As a new winter season is getting close over Europe, the gas market becomes more sensitive, with supply and infrastructure risks looming again. The European Union wants to keep economic sanctions against the Russian Federation and to get into a position where energy blackmail is impossible. Meanwhile, Russia wants to sell as much gas as possible to the EU avoiding the Ukrainian route. Turkey wants to seize the opportunity and make money.

A Turkish hub to mask Moscow’s exports

Russian deliveries into Europe by pipeline are currently limited to flows via the European string of TurkStream and Ukraine. The two-string Nord Stream pipeline under the Baltic Sea was taken out of the game in a suspected sabotage attack in late September 2022. Very soon after, in October 2022, Russian President Vladimir Putin proposed setting up a gas hub in Turkey, building on a southern route for exports. Without being specific, Putin said a hub could be set up in Turkey relatively quickly and predicted customers in Europe would want to sign contracts.

Russia has proposed adding two more strings to TurkStream, to double its capacity. The Turkish market itself is already saturated but Turkey enjoys not only access to Azeri and Iranian piped gas, but also LNG. The country is targeting its first production from the offshore Sakarya field in 2024, which is expected to cover its growing gas demand for years to come. Turkey could in theory feed all of Europe with Russian, Azerbaijani, and Iranian gas entering the European pipeline system from the south-east of the Continent.

According to an Intellinews analysis, the Kremlin wants to send Russian gas to Turkey for onward transport to Europe. As more and more EU member states and companies are expected to phase out Russian gas over the coming years, the Russian plan appears to be to sell supplies to Turkey that could then be resold to European buyers. Once in the grid, after all, gas molecules are indistinguishable. Deciding how much of the gas that Europe takes from Turkey has a Russian origin would be hard to do.

In December 2022, President Tayyip Erdogan and Gazprom CEO Alexey Miller discussed the proposition and agreed on the hub creation in the Thrace region, at the Bulgarian border. The hub is expected to be commissioned between 2023 and 2024. Turkey would become the privileged route for Russian gas transport to bypass the usual Polish and Ukrainian routes. Neither Gazprom nor the Kremlin provided a cost estimate for the Turkish hub idea.

Ankara also said it would be possible to include the Trans Anatolian Natural Gas Pipeline (TANAP), which carries Azeri natural gas to the Turkish border, into the proposed hub.

The US government and the European Union sent public messages to discourage such a strategy. One suggestion that came up was the adoption of stricter energy regulatory measures on the transparency of energy sources.

An analysis of the independent research company Enerdata also concludes that the purpose of the hub is to hide the origin of the gas that European buyers are purchasing from Turkey. The country has a capacity of 129.5 billion cubic meters per year, far beyond domestic demand (57 billion cubic meters in 2021). Moreover, Turkey is already equipped with the infrastructure needed for hub creation, making it a major strategic anchorage for the Kremlin.

Gazprom prospers in Turkey

In March 2023 the Kremlin admitted the complexity of the project, which “cannot be implemented without time delays, or technical issues”, unlike what Putin asserted in October 2022.

An article by the Center for European Policy Analysis claims that, historically, the Turkish gas market has been heavily politicized, and it is likely to come under even closer political control in the context of the negotiations with Russia for the hub. Another problem is that the gas incumbent BOTAŞ was pushed into debt after years of heavy subsidies combined with last year’s soaring energy costs. The exact size of Turkey’s gas-related arrears is not known, but it sparked Turkish media claims that BOTAŞ might be managed by Russia’s Gazprom.

The reports were promptly dismissed by BOTAŞ and Gazprom. Nevertheless, the Turkish government did acknowledge it had agreed with Russia to defer payments for Russian gas supplies until 2024. In May, with only a few days before the first round of the presidential election in Turkey, Reuters reported that Ankara deferred payment to Russia of a $600 million natural gas bill to 2024. That was the first such postponement under a deal that provides the possibility to postpone up to $4 billion in Turkish energy payments to Russia until next year. Turkey’s energy import bill hit a record of almost $100 billion in 2022, as it bought 21.6 billion cubic meters of gas, or 39% of its total gas imports, from Russia, according to statistics from energy market regulator EPDK. Turkey is the second country to obtain a deferred payment concession from Moscow, with Hungary last year disclosing a similar deal with Gazprom, without giving details about volumes or payments.

Putin`s “special relationship” with Erdogan

Putin and Turkish President Tayyip Erdogan have forged close relations in past years despite a recent history marred by the murder of Russian ambassador Andrei Karlov in Ankara in 2016 and Turkey’s downing of a Russian jet on a mission to Syria a year earlier.

A recent report issued by the Turkish Democracy Project (TDP) concludes that, besides Ankara’s decision to refuse sanctions on Russia along with fellow NATO members, there are deeper business ties between Russian and Turkish oligarchs that play a big role in sustaining both Putin’s and Erdogan’s autocratic regimes.

”Russia’s and Turkey’s oligarchs are intertwined in a network of questionable financial connections that take advantage of the leniency they enjoy from their presidents. The countries have even considered joining their already controversial public wealth funds, which function similarly as parallel government slush funds reserved for rewarding the regimes’ allies. These connections economically defraud the Turkish and Russian people, while oligarchs’ amassed wealth has enabled a precipitous erosion of human rights. Oligarchy also allows Russia to influence Turkey away from its traditional allies: Russia-connected Turkish oligarchs can function as mouthpieces for pro-Russian sentiment while Erdogan continues to play both sides of major geo-political crises like the war in Ukraine”, the report said.

After the February 2022 Russian invasion of Ukraine, Turkey began offering Russians its citizenship by investment scheme, which provides a Turkish passport within three to four months to anyone willing to invest at least $250,000 in real estate or $500,000 in government bonds, companies, investment funds or a local bank account. Currently, Russians make up the majority of international real estate buyers in Turkey. Also, Turkey is the preferred destination for the oligarchs’ yachts, in search of a safe haven from sanctions. Some of the most prominent Russian oligarchs who parked their yachts in Turkish waters are Roman Abramovich, Leonid Mikhelson, Dmitry Kamenshchik, Vladimir Strzhalkovsky, and Alexander Abramov.

”One crucial strategy for Erdogan in navigating this relationship is the diplomatic and financial support that Turkish oligarchs can give Russia while providing safe harbor for Putin’s proxies. Erdogan places pro-Russian sentiments into oligarchs’ mouths while encouraging them to put Turkish wealth into Russian projects, thereby sending a signal to Moscow without compromising his image with the Western world”, according to the analysis.