Turkey-Russia Fallout a Gas Opportunity

Turkey-Russia Fallout a Gas OpportunityTurkey-Russia Fallout a Gas Opportunity

Political and economic relations between Moscow and Ankara may hit a new low if Russia halts natural gas supply to Turkey, with the rift providing Iran with the opportunity to claim a bigger stake in the Turkish gas market.

Experts say the move could have serious consequences for a country that supplies nearly one-third of its gas demand from Russia and generates 40% of its electric output from gas-fired power plants.

Shuaib Bahman, an analyst at the Institute of Iran and Eurasia Studies, says Russia has already used natural gas to put pressure on Kiev over the Crimea dispute and they could do the same with Turkey.

"Russia does not look like using natural gas as leverage against Turkey just yet. But if tensions escalate, the possibility will be there," he said. Tensions started to run high when Turkish air force downed a Russian warplane near the Syrian border last month. Ankara says the Su-24 fighter jet entered the country's airspace and the plane was shot only after it was warned to leave the country's aerial territory.

Russia says its warplane–on a mission to bomb the Islamic State targets in Syria—never entered Turkey's airspace.

The Kremlin has already banned the import of certain food items from Turkey, suspended a visa-free regime with the country and denied the entry of some 1.250 Turkish trucks within its borders last month. However, Shuaib believes that pulling the plug on gas supplies will not be on the cards. He stressed that Russians have shown during the Cold War era that they know how to handle global political tensions and can handle the fallout with Turkey without going too far.

Bahman added that Russia is unlikely to risk losing a major source of revenue by cutting gas export to Turkey.

"Russia is feeling the pinch of western sanctions … It would deprive itself of massive revenues by halting gas supply to Turkey," he said.

Russian President Vladimir Putin branded the incident on Nov. 24 as a crime and has pledged that Moscow will slap more sanctions against Turkey. The Kremlin said work on Turkish Stream, a pipeline intended to pump Russian gas into southeastern Europe via Turkey while bypassing Ukraine, had been suspended.

  Iran's Opportunity

Turkey has reportedly turned to new gas suppliers to diversify imports as it is gearing for the worst in standoff with Russia and Iran is a likely candidate to help Ankara meet its demand in the cold season.

The Persian Gulf country pumps around 30 million cubic meters of natural gas a day to Turkey, second to Russia with 16-17 billion cubic meters of annual supplies.

Tehran says it can ramp up gas exports to Ankara upon the launch of several phases of the country's South Pars Gas Field, with output expected to rise by 100 mcm/d from the southern field in the near future. But Bahman says a lack of export infrastructure will prevent Iran and Turkey from improving the current gas deal.

"The gas pipeline to Turkey is working with full capacity … To raise exports, a second pipeline should be laid, which will take at least 10 years to complete," he said.

Bahman also said Iran will have to ensure it will not face a shortage of natural gas in winter, which is expected to stand at 500-550 mcm/d.

Raising gas supplies to Turkey over the next few months is all but a far-off target, but the country can become a natural gas hub in the region if it meets the self-assigned target of boosting gas output to 1 bcm/d in two years and 1.2 billion cubic meters by 2020.