‘Cheaper gas possible for Turkey by talking to Russia’

Murat Yetkin

President Tayyip Erdoğan is scheduled to discuss the Syria and Idlib crisis with Russian President Vladimir Putin on 5 March in Moscow. Before this contact, there is more news that the forces affiliated with the Bashar Assad regime were attacking Turkish troops around Idlib, and that a U.S. delegation including the U.N. Permanent Representative Kelly Craft and Syria Envoy James Jeffrey were in Turkey.

Syria is a topic that is of strategic importance for Turkey. Ankara is trying an exit the Syrian quagmire it was dragged into in 2011 with as few causalities and damage as possible.

Turkey has another strategic issue with Russia, at least concerning Turkish citizens. Turkey is largely dependent on Russian natural gas in electricity production, heating, and cooking. Citizens pay skyrocketing bills. The rise in natural gas prices in 2019 alone exceeded 30 percent. The government attributes the increase in natural gas prices to the rise in exchange rates and contracts with Russia, some of which were signed before Erdoğan’s Justice and Development Party (AKP) governments.

However, it seems that there is a way to reduce Turkish natural gas prices: to speak to Russia and renew the contracts. After all, Turkey is among Russia’s biggest and most important customers that it would not want to lose.

Fatih Birol, the Executive Director of the International Energy Agency (IEA), headquartered in Paris, answered YetkinReport’s questions on the issue.

Natural gas is abundant and cheap

– Mr. Birol, is the increase in natural gas prices in Turkey due to the increase in the world? Did other developments in Syria, Iran, and the Middle East cause the gas market to contract?
– Natural gas markets in the world are currently experiencing an unprecedented period of abundance. The U.S., Russia, Canada, Qatar, UAE, and Australia are producing and launching large quantities. Currently, natural gas prices in the world have dropped by 60 percent compared to two years ago. There are also Liquified natural gas (LNG) options. It’s getting cheaper in the U.S.; prices are at their lowest level in ten years”.

Coronavirus and natural gas prices

– Besides the abundance of supply, are there any other reasons for this decrease in natural gas prices?
– Prices have dropped not only in the U.S. but also in Asia. The driving force of natural gas demand was China. Along with the decline in China’s exports and production due to the coronavirus, demand for natural gas and therefore prices have also decreased. The same is true for oil. Oil prices are at the lowest level in the last decade. This allows oil and gas importing countries to renegotiate long-term contracts with the exporting countries and lower prices. I think all gas importing countries have this opportunity.

Turkey can also renegotiate with Russia

– It’s like you just described Turkey’s situation. More than half of Turkey’s natural gas imports that it uses in electricity, heating, and cooking come from Russia. Are there any countries that renegotiated with Russia and reduced the import prices?
– A number of countries within the European Union (EU) saved 8 billion dollars by renewing the contracts with Russia last year [2019]. Germany and Poland are among those. Turkey, like other countries that have long-term natural gas contracts with Russia, can sit around a table with Russia when the contract renewal time comes, negotiate the conditions on the world markets, and reduce the prices. This would have a positive impact on Turkey’s economy.

Natural gas bills

Actually, there is no need to say much. We are going through a period of abundance and cheapness in natural gas and oil in the world, as Fatih Birol, the head of IEA — which regulates the world energy markets — underlines. EU countries, which are richer than Turkey, are renewing their contracts by renegotiating with Russia. Russia, whose main source of income is oil and natural gas exports, lowers the prices in order not to lose its customers. Therefore, the administrations of those countries reduce their heating and electricity prices, thus relaxing their citizens and strengthening their economies. The natural gas bills in Turkey are among the most serious problems of low-income citizens and industrialists alike.

The domestic energy lobbies?

Does the Erdoğan government have an initiative with Russia in reducing natural gas prices, that hasn’t been announced to the public yet? What are the results, if any? For example, have the purchase prices from Russia been lowered already, though they haven’t been reflected in the public sales prices? If there was no interference, why not? How long will this interdependent relationship, which gives Russia more advantages, continue to work against the citizens? I wonder if it’s the domestic energy lobbies that do not want prices to fall for more profit. Behold the energy companies close to most governments, who will object to the fact that if prices drop, we will have to sell gas and electricity cheaper. All kinds of things come to mind.

Now Syria and security problems are at the forefront. But this issue should come up on the agenda. Erdoğan should discuss the natural gas trade with Putin, whom he calls “my friend,” decrease the prices, and reflect this as a price reduction to the public. Such a move is necessary considering the interests of the country and the people.