Russia has put forward various assessments of the European Green Deal approved by the European Union in 2019, marking the intensive stage of energy transition. Some experts prefer to stress that developing green energy in the EU is another step in putting an end to energy dependence on Russia and the unstable states of the Middle East as well as a way to build up the EU’s competitive edge by making more efficient use of resources, developing new technology-intensive sectors and imposing a carbon border tax on carbon-intensive products from outside the EU. In this case, combating climate change is the niche where the EU is attempting to expand its own global role and where the EU has quite a shot at leadership. This realism-based approach calculates Russia’s possible losses and focuses on ways to minimize them. Another opinion, more typical of the liberal paradigm, is based on the premise that the EU—if acting on its own—is, a priori, incapable of achieving the desired results in combating climate change, since it is not the main polluter on the planet, while China, the U.S., India and Russia account for the bulk of emissions. So, without truly global cooperation, the EU can hardly achieve its goals. Consequently, an era of new opportunities is opening up for increasing collaboration under the slogans of shared responsibility for saving the planet. In his Address to the Federal Assembly, Russia’s President Vladimir Putin paid unprecedented attention to preventing climate change and environmental pollution, which demonstrates a clear trace of the EU’s new climatic agenda and a desire to show that Russia is not alien to the universal human values of fighting for quality of life in the future.
No matter what, it is expedient for Russia to account for both the realist and the liberal arguments and, on the one hand, to research opportunities and take steps for improving its own competitive edge and, on the other hand, to take advantage of the chance to use interdependence and reset relations with the EU on the basis of the new global “green” agenda.
New geopolitics of the EU’s “green energy”
Energy transition entails a number of major geopolitical challenges, requiring a transformation of the EU strategy for collaboration with regions and nations, certainly including Russia, which have played a particularly great role in ensuring the EU’s energy security.
The first challenge lies in altering the pattern of interdependence with the Middle East and North Africa (MENA) as well as Russia. The EU’s transition to renewable energy sources (RES) reduces its dependence on hydrocarbons from those regions, especially after 2030, when gas consumption is to be decreased. For MENA nations and for Russia, this entails a major drop in national budget revenues, and it will require a transformation of the economic model, possibly producing social instability in some of these states. The latter is particularly important for the EU owing to the situation concerning migration in the Mediterranean. The EU has already been quick to adopt visionary documents to establish a new framework for shaping a new pattern of interdependence. On March 9, 2020, the European Commission announced the EU’s comprehensive strategy with Africa, which includes five priority partnerships: green transition, digital transformation, sustainable growth, peace and governance, migration and mobility, also intending to usher in an era of closer cooperation with African states. In February 2021, the new “Agenda for the Mediterranean” was presented in Brussels, claiming that the COVID-19-induced crisis in the region gives Europe and other regional nations a unique chance for cooperation geared towards environmental, digital, sustainable and fair recovery. The overall funding for the “Agenda” under the Neighbourhood and Development and International Cooperation Instrument (NDICI) will total €7 bn (possibly increasing to €30 bn). Five of the twelve priority cooperation areas have to do with green transition, sustainable development, regional connectivity, digitization, green growth and climate.
On the one hand, the new stage in the EU’s cooperation with the Mediterranean states seeks to help them avoid the negative consequences of economic restructuring and to promote economic development and social stability in the region by introducing new technologies, improving the environment and creating new jobs. On the other hand, the EU itself is entering into a state of a new dependence on the states of the Southern Mediterranean since it needs the wind and solar power that abound in the region. So, the EU is extremely interested in establishing and implementing new partnerships as fast as possible. In particular, the Germany-Morocco hydrogen energy partnership is already in place, while French companies are developing wind and solar energy in Tunisia. Construction of interconnectors between the Northern and Southern Mediterranean has received a new impetus. In particular, Italy and Tunisia are building the Elmed interconnector to link Tunisia’s power grid with the European grid in 2025, with Morocco having launched energy exports to Spain in 2019 via seven underwater cables connecting the two states.
The second challenge the EU faces in developing RES is to preserve and advance its regulatory influence in the neighboring regions. This challenge stems from a decline in interdependence potentially shrinking the EU’s influence on the direction in which these states develop, pushing them to diversify partnerships and look for cooperation with potential rivals of the EU that do not tie their investments to any democratization and human rights commitments. For North Africa, this primarily means China, whose investment in RES and overall trade volume with the Southern Mediterranean is steadily growing. There are similar justified concerns that Russia might increase its eastward exports following a drop in hydrocarbon exports to the EU, though its dependence on China might grow accordingly. We should add China’s increasing technological competitive edge, particularly in solar energy.
The third challenge, largely stemming from the first two, is the need to intensify diplomatic dialogue with international partners—for a “green deal” not to be perceived solely within the realistic paradigm as a zero-sum game but rather as improving one’s own competitive edge by creating barriers in the way of others. Citing political differences as reasons for ignoring opportunities to cooperate with certain states in combating climate change will definitely harm the EU’s reputation as a globally responsible leader. So, pursuing dialogue is more of a necessity than a choice in this case.
Russia: a forced rule-taker?
For Russia, the challenge is not only to adapt to the inevitable contraction of the hydrocarbon market and to diversify its economy but also to make sure the country seizes the opportunities to do business in other countries and regions. In particular, it remains to be seen how the EU’s new African and Mediterranean strategies affect the prospects for Russia’s regional economic presence, which is largely associated with energy projects. After all, the question for Russia is how not to fall by the wayside of the new European green deal and China’s Belt and Road Initiative, as the interests behind the two projects inevitably overlap in the Mediterranean. Will Russian companies have enough competitive edge to participate in international “green” energy projects? Won’t Russian companies be excluded as not complying with the new environmental standards? Could Russia become a rule-maker in the global green deal rather than a mere rule-taker?
As conventional wisdom has it, if you want to grasp the rules of the game quickly, you should start playing it. And if the rules have not been fully set yet, it is crucial to join the game in time.
Institutionally and rhetorically, Russia adheres to combating climate change and environmental pollution. Russia has ratified the 2019 Paris Accords, adopted a series of internal strategic documents, such as the National Action Plan for the First Stage in Adapting to Climate Change up to 2022 and then The Russian Federation’s Long-Term Development Strategy for Low Greenhouse Gas Emissions up to 2050. The country has also developed a series of national climate and environment projects. In reality, however, Russia’s progress in the area has witnessed few successes. In particular, in 2021, Russia was ranked 73rd out of 115 states in the annual World Economic Forum’s ranking measuring how much states progress in transferring to clean energy, while the share of wind and solar power in Russia’s UES balance is only 0.15%. Calculations indicate that—should the most ambitious plans be implemented—the RES share in Russia’s energy generation will have reached 2–2.5% by 2035. At the same time, Russian companies have been rather active in going “green”, launching “clean” detachment of “dirty” assets into separate subsidiaries in order to attract investment and export their products to the EU while leaving products with a high carbon footprint for the domestic market. Owing to the absence of a domestic market, “green projects” launched in Russia, such as RES and hydrogen equipment, are clearly export-orientated. Russia is unlikely to receive assistance in exploring its own internal capabilities and need for RES. The principal actors here are, traditionally, the state, businesses and the civil society that particularly articulates the need for “going green” and introducing climatically neutral innovations. Yet, since this need has been recognized and expressed, it is high time Russia looked for potential partners. On the one hand, such partners would need to be sectoral technological leaders capable of sharing best practices in implementing domestic projects while simultaneously “guiding” Russia in international cooperation projects. On the other hand, such partners should not strive to politicize economic cooperation. The Italian Republic might apparently be just such a partner for Russia.
Italy as a RES leader
Italy is certainly a leader in developing RES. The desire of one of the EU’s most energy-dependent states to reduce this dependence is quite rational and justified. In 2019, renewable energy sources—such as solar, wind and hydropower—accounted for about a third of its total energy generation. About a fifth of Italy’s demand for heating and refrigeration is covered by RES, which is slightly above the average in the EU. In transportation, RES account for 7.6% of total end-consumption of energy, which is a little below the average EU level.
Throughout 2010 to 2019, Italy ranked 7th in the world in terms of accumulated investment in renewable energy sources (USD 82 bn), coming ahead of France, Brazil and Spain. By 2020, Italy had reached the target indicators for the RES share in its energy consumption ahead of schedule (17.8% in 2018, 14th place in the EU). Italy is Europe’s leader in geothermal energy generation. In 2017–2018, Italy ranked second in the EU when it comes to solar energy generation, third in producing biogas, second in hydropower, and fifth in wind energy generation. 33% of the electric energy consumed in Italy in 2018 was generated from renewable sources, with hydropower accounting for 60%. Italy also ranked 6th in the EU in 2018 in using biofuel in transportation and 4th in generating primary energy from municipal waste. Italy’s National Energy and Climate Plan (NECP) sets the goal of having RES account for 30% of its gross end-consumption by 2030, which the EU judged to be quite ambitious. Under the NECP, Italy is on the way to achieving the EU’s 2030 goals. Implementation of this plan will cut greenhouse gas emissions by 33% (emissions not covered by the trading systems (transport, residential construction, agriculture, and waste)). To achieve this ambitious goal, Italy plans to increase solar energy generation from 19 GW to 52 GW and wind energy generation from 10 GW to 19 Gw (mostly coastal). Italy is also planning to exceed the EU’s target indicators of having a 14% RES share in transportation and to reach a 22% share by using biofuel that is three-quarters biomethane. Experts believe this goal to be quite feasible, since Italy today has Europe’s biggest fleet of cars running on gas. A study of five EU states in 2021 (Germany, France, Italy, Spain, and Poland) ranked Italy first in generating, consuming, managing waste, investment, and engagement in waste processing, repairs, and recycling waste.
Russia and Italy: The importance of bilateral partnership and beyond
Italian and Russian companies have already started cooperating in RES. In particular, Rosnano and Enel Russia intend to implement Russia’s first “green” hydrogen production at a wind power plant in the Murmansk Region. Additionally, the parties are to launch a joint fund for supporting green energy generation in Russia in 2025–2035, each of them investing RUB 36.5 bn (€800 m total). If the Russian leadership is serious about developing RES domestically and exporting hydrogen to the EU, the mutual benefits from the Russia-Italy partnership are apparent given Russia’s potential in wind and solar energy and Italy’s major experience in developing these sectors and technologies. Other promising areas might certainly be waste processing, biofuel production, and use of RES in transport.
Yet, the cooperation potential is not restricted to the bilateral level.
Italy believes energy transition and sustainable development to be a crucial factor in its relations with the nations of MENA as it considers climate change in the region an immediate security threat. Official documents of the Italian Ministry for Foreign Affairs include this aspect among other priorities in developing cooperation with African states. Experts rank very highly the importance of the Mediterranean for developing green energy in the EU in general and Italy in particular, as they do the need to promote a fair transition in especially vulnerable states to avoid a new rise in migration pressure.
Given the energy transition announced by the EU, Russian companies’ prospects with respect to their presence in Mediterranean energy remain rather vague, and the pressure of sanctions makes participation in international cooperation projects increasingly complicated, as the case of Algeria shows. Given that “green energy” has not yet been affected by sanctions and Russia and Italy have accumulated experience of successful regional cooperation (in particular, in Egypt’s Zohr gas field), it would obviously be expedient to analyze the possibilities for Russian and Italian companies to participate in joint RES projects in the Mediterranean.
Since Mario Draghi has become Italy’s prime minister, the country has been strictly following Euro-Atlantic solidarity, yet such cooperation with Russia would not contravene this stance. On the contrary, it would promote Italy’s image as a middle power skillfully building bridges between conflicting parties. Italy sees the “green transition” as an opportunity to embark on another stage of its technological leaders’ international expansion and, unlike many other EU states that have succeeded in developing RES, it is not inclined to politicize economic cooperation. It was largely Russia and Italy’s energy cooperation—launched at a time of fierce inter-bloc confrontation and delicate energy diplomacy in the relations with the USSR and the states of the Southern Mediterranean—that allowed Italy to gain the status of a middle power in the second half of the 20th century.
From our partner RIAC
Analyzing China Solar Energy for Poverty Alleviation (SEPAP) Program
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.
USA-KSA Energy War and Global Energy Crisis
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.
Russia-Turkey: Gas partnership as an answer to Western sanctions
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.”
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