What is in a sanction for Turkey? Well, it depends on the country in question, and it surely means a lot when this country is Iran, one of Turkey's major oil and gas providers. Tuesday's reports that the Turkish government was embarking on a new quest to diversify its gas and oil supply channels normally say no more than stating the obvious. However; as the popular motto during and following the 2008 global financial crisis goes; we are not living in normal times.
Each market pundit knows well it is quite natural for the energy-poor Turkey to seek new -- and cheap if possible -- supply channels in the face of ballooning domestic demand. However; reports on Tuesday that the US has exempted Turkey from financial sanctions along with six other countries, which gives meaning to the country's recent energy supply campaign. US Secretary of State Hillary Clinton said on Tuesday that the US would exempt India, South Korea, Turkey and four other countries from financial sanctions because they have significantly cut purchases of Iranian oil. The US expects to impose sanctions on Iran starting June 28.
Market observers could tell this has been coming since the US intensified pressure on allies and “close friends” to cooperate in pushing the Islamic republic further to the corner. The US and the EU believe Iran is trying to build nuclear weapons. Tehran says the program is strictly for civilian purposes.
Turkey’s energy purchases from Iran are as high as $13 billion annually, a critical figure. Turkey cannot deny the fact that it heavily depends on the Iranian energy supply along with Russia and Azerbaijan. Turkey had raised questions over the “much too high” prices for the gas it purchased from Iran and hinted that it would look for alternative sources, the autonomous Kurdistan region of Iraq being a strong candidate. On Tuesday, Turkish Energy and Natural Resources Minister Taner yıldız revealed further steps in the country’s energy diversification campaign. He said the Turkish Petroleum Refineries Corporation (TÜPRAŞ) made an agreement with Libya to purchase 1 million tons of crude oil. Yıldız said TÜPRAŞ’s agreement with Libya came after the company decided to reduce the amount of Iranian crude oil it bought by 20 percent. Regarding sanctions imposed by the United States on Iran, Yıldız stressed that the US is a “strategic partner” for Turkey. “Our priority is to purchase energy from relatively cheaper sources.
TÜPRAŞ is currently holding talks also with Saudi Arabia for a long term supply of crude oil,” Yıldız said. He said Turkey remained one of the countries with the highest levels of trade with Iran and that it aimed to increase trade volumes. Yıldız said the talks were in line with Turkey’s main energy target to increase the number of countries from which Turkey imports crude oil. “Talks with Saudi Arabia on long-term crude oil purchases have started. This doesn’t concern only TÜPRAŞ but also concerns Saudi Arabia’s Aramco. Talks are still going on; they will discuss the quantities between them,” Yıldız told reporters. Asked whether the Saudi oil would be as cheap as Iranian oil, Yıldız said TÜPRAŞ would compare crude oil prices and make that decision. “We aim to increase the number of countries where we buy natural gas from five to seven or eight and the number of countries where we buy crude oil to 14, if possible, from 11. We have determined Libya as the 12th country. TÜPRAŞ has made connections to buy around 1 million tons [of crude oil],” Yıldız said. At the end of March, the minister said Turkey would diversify its oil supplies, and the first shipment of crude under a Libyan term contract deal had already arrived in February.
Turkey has also been working with Venezuela for months on a project, under which the South American country would provide oil products to Turkey in exchange for the construction of housing there. “Our work with Venezuela is now at the final stage. We are working towards a plan where we import petroleum coke in exchange for our contractors’ working there,” Yıldız said.
No big troubles in Turkish-Iranian trade following sanctions on latter
EU companies will be banned from insuring tankers carrying Iranian crude from July 1 onwards, and since European insurers cover most of the world’s tankers, Asian importers in China, India, Japan and South Korea have struggled to find alternative insurance. With just 20 days to go until European Union sanctions against Iran’s oil trade -- effectively cutting off tanker insurance -- major Asian buyers of Iranian crude were still scrambling on Tuesday for a solution to keep the oil flowing. Meanwhile, Chinese refiner Sinopec has turned down offers of bargain Iranian crude and will cut imports by up to one-fifth this year, a senior Chinese oil executive said, insisting ties with the United States were more important than cut-price oil as the West squeezes Tehran over its nuclear program.
Sharing their views on what the US sanction exemption would mean for Turkey with Today’s Zaman, Turkish observers said the decision meant neither the beginning of nightmare nor a rapprochement in trade between the two neighbors.
“Turkey and Iran already lag behind their desired level of bilateral trade. … The current total trade volume between Turkey and Iran remains at $15 billion, more than 80 percent of this being gas and oil purchases by Turkey. Iran is the only neighbor that Turkey has a deficit in bilateral trade. The two should first put efforts to establish a relatively more balanced trade,” Mehmet Şahin from The Center for Middle Eastern Studies (ORSAM) tells Today’s Zaman in a phone interview. Turkish investments in Iran are well below the desired level. We have the examples of Turkcell and TAV. Iranian authorities would discriminate against Turkish firms in local tenders. Turkey will not have problems in diversifying its oil and gas exports. Its trade with the northern Iraq alone is $8 billion and this region remains a key provider for energy-poor Turkey.
According to the Rector of Onsekiz Mart University, Sedat Laçiner, Turkey is trying its best to follow a balanced policy in relations with both the US and Iran. “Turkey responded to US demands of reducing oil trade with Iran in a timely fashion. Likewise it continued to promote diversifying exports to Iran. The Turkish private sector has also shown willingness to penetrate more into Iranian markets.
“Iran has no difficulty in finding imported goods but the problem is that prices are higher than they were prior to Western sanctions. In this aspect, selling products to Iran is more profitable for its trade partners,” he says. Laçiner adds Western sanctions put the worst pressure on Iranian customers on the street not the high rank bureaucracy. He joins Şahin in recalling the problems Turkish firms experienced in tenders in Iran. “Iran should first prove its sincerity in opening room for Turkish firms and buying more Turkish products. The same is valid for Russia,” he asserts.