Turkey and Russia have re-launched discussions to set up a regional hub for natural gas trading, but current disagreements about trading platforms and who should be in charge could delay the potential launch.
In October last year, Recep Tayyip Erdogan and Russia’s Vladimir Putin agreed to set up a natural gas hub in Turkey, the Turkish president said.
“And in his own words, Putin announced to the world that ‘Europe can get its natural gas from Türkiye’,” Erdogan was quoted as saying back then.
A week earlier, Putin first had suggested that Russia redirect natural gas supplies intended for the damaged Nord Stream pipelines to the Black Sea and the creation of a European gas hub in Turkey.
The Russia-Turkey talks were suspended due to the February earthquake in Turkey and the presidential election in May, in which Erdogan secured another term in office.
This week, Turkey’s Minister of Energy and Natural Resources, Alparslan Bayraktar said, as carried by Bloomberg, that the talks had resumed.
However, there are disagreements over the trading platform to be used. Russia insists on a new platform while Turkey proposes to expand its already operational Energy Exchange Istanbul, Bayraktar has said.
Preparing for a potential gas hub, Turkey also plans to expand its natural gas infrastructure, the minister was quoted as saying by Reuters.
Earlier this week, sources with knowledge of the gas hub project told Reuters that Russia and Turkey are at odds over who should be in charge of the hub.
“There are managerial issues, they are fighting for who should manage the hub,” an anonymous source told Reuters, while another person, close to Russian state gas giant Gazprom, told the news agency that the two countries have encountered a “problem” over the management of the hub.
Gazprom has reported a plunge in its first-half net profit as pipeline gas deliveries to Europe plummeted compared to 2022, when Russia was still supplying pipeline gas to its European customers for most of the first half of last year.
ADVERTISEMENT
By Charles Kennedy for Oilprice.com
More Top Reads From Oilprice.com:
- An Apparently Unstoppable Oil Price Rally
- Georgia Suspends Gasoline And Diesel Tax Amid Inflation Pain
- Hedge Fund Partner Blasts Oil Demand Decline Narrative
Whatever differences exist between them about trading platforms and the management of the hub will be ironed out during the negotiations.
The new trading hub could prove of paramount importance for Europe’s economy and the eventual resumption of Russian gas supplies to Europe.
Europe’s economies were built since the early 1970a on cheap and plentiful Russian piped gas and will be forced to return to Russian gas as soon as a the Ukraine conflict is over.
The disruption of Russian piped gas to the EU because of sanctions and the sabotage of both Nord Stream 1 and Nord Stream 2 gas pipelines have had disastrous impact on the EU’s economies particularly Germany, the leading European economy.
The EUs Central Bank, the ECB, projects that the EU economy will grow only by 0.7% in 2023 (prev. 0.9%), 1.0% in 2024 (prev. 1.5%) and 1.5% in 2025 (prev. 1.6%).
These rates over the next three years will be barely above zero with expectations that the European recession will only go from bad to worse.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert