China becomes the world-leading market for solar energy and by 2015, It reached a total installed capacity of more than 43.18GW. Considering the scenario, SEPAP was formulated with a strategic vision that will benefit the local people while also expanding distributed Solar PV generation and absorbing overcapacity. 

In 2014, SEPAP was launched by National Energy Administration (NEA) and State Council leading group

Office of Poverty Alleviation and Development (CPAD) as two joint policies. A first policy designed two alternatives for policy implementation. Installing rooftop Solar PV systems for low-income families formerly registered with CPAD was the initial option. The other policy alternative was to build Solar Power Station on the non-arable lands near the counties and villages. Using a robust financial model described in policy guidelines, the SEPAP was funded by both Government subsidies and corporate donations as a part of their corporate social responsibility initiatives. The second joint policy includes detailed guidelines for developing pilot SEPAP Projects in six provinces which included 30 counties. The provinces targeted were relatively underdeveloped while having abundant solar resources. Provincial Governments were involved to carry out the implementation process which include collecting comprehensive data on the poor household, energy supply and consumption, and quality of grid connection for each county. After the approval of plans from central governments, they were executed by the county’s government via an open bidding process. Provincial Governments’ poverty alleviation funds and policy banks’ preferential loans were utilized for the financial support of the pilot project of the Program. To ensure accountability and transparency in projects, monitoring and evaluation teams were designed by NEA and CPAD to maintain a check and balance on program activities and construction maintenance. To raise poor household income through this project, the profits gained from the sale of solar power were distributed fully among residents after Tax deductions. The policy goal also guaranteed 3000RMB of annual income per household for more than 20 years. The program created a win-win situation by alleviating the poor from poverty while absorbing China’s overcapacity of solar energy at the same time. 

China’s ambitious plan to align poverty alleviation goals with the expansion of renewable energy has some serious practical concerns associated with it. Analyzing the program leads to significant gaps in policy design and implementation. The program faced severe budgeting and financial problems because of a lack of appropriate arrangements and no detailed financial mechanism was developed for post-construction maintenance of the projects. Only the central government endorsement was not enough to tackle these challenges but consistent support from the banking and bureaucratic sector was the pre-requisite for program implementation. Moreover, proper financial incentives were also required to encourage the solar companies to take lead in the construction of projects. Another challenge associated with the project was the complication in the governance structure where energy regulators took the lead rather than development officials. Misallocation of expertise affected the priorities in agenda setting of the program i.e. energy regulators based on their expertise, advocated the expansion of industrial capacity rather than looking out for poverty and development issues in the local context. Moreover, the time frame designed for the assessment of pilot projects was not enough for the critical evaluation of the success and failure of the project before its transition toward a national program. 

Even though it’s a commendable approach, the combination of renewable energy technology with poverty reduction needs to be further examined through rigorous empirical studies both in China and in other developing nations. Future studies on how to integrate industrial strategies with development priorities and what governance institutions or structures might best serve these many policy goals can provide great insight into various policy alternatives that would be beneficial in the long run as well. 

Continue Reading

Energy

USA-KSA Energy War and Global Energy Crisis

Published

on

In this photo released by Saudi Press Agency (SPA), Saudi Crown Prince Mohammed bin Salman, right, greets President Joe Biden, with a fist bump after his arrival in Jeddah, Saudi Arabia, Friday, July 15, 2022. (Saudi Press Agency via AP)

The response of the USA to OPEC and its partner’s plan to reduce output by two million barrels per day was strong enough to suggest an uptick in hostilities with oil producers, particularly Saudi Arabia. Despite the fact that the decision was well anticipated, Washington saw it as a strong indication from its Gulf allies that they are not likely to comply with USA’s requests to continue oil production. In fact, it has started a war between the two major oil powers to make a serious impact on the energy regime. Hence the tug of war has an impact on the global energy domain since these two are the principal role player in the energy regime.

However, prior to the 2020 election, current US President Joe Biden urged to charge Saudi prince Mohammed bin Salman for the Jamal Khashoggi issue. The Trump era was quite friendly with the Saudi government. So, to confront Donald Trump Biden used the anti – Saudi stance in the 2020 election. Even the US government published a report on the issue after Biden was elected as the president. But the Ukraine war changed the landscape of global politics by introducing the energy crisis. To maintain a balanced price inside the USA, the Biden administration requested the KSA to put a bridle on the price. But despite having kept the USA’s urge the OPEC plus decided to hold the production of 2-million-barrel oil per day. It will help to move the price upward since the downward price of oil was alarming for the OPEC members. The rising oil price can determine the interim election in the USA. Hence the US responded strongly. But the KSA maintained its position. However, here the action of the two big powers in terms of energy will facilitate another round of energy crisis in the global market. The following portions will discuss the issue and what ramifications it will bring.

Strong Stance of the KSA

Suhail Al-Mazrouei, the energy minister for the Emiratis, stated to reporters following the Vienna summit that OPEC took action to assure that producers would continue to invest in new oil supply. “They have their own stories, too, in Europe,” he continued, “and in Russia. We cannot support either this nation or that nation. Moreover, Prince Abdulaziz bin Salman, Saudi Arabia’s energy minister, ruled out whatever political purpose and impliedly rejected the notion that the resolution entailed any hostility toward the US or other purchasers, claiming it was not done in defense of Russia. These portray that the KSA is not showing its intent in a hostile manner rather it wants to deal the tension through diplomatic channel.

NOPEC: Reappearing on the Set

The No Oil Producing or Exporting Cartels (NOPEC) bill will allow the U.S. attorney general to sue OPEC or its members, such as Saudi Arabia, in federal court. Other producers like Russia, which works with OPEC in wider group known as OPEC+ to withhold output, could also be sued.

The decision to reduce oil production, however, has already caused President Joe Biden to express his “disappointment,” adding that he would be exploring at “alternatives” to increase inventories. Hence, National Security Advisor Jake Sullivan and Director of the National Economic Council Brian Deese, two senior officials, issued a joint statement urging the White House to rethink its position and support the so-called NOPEC bill, which would hold the oil-producing cartel legally responsible for any price collusion.

Releasing Strategic Reserve: Not an Optimistic Option

The Biden administration’s alternative choice is to increase the amount of oil that is released from the strategic reserve, which is currently at its lowest levels since 1984. A previously stated release of tens of millions of barrels had no effect on the market, but further releases could lead to a supply surplus that would support further OPEC production cutbacks.

The Russia Factor

Washington commentators spouted accusations of Saudi Arabia “siding with Russia” after the OPEC+ announcement of relatively small production cuts. In a statement, the Saudi foreign minister revealed that the U.S. asked OPEC+ to delay announcing its production cut by a month and said that he rejects such “dictates” from Washington.

Moreover, according to OPEC, the decision is simply technical and for maintaining market stability. However, the US administration was enraged because Alexander Novak, the deputy prime minister of Russia and minister of energy, was present at the OPEC+ summit in Vienna. According to sources at OPEC, the US attempted to exert pressure on Austria to forbid his attendance, but OPEC+ members vowed to relocate the organization’s headquarters from there if its integrity was not upheld.

According to analysts, rising oil prices prior to a price cap would be advantageous for Russia, the largest non-OPEC producer. At least the discount starts at a higher price level if Russia is forced to sell oil below market value. Early in the year, high oil prices somewhat offset the sales Russia lost as Western consumers avoided its supplies. Additionally, the nation has been successful in redirecting almost two thirds of its traditional Western sales to buyers in nations like India.

However, as oil prices and sales volumes dropped, Moscow’s revenue from oil decreased from $21 billion in June to $19 billion in July to $17.7 billion in August, according to the International Energy Agency. The price limitations would further undermine a significant source of income since oil and gas revenues account for one-third of Russia’s federal budget.

Ramifications: “Weaponization of Oil”

The world will experience a surge in demand for oil. Besides, the global politics will divide into two separate blocs, though already the polarization is vivid enough. There are other ramifications of the war.

Firstly, The Biden administration plans to “re-evaluate” America’s eight-decade-old alliance with Saudi Arabia because of last week’s OPEC+ decision to cut oil production. But the White House posturing looks like a bid to distract from the effects at home of Washington’s failure to pursue a successful transition to clean energy.

Immediately following the OPEC+ decision, Roger Diwan, an analyst with S&P Global Commodity Insight, claimed in a note that the cuts represented a “weaponization of oil” and that the meeting’s timing and location were an intentional signal: The deputy prime minister of Russia, who is subject to US sanctions, was present to discuss limiting the oil supply as winter approaches and Russia has already militarized its gas deliveries to Europe. The confrontational course taken by Saudi Arabia will increase the price risk for oil.

Secondly, a shift in the gulf’s policy domain will be experienced. Some in the US perceived the decision as a failure of Biden’s Gulf policy because it was taken just over two months after Biden’s meeting with Saudi Crown Prince Mohamed bin Salman in Jeddah. The ruling Democratic Party was anxious about the Congressional midterm elections in addition to the conflict in Ukraine and the economic sanctions against Russia. With opinion surveys indicating that Republicans might win majorities in both the House and the Senate, high gas prices at the pump only worsen their already bleak prospects.

Thirdly, Saudi Arabia’s energy minister cautioned in a deliberate response to the American response that US-led plans for a price ceiling on Russian shipments are fanning the uncertainty that prompted OPEC+ to its largest output cut in two years. The perception that the next two months would be “a period of uncertainty” is increased by “the lack of details and the lack of clarity” regarding how the price ceiling will be put into place. People have no idea how the market or the participants would respond.

Fourthly, according to some Gulf sources, the “strategic alliance” between the US and Gulf nations will prevent the situation from turning into a full-blown energy crisis. They even assert that everything will “cool off” following the midterm elections later this month.

Sixthly, the USA will search for alternative sources in the African region for maintaining supply-chain of oil and gas. The visit of Biden to the African states was a sign of newer sources to ensure the security of commodities like oil.

Finally, the energy war is empowering the movement for renewable energies facilitated by the USA inside and outside the USA. The initial election mandate for the US president was to enable more renewable energy sources.

Moreover, higher oil prices will unavoidably exacerbate the inflation problem that central banks around the world are trying to solve, and they will affect the decision to raise interest rates even further to slow down the economy. That might increase the price of gasoline globally and intensify an energy crisis in Europe and the rest of the world that is mostly related to Russian reductions in natural gas supplies used for heating, electricity, and manufacturing.

In the end, it is a reality for the developing and underdeveloped nations, that they will suffer the most. Reserve shortage, high inflation, high food price, and a prolonged energy crisis are what they might expect from the situation.

Continue Reading

Energy

Russia-Turkey: Gas partnership as an answer to Western sanctions

Published

on

In early November, the European Union extended for the umpteenth time its sanctions against Turkey for another year for Ankara’s allegedly illegal exploration of gas fields off the coast of Cyprus.

The EU is understandably obliged to protect the interests of its member nations, in this case, of Greece and Cyprus, but I believe that this latest move by Brussels should be viewed in a broader context. The issues of extraction, transportation and supply of natural gas have already acquired a distinct political dimension in the world.

“We could move the lost volume of transit through the Nord Streams along the bottom of the Baltic Sea to the Black Sea region … by creating the largest gas hub for Europe in Turkey, if, of course, our partners are interested in this,” Russia’s President Vladimir Putin said, when addressing the plenary session of the Russian Energy Week International Forum. His Turkish counterpart enthusiastically accepted the offer.

Notably, the “gas” issue has more than just economic or political significance for Turkey. It has also become a sort of a metaphysical symbol of its success in the international arena. Ankara has long outlined its goal of becoming a major transportation hub, and if possible, the seller of natural gas to Europe, and is working hard to make this happen. Right now, there are seven main gas pipelines running through Turkish territory, four operational LNG terminals, and the country’s own gas fields in the Black Sea that are being actively developed by Turkey, which plans to put the first of these gas fields into operation within a month.

Not everyone believes the Turkish reports about the “huge reserves” of natural gas in the country’s territorial waters, though. Some skeptics even joke that Gazprom will lay a pipe to these fields, and BOTAŞ (the Turkish analogue of Gazprom) will simply latch onto it.

Meanwhile, in an interview with TRT Haber, Turkish Minister of Energy and Natural Resources, Fatih Donmez, said that “in the event of an increase in demand, Russian gas alone may not be enough.” Therefore, Ankara is currently in talks with other suppliers of pipeline and liquefied natural gas in the Middle East, North Africa, Central Asia and even Southeast Asia – about half a dozen in all. Given this vast geography, the logistics of supplies will be fairly complicated though, but Ankara’s plans to hold a conference with potential gas suppliers for the proposed hub early next year proves the seriousness of its intentions.

By implementing this project, Ankara expects both to receive relatively inexpensive gas and also payment and even commissions for the sale of Russian fuel to the European market. And of course, Turkey would not be Turkey if, just days following President Putin’s abovementioned  statement, the country’s Treasury and Finance Minister, Nureddin Nebati, did not reiterate its request for a discount on Russian gas and for a deferral of payments for its supplies.

Meanwhile, Hungary and Serbia continue to buy Russian gas, while the European Commission has officially banned its purchases – politics in the West today prevails over the economy. At the same time, many countries are willing to purchase Russian gas, but subject to the observance of “sanction propriety,” and the proposed hub where gas from different suppliers will inevitably be mixed, will help observe this “propriety.”

As for Turkey’s relations with Western allies, both the US and the EU have repeatedly and persistently invited the Turkish leaders to join the anti-Russian sanctions, which is something Ankara has so far carefully avoided.

Almost a week after Putin and Erdogan agreed to set up this hub, US Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg visited Ankara and Istanbul to discuss “a range of topics, including the sanctions and export controls imposed on Russia by a broad coalition of over 30 countries, energy security, anti-money laundering policy, and countering the financing of terrorism. These meetings affirmed the importance of close partnership between the United States and Turkey in addressing the risks caused by sanctions evasion and other illicit financial activities,” the US Treasury Department said.

Starting from June, US Deputy Treasury Secretary Wally Adeyemo and European Commissioner for Financial Services, Financial Stability and Capital Markets Union Mairead McGuinness traveled to Turkey with approximately the same agenda.

At the same time, Washington and, at its suggestion, Brussels are ramping up economic pressure on Ankara, above all on its banking sector. As a result, Turkish banks were forced to refuse to service Russia’s Mir cards, periodically returning payments in dollars and euros to Russian payers, even if they go via correspondent, almost entirely Western banks. There is always a way out though, and work is now underway to resume accepting Russian bankcards, and payments are easily made in rubles. Such transactions are not tracked by financial regulators in the United States and Europe.

As for Ankara itself, it has its own means of counteracting this. Europe has fresh memories of Recep Tayyip Erdogan once opening the “gate” for hundreds of thousands of Asian and African migrants, and due to the “obstinacy” of the Turkish leader, NATO is still unable to take in Sweden and Finland.

Turkey, like probably no other country in the world, is interested in maintain sustainable economic ties with Russia. Therefore, it is safe to assume that it will continue to resist pressure brought to bear by the Western allies, even if at times it comes under their “friendly fire.”

From our partner International Affairs

Continue Reading

Publications

Latest

Trending