BACKGROUND: Second only to China, Turkey is the country in the world where the demand for energy supplies have increased most during the last decade. Turkey is dependent on foreign supplies for seventy-four percent of its energy consumption. Turkey’s main suppliers of natural gas are Russia and Iran. Natural gas accounts for the production of nearly fifty percent of its electricity, and eighty percent of the natural gas that Turkey imports is in turn provided by Russia and Iran.

To decrease the dependency on Russia and Iran, the diversification of energy supplies has long been a major preoccupation for Turkey’s leaders. Ankara has been looking to sign deals that would bring natural gas from Iraq, the Persian Gulf and the Caspian region to Turkey. This strategy aims both at enhancing Turkey’s energy security by diversifying its suppliers, and to turn Turkey into an energy hub, providing a transit route for energy to the European markets.

In this light, the presently most feasible project is the one that would bring gas from the Shah Deniz II field in the Azerbaijani sector of the Caspian Sea to Europe via Turkey. The agreement to realize TANAP (the Trans-Anatolian Project) was signed on June 26, 2012, with the participation of Azerbaijan’s President Ilham Aliyev and Turkish Prime Minister Recep Tayyip Erdoğan in  a ceremony in Istanbul. The project is expected to be finalized by 2018, by which at a first stage an annual production of 16 billion cubic meters (bcm) of natural gas will be transported. Later, depending on exploration in adjacent areas, the annual production to be transported is estimated to rise to as much as 30 bcm.

According to the agreement between Azerbaijan and Turkey, 6 bcm of the annual flow of 16 bcm is set aside for Turkey. The assumption is that the remaining 10 bcm will be delivered to European markets through Nabucco West or the Trans-Adriatic Pipeline. The decisions about the route that Nabucco West and TAP will follow are in turn expected to be finalized in 2013.

There can be no doubt that the agreement about TANAP represents the strategically most important agreement of its kind since the construction of the Baku-Tbilisi-Ceyhan oil pipeline. The Trans-Anatolian Project has significant strategic implications, as it opens a new, southern route for the energy sources of the Caspian region, to the detriment of Russian interests.

As Russia aspires to monopolize the role as the natural gas supplier of Europe, the opening of a southern route from the Caspian Sea to Europe runs counter to its interests, and Russia’s position on this matter has long been well known. Indeed, certain events before and after the signing of the Trans-Anatolian Project agreement are noteworthy in this light: The clashes on the Azerbaijani-Armenian border, the bombing of the Iranian natural gas line by the Kurdistan Workers’ Party (PKK), the subsequent attack by the Kurdish militants on the Turkish army outpost of Dağlıca in southeastern Turkey, and finally the downing of the Turkish RF-4 aircraft on June 22 over Syrian airspace are strong reminders of the strategic volatility of the region. Several Turkish commentators have made the point that Turkey risks exposing itself for Russian and Iranian retaliation by implicating itself in the Syrian crisis.

Russia has certainly not made any attempt to hide its displeasure with the signing of the TANAP agreement; Gazprom spokesman Sergei Kupryanov noted that “Gazprom has amply demonstrated that it has been a reliable partner for its Turkish business partners. On occasions of technical troubles and of extreme cold, Gazprom has always made up for not only the loss, but also provided more natural gas than what had been stipulated by agreements.” The Gazprom spokesman went on to advise Turkey to direct similar requests to Baku after TANAP becomes operational in 2018.

IMPLICATIONS: From Russia’s point of view, TANAP undoubtedly amounts to a strategic setback, since the Trans-Anatolian Project will make Azerbaijan independent from Russia as a conduit to the world markets. And it would at first glance also seem to signify an economic loss for Russia; Turkey is the recipient of one third of Russia’s export of natural gas, and Russia would thus seem to stand to lose some of its position on the Turkish market when Turkey acquires a new provider. However, the crucial point and concern from Moscow’s perspective is that other producers are provided with the possibility of accessing the European market by a southern route. The threat that looms in a longer perspective is that natural gas from Iraq and the Persian Gulf will take the southern route to Europe.

From a Turkish perspective however, TANAP is very far from providing a solution to the country’s energy problems. Turkey will still remain confronted to the fact that the demand for energy by far exceeds supply, at least as long as Turkey’s economy continues to grow. Indeed, the estimates are that Turkey will need to make additional deals for the provision of 20 to 30 bcm of natural gas until 2018. The 6 bcm that TANAP will provide annually will not make up for the country’s growing energy needs; even if NABUCO West and TAP are not realized, Turkey would absorb all of the 16 bcm from Shah Deniz II, still leaving it in a position of needing to secure additional natural gas supplies.

Turkey’s energy problems are aggravated by the fact that the country has foreign policy problems with all of its present and potential suppliers; relations are strained with Russia, Iran and Iraq, while the Armenian issue still remains a potential strain on the relations between Turkey and Azerbaijan, even though the two countries are now becoming ever more strategically interconnected. U.S. pressures on Turkey to improve its relations with Armenia have on occasion brought Turkish-Azerbaijani relations to the breaking point, and there are no guarantees that similar crises will not occur again in the future.

Concurrently, Turkey’s energy dependency on countries like Russia and Iran have a restraining effect on its foreign policy. The signing of the Trans-Anatolian Project does not stand to decrease Turkey’s dependency on Russia as a natural gas supplier. Indeed, as Turkey tries to diversify its energy sources and become less dependent on fossil energy, its energy ties to Russia are in fact continuously deepening. The Russian-financed construction of the nuclear reactor in Akkuyu, which is scheduled to start at the end of this year, will mark yet another important step in the evolution of the Russian-Turkish energy relationship.

CONCLUSIONS: The realization of the Trans-Anatolian Project by 2018 will strengthen Azerbaijan in strategic terms, offering it a direct route to the world markets in the place of one that would be controlled by Russia. From Moscow’s point of view, the realization of TANAP is a strategic setback. However, TANAP does not offer a solution to Turkey’s energy predicament. The amount of natural gas that Azerbaijan will provide Turkey is far from covering the country’s vast and growing energy needs. Turkey will thus remain dependent on Russia, both a supplier of natural gas and for its nuclear energy program. As Turkey will have to conclude new deals for Russian natural gas supplies, TANAP will not affect Russia’s position on the Turkish market.

The contribution of the Trans-Anatolian Project to Turkey’s energy security will be marginal. Rather, the importance of TANAP resides in the fact that it brings a new element to the equation of energy geopolitics in the region; the opening of a southern route of natural gas that represents a significant geopolitical accomplishment for Turkey, the West, and Azerbaijan.

M. Kemal Kaya is a Nonresident Senior Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center.

© Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center, 2012. This article may be reprinted provided that the following sentence be included: "This article was first published in the Turkey Analyst (www.turkeyanalyst.org), a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center".