Patronage and Power Players in Turkey’s Energy Sector
In parallel with the rise to power of President Recep Tayyip Erdogan and his Justice and Development Party (AKP), we are witnessing the rise of a system of patronage in Turkey. To secure and extend their influence throughout state and society, including in key sectors of the economy, such as the energy sector, the government of President Erdogan appears to be providing preferential treatment to party loyalists.
All Trust in a Son-in-Law
The most visible actors in Turkey’s energy sector are predominantly members of the senior political elite. More specifically, the most influential actors are the President himself, and his son-in-law, the Minister of Energy, Berat Albayrak.
That Albayrak is considered to be the right-hand of Erdogan infers that he is a trusted figure and key power player. For example, through BOTAS, Albayrak is believed to have secured government bids to businessmen with close ties to Erdogan.
Reportedly, Albayrak has personally benefited from energy sector deals, as well. For example, according to Haber7, Albayrak allegedly owned companies with shares in Ar Enerjy, owned by Ziya Ilgen, the President’s brother-in-law. Benefiting from perceived political support, this entity was awarded contracts with the State Oil Company of Azerbaijan (SOCAR), through BOTAS.
The influence Albayrak appears to have secured in the energy sector aligns with his political aspirations. According to Shadow Governance sources, Albayrak is likely the strongest candidate within the AKP to steadily emerge as its leader and as the “natural” inheritor of Erdogan’s political power. In this context, the control of the energy sector goes beyond economic resources and services in Turkey, but acquires political, governance and blood kinship angles.
Securing Energy-Institutional Control
Another key institution that exerts control over Turkey’s energy sector is BOTAS. This entity is currently under the chairmanship of Burhan Ozcan, who only a year ago was president of a minor natural gas company in Ankara, Baskent Dogal Gaz Dagitim AS. This company was entirely privatized in 2013, when Ankara Municipality sold it to Aksa Dogal Gaz Dagitim AS.
Prior to working at Baskent, Ozcan was general manager of Aksa. Shadow Governance sources report that another shareholder of Baskent Dogal Gaz was Aziz Torun, who was a classmate of the current President. The connections between Ozcan and the Turkish political elite have endowed him with a previously unheld degree of influence, although his main task is to ensure that the policies coming from Erdogan and Albayrak are followed. Related: Venezuela Could Default In The Next 48 Hours
Besides Ozcan’s network in the energy sector, the current president of BOTAS is one of the founders of 24 Gayrimenkul Portfoy. One of the directors of this company is Aziz Yeniay, who has worked extensively for the Turkish administration. Yeniay was an active player in urban development at the Istanbul Municipality during the 1990s, when Erdogan was the mayor. Moreover, 24 Gayrimenkul Portfoy is part of the Torunlar GYO, whose Chairman is Aziz Torun.
A Politically Exposed Private Sector
Considering how the energy sector operates in Turkey, private actors involved in it are becoming increasingly exposed to the political environment. In this sense, the network that occupies the decision-making positions in energy sector institutions is directly—or indirectly—tied to some of the country’s key business elite.
Within this framework, Erdogan and Albayrak have strengthened their alliance with certain businessmen believed to benefit from this relationship. In other words, patronage from the President and his son-in-law has resulted in the expansion of their business interests. This relationship will likely endure as long as these businessmen demonstrably maintain their political loyalty to the Turkish ruling elite.
In this context, BOTAS and Ozcan play a critical role. As mentioned, before being nominated as the head of BOTAS, Ozcan worked for the energy company Aksa, owned by the Kazanci group. It is believed that, since 2003, a year after the electoral victory of the AKP, Aksa has expanded its business interests.
Kazanci Group has become one of the major distributors of energy in Turkey—it’s a main client involved in BOTAS’s distribution networks, and last year secured a $996 million loan from Is Bank and Garanti Bank. Moreover, Aksa was one of the first Turkish energy companies to secure interest in Northern Cyprus, interestingly starting its operations in 2003. More importantly, Kazanci is believed to be a key player in Russian-Turkish energy relations. Ali Metin Kazanci (Kazanci’s Group President) signed an import contract with Russia’s Gazprom in 2009. During these negotiations, Kazanci family members reportedly met with Russian officials, as well as with Vladimir Putin. These contracts are believed to have also incorporated future Gazprom investments totaling $2 billion.
Besides Kazanci Group, other private companies in Turkey have expanded their interests in the energy sector during the AK’s reign. Again, through BOTAS, a police investigation in 2006 looked at allegations of tenders being rigged in energy public procurement contracts. The investigation also considered cases of associated money laundering and bribery. Alongside BOTAS, as many as 77 businessmen were investigated, and many were found guilty and given prison sentences ranging from 3 to 52 years. Among them were individuals who remain active players in the energy and construction sectors, including Nihat Ozdemir (Limak Holding), and Muzaffer Nasiroglu (Fernas Group and cousin of AKP member of parliament Nezir Nasiroglu). Related: The Qatar Blockade Could Cause A Regional Recession
These businessmen also enjoy close ties to the government and the AKP. Interestingly, in March 2016, the Turkish Supreme Court annulled the prison sentences associated with the BOTAS affair.
Nihat Ozdemir and Limak Holding have particularly benefited from this reversed judicial decision. Ostensibly because of their ties and loyalty to the AKP, it has been presented with opportunities to expand its interests outside Turkey. This includes the construction of the international airport in Pristina, Kosovo—at which Erdogan’s presence at the inauguration highlights the joint political importance of projects of this nature.
The abuse of Turkey’s energy sector by a variety of power players has triggered opaque and questionable transactions, many of which appear to have ultimately benefited the political elite, and businessmen who have proven their loyalty to Erdogan and the AKP. State institutions may heavily control Turkey’s energy sector, but these institutions have increasingly fallen under the (seemingly unilateral) influence of Erdogan—either directly or through loyal government officials.
The high levels of political influence within the energy sector makes any external interests complicated, especially when the government shields allegations of corruption and embezzlement with the rhetoric that certain transactions are in the “national interest”.
Current power players and energy companies associated with the Turkish government are therefore more likely to continue to benefit.
By Shadow Governance Intel for Oilprice.com
More Top Reads From Oilprice.com:
- Why Are Oil And Gas Prices Diverging?
- Two Undeniable Shifts In Today’s Energy Markets
- The Rise Of The Petroyuan