Geography has endowed Turkey with great strategic importance, situated as it is at the crossroads between Europe, Asia and the Arab world, yet it has been less generous in its allocation of natural resources.
Turkey relies on imports for almost three-quarters of domestic energy consumption, much of it in the form of Russian gas. Turkish President Recep Tayyip Erdogan wants to diversify supplies by tapping new sources of gas in the eastern Mediterranean and northern Iraq.
Unlocking these resources, however, is fraught with economic and geopolitical risks, even before attempting the challenge of connecting them to the Turkish market.
Eastern Mediterranean resources are split between three countries — Israel, Egypt and Cyprus — which have complicated relationships with Turkey and each other.
Northern Iraqi gas, meanwhile, is exposed to political tensions over the separatist aspirations of the Kurdish people, as well as wider turbulence in the war-torn region.
“There’s so many factors to consider,” says Gareth Winrow, an independent analyst on Turkish energy. “It’s hard to be optimistic given the cocktail of issues.”
Recent signs of progress have come with big caveats.
Rosneft, the Russian energy group, announced this month that it was in talks with the Kurdistan Regional Government of Iraq about building a gas pipeline to serve the Turkish and European markets. Agreement was expected by the end of the year, Rosneft said, for an “accelerated” project that would see gas flowing by 2020.
While potentially opening new supplies, the involvement of Rosneft has shown how hard it will be for Turkey to escape Russia’s stranglehold over its energy market. Rosneft also bought a 30 per cent stake in Egypt’s Zohr gasfield from Eni of Italy last year, in a further sign of Russian state-controlled companies taking a position in resources which threaten to undercut their dominance of European markets. Zohr will serve the Egyptian market when it starts production — due later this year.
But the giant field has export potential, as do neighbouring resources in the eastern Mediterranean. The $3.75bn development of Israel’s Leviathan gasfield was given the go-ahead in February by its owners, led by Noble Energy of the US. Drilling in Cypriot waters has so far been disappointing but there remains hope of larger finds.
Turkey sees an opportunity in eastern Mediterranean gas, not only as a source of supplies but also as a way to make itself an energy hub for the rest of Europe. Berat Albayrak, the Turkish energy minister and son-in-law of Mr Erdogan, said in July that he would visit Israel before the end of the year with a view to building a pipeline between the countries.
Such an agreement would seal an improvement in bilateral relations after tensions caused by Israel’s killing of 10 Turkish pro-Palestinian activists during the storming of a Gaza-bound ship in 2010.
A bigger obstacle may be finding a path for the pipeline through a region riven by rivalries. Arab-Israeli hostility rules out Lebanese and Syrian waters, yet the alternative route, close to Cyprus, is scarcely easier. The breakdown in July of reunification talks with the breakaway Turkish part of the island bodes ill for the chances of Cypriot support.
Israel in April signed a preliminary agreement with Cyprus, Greece and Italy to build a separate pipeline direct to western Europe in a sign of the country hedging bets over its best route to market.
For Turkey, access to eastern Mediterranean gas — as well as that of northern Iraq — would add to new supplies due to arrive next year via the Trans-Anatolian pipeline from Azerbaijan. Meanwhile, Gazprom started work in May on the $12.7bn Turkstream pipeline to add further Russian supplies.
The rush of new infrastructure reflects Turkey’s status as fastest-growing energy market among the OECD group of wealthy nations, with average annual growth of 4.4 per cent between 2005 and 2015. By diversifying supplies, Turkey aims to increase energy security, gain pricing power and profit from becoming a regional trading hub.
“The Turkish trade deficit is driven by energy,” says Matthew Bryza, a former US diplomat and director of Turcas, a Turkish energy company. “They need to bring down the price of natural gas.”