Turkey promises to establish a new gas trading center in Istanbul in 2025 together with Russia. This idea was initially proposed by Russia in 2022 amid the West's attempts to isolate the country. However, the situation has changed since then. What is the reason behind Ankara’s and, most importantly, Moscow’s interest in a new gas hub in Turkey?

“By 2025, we will create a robust infrastructure in partnership with Botas and Gazprom, which will manage a trading platform at the Istanbul Financial Center. We have sent them a memorandum of understanding,” said Turkey's Minister of Energy, Alparslan Bayraktar, in an interview with a local outlet.

He noted that the Istanbul Gas Index will be used at the trading center. “Now, when Russia sells its gas, it will say: ‘I am selling this gas based on the Istanbul Gas Index formula,’” added Bayraktar.

He also mentioned that Russian President Vladimir Putin confirmed to Turkish President Recep Tayyip Erdoğan that he would instruct Gazprom on this matter.

The idea of creating a gas hub in Turkey initially belonged to Russia and was announced by President Putin in 2022 amid Western sanctions and the sabotage of the Nord Stream pipelines. However, since then, the project has been discussed but not implemented.

Russia has already lost its economic interest in this gas hub, while Turkey sees its own benefit, believes Igor Yushkov, an expert from the National Energy Security Fund and the Financial University under the Government of Russia.

“There is no need to build any powerful infrastructure. They simply need to launch a trading platform within the existing Turkish exchanges. I think Turkey is just bargaining with Russia.

Turkey wants to get new long-term contracts with Gazprom and the Turkish company Botas, based on a formula: market price minus a percentage, i.e., at a discount. This would allow Botas to resell Russian gas to other clients at higher prices, ensuring guaranteed profits,” Yushkov says.

However, Russia has a reasonable question: if we allow Turkey to become intermediaries and earn money from reselling our gas, what will Turkey give us in return? Turkey offers the gas hub, but it has not been created yet. Yushkov believes the time for this has passed, and from an economic point of view, Russia no longer needs the hub.

“When Russia came up with the idea of the gas hub in 2022, we needed it to depoliticize the supply of Russian gas to Europe. Because in spring 2022, sanctions were imposed on Russia, and many European companies were afraid to buy Russian gas, fearing accusations of financing Russia. The gas hub would have helped anonymize the origin of the gas. Not only Russian gas would be traded there, but also Azerbaijani gas and LNG. European companies could then say they were buying gas not from Russia, but from the Turkish hub with multiple suppliers,” explains Yushkov.

However, that panic has long passed, sanctions have been clarified, and Europeans are buying Russian gas through the remaining routes – via Ukraine and the Turkish Stream. In September 2024, Gazprom's exports to the EU reached 101 million cubic meters per day, of which 58 million cubic meters were transported via Turkish Stream, with the remaining volumes going through Ukraine.

“Now, for Russia, this gas hub has become purely a matter of image. First, Russia initially proposed this Turkish gas hub, and it would not look good to back out of it now. Second, the hub is important for international interaction. It's like with BRICS: we were threatened with international isolation, but we gathered half the world, and everyone came to Kazan. Europe wanted to abandon our gas, and we opened a whole gas hub. But from an economic standpoint, there is no benefit. Everything that is profitable is already working. Gazprom is already selling its excess gas to Turkey, and it is being further sold to Bulgaria, Romania, etc.,” Yushkov says.

As for Ukraine, the transit of Russian gas through its territory may continue after the expiration of the transit contract with Gazprom in January. A new long-term contract is not necessary. Ukraine only needs to hold auctions for capacity reservations, as stipulated by European regulations, to which Kyiv has agreed.

“The only thing that may change from 2025 is that Gazprom will supply gas to Moldova not through Ukraine but through Turkey.

This is about small volumes of gas, and technically, Moldova could be supplied via Turkish Stream and then through the former Trans-Balkan pipeline. Previously, gas flowed through this pipeline from north to south, to Turkey. But after the launch of Turkish Stream, this pipeline was halted. Now it can be reversed to pump gas to Moldova,” the expert concludes.

Creating an Istanbul Gas Index will be difficult because the trading volumes will be insignificant. As a result, the Turkish gas hub will mainly trade gas surpluses from Russia, Azerbaijan, or the LNG market, according to the expert.

However, Turkey has long-term goals for the hub, in addition to seeking discounts on Russian gas. “The creation of the gas trading center is linked to increasing Turkey’s role as a 'transit' country for natural gas. In particular, Turkey ensures 60% of the transit of Russian gas to Europe.” By the end of the decade, Turkey may emerge as a natural gas producer for the European market. This relates to the development of the Sakarya field in the Turkish part of the Black Sea,” says Sergey Tereshkin, CEO of Open Oil Market.

The reserves of Sakarya are estimated to be at least 540 billion cubic meters of gas. Current gas production at Sakarya does not exceed 5 million cubic meters per day, but by the end of the 2020s, production is expected to reach 60 million cubic meters per day. For comparison, Turkey’s LNG imports in 2023 were 40 million cubic meters per day.

“With the development of Sakarya, Turkey could not only replace LNG imports but also become a significant gas supplier to Southern Europe. Much will depend on the development path for the field’s infrastructure: whether it will involve building underwater export gas pipelines or expanding LNG liquefaction capacities. In the latter case, Turkish gas will be available not only for the European but also the global market,” Tereshkin concludes.



Translated using ChatGPT.


Source: https://vz.ru/economy/2024/11/2/1295757.html