Black Sea Gas Find Strengthens Turkey’s Hand Against Greece

(Bloomberg Opinion) -- An important development has been lost amid the growing alarm over the contretemps in the Eastern Mediterranean: Last month President Recep Tayyip Erdogan announced a major natural gas discovery off Turkey’s other coast, in the Black Sea. The finding was estimated at 320 billion cubic meters, and there is a strong expectation that the figure will be revised upwards as a result of additional exploratory drilling.

The finding has implications for Turkey’s energy balance and energy security — and for its stance in the Eastern Mediterranean confrontation with Greece.

As a country poor in hydrocarbon resources, energy imports have always been a major burden for Turkey. Last year’s energy import bill amounted to $43 billion, or 20% of all imports. The new gas finding, which Erdogan said will come onstream as early as 2023, will help stanch a major drain on foreign exchange. A back-of-the-envelope calculation based on an annual internal consumption of 45 billion cubic meters suggests that the Black Sea reserve could cover almost all of Turkey’s natural-gas needs for nearly seven years.

The finding may be small compared to other major gas-producing countries such as Russia, Qatar and Iran, but it would help Turkey to greatly reduce its chronic current-account deficit. It could also potentially produce macroeconomic benefits by lessening the pressure on the domestic currency.

Additionally, the finding will have strategic consequences, especially if more reserves are discovered. Turkey has traditionally been dependent on Russia and Iran for its natural gas imports. Five years ago, Russia accounted for over half of its gas imports. Since then Turkey has made smart use of changing spot-market conditions to increase the share of imports from other sources, such as Algeria and Nigeria. By the end of 2019, Russia’s share had been reduced to 33% and Iran’s to 17%.

But due to long-term take-or-pay commitments with these countries, the financial benefits of this rearrangement are more limited than those figures would suggest.

The new find will allow Turkey to greatly reduce its dependence on Russia and Iran. It will also strengthen Ankara’s hand significantly in future negotiations with Moscow and Tehran on the renewal of supply arrangements.

The Black Sea discovery will also impact Turkey’s posture in the Eastern Mediterranean. It will be seen as a vindication of the government’s hawkish approach to the confrontation with Greece and help consolidate the already sizeable domestic consensus on the current trajectory of Erdogan’s foreign policy. The so-called “Blue Homeland” doctrine, which underpins this vision, sets out an extensive claim for Turkey’s continental shelf and economic exclusive zone in the Eastern Mediterranean.

The consequence, from the perspective of the Eastern Mediterranean, is that Turkey will be less sensitive to foreign pressure. The emerging domestic consensus on hitherto little-discussed topics such as maritime borders, exclusive economic zones and the continental shelf will allow Erdogan to sustain his hard-power approach to the conflict.

This only adds urgency to the need for a de-escalation and a demilitarization of the Eastern Mediterranean dispute. In past decades, the U.S. played the lead role in mitigating Turkish-Greek conflicts. But with the Trump administration’s already narrow diplomatic bandwidth further constricted by the onset of the presidential elections in nine weeks, the burden falls mainly on the European Union to facilitate the resumption of direct negotiations between Ankara and Athens.

Germany showed the way forward by using its diplomatic leverage to convene Turkish and Greek delegations in Berlin last July. These talks were derailed with Athens’ announcement of its maritime borders deal with Egypt and Turkey’s subsequent resumption of its exploration in the contested waters.

The EU must now choose between two mutually exclusive strategies. It can either take sides with its member Greece against Turkey. Or it can adopt a more neutral stance and press for bilateral talks between Ankara and Athens. In either event, the Black Sea finding strengthens Turkey’s hand.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sinan Ulgen is the executive chairman of Istanbul-based think tank EDAM and a visiting scholar at Carnegie Europe in Brussels.

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