Caspian Energy Journal Caspian European Club
Friday, 10 July 2015 12:00

“Azerbaijan is currently the only new and immediate reliable source of energy” - Alper Coskun, Ambassador Extraordinary and Plenipotentiary of the Republic of Turkey the Republic of Azerbaijan Featured

Turkey has high ambitions


Caspian Energy (CE): Mr. Ambassador, what role does Turkey assign to the energy industry in its plans to enter world’s top ten economies by 2023? How do you see the cooperation with Azerbaijan by that time?

Alper Coskun, Ambassador Extraordinary and Plenipotentiary of the Republic of Turkey to the Republic of Azerbaijan: We have to look at this from various perspectives. First of all, as far as its economic performance and related forecasts until 2023 are concerned, one needs to understand that Turkey has high ambitions. We have had steady economic growth for more than ten years, averaging about 4% per year. This is proof of the significant and linear economic development that is going on in Turkey. We have a young and growing population, which brings together with it continuing needs, as well as economic opportunities. We are confident that Turkey will be able to maintain its growth trend which will inevitably increase our energy demand.

Our ambition to become one of the world’s top ten economies entails a strategic component; namely ensuring that Turkey has access to the necessary energy resources. This is particularly important for Turkey given the fact that we are heavily reliant on imports for energy. We obtain roughly 75% of our total energy needs from abroad. When it comes to oil, we import about 90% of our needs, while in natural gas the ratio climbs up to above 99%. We complement our needs with some local production in oil, coal and renewable energy. Therefore, it is extremely important for Turkey to ensure that it has the ability to meet its growing energy needs, and to do this in a sustainable, in other words secure manner. To this end, we focus on diversification of both the source countries from which we import our energy resources, and the routes through which these supplies reach Turkey. Azerbaijan is our leading and most reliable partner in this context. There is no doubt about that. We have long-standing energy cooperation with Azerbaijan. Of course, one should always remember that Turkish-Azerbaijani relations are distinct and very special. They are not simply based on a traditional form of friendship or partnership between any two given countries. It is much more than that. We do not view Azerbaijan simply as a friendly country, or a source of energy. Nor do we see it solely as a market to export our goods to. Azerbaijan is a passion for us. We are two sisterly countries, in the true meaning of the word, that act as partners. We come from the same roots, and therefore share a common past and are walking hand in hand towards a common future. We are bound not only by history and culture, but also by a shared destiny. This feeling is mutual between Turkey and Azerbaijan, and is engrained in the minds and hearts of our common nation. In other words, the basis of our bilateral relations is unique and as such, is not defined by economic considerations or traditional cost-benefit analyses. Our relations are of truly strategic nature.


CE: It is a common knowledge that Azerbaijan investments into Turkey have been growing in recent years. Which factors, in your opinion, are helpful and which ones bring additional risks to attracting Turkish investments in Azerbaijan?

Alper Coskun: As far as reciprocal Turkish and Azerbaijani investments are concerned, one should again be reminded of our special relations. Since the early days of Azerbaijan’s second independence in the beginning of the 90’s, Turkey has been offering any support and assistance within its means and has been trying to cooperate with Azerbaijan in every walk of life. We have also been encouraging our investors, particularly in the private sector, to be active in Azerbaijan. Currently, when you look at the spreadsheet of Turkish investments abroad, you will see that Azerbaijan is a leading destination. Within Azerbaijan, Turkey is the largest investor in the non-energy sector, and ranks among the first in energy sector investments. You may be aware that Turkish Petroleum is now the second investor in Shah Deniz-2. So, all this is a reflection both of our full confidence in the future of Azerbaijan, as well as our firm determination to continue to work together. As you pointed out, Azerbaijan is also investing increasingly in Turkey. This is a very positive development that we wholeheartedly welcome. SOCAR is forecasted to become the biggest company in terms of foreign direct investments in Turkey by 2018. Obviously, this is a reflection that likewise, Azerbaijan sees Turkey as a reliable country to invest in; as a solid partner and promising market to be active in. In short, one can speak of a convergence in economic interests between Azerbaijan and Turkey in all fields, and particularly in the energy sector. But as I said, neither party is driven solely by economic interests. The strategic choice that Turkey and Azerbaijan are making in each other’s favor has a unique basis. But the beauty of it all is that our strategic choices are also economically viable.


We should continuously strive to further enhance the investment climate both in Turkey and Azerbaijan.


CE: Are the Turkish businessmen satisfied with the investment climate here in Azerbaijan?

Alper Coskun: I think that as a matter of principle, businessmen should never be satisfied with prevailing circumstances and should always be a driving force for more. They should continuously encourage state authorities to provide more amenable circumstances for their investments. The Azerbaijani authorities I speak to consistently underline their strong desire to see more investments from Turkey. I agree with them and share their expectation. As such, I am doing my best to encourage Turkish business circles, and to find areas where they could see a niche for themselves and provide added value to Azerbaijan. The Turkish Government as a whole is very active in this regard. When you look at global investment patterns of Turkish entrepreneurs, you will see that they do not shy away from difficulties and are on the contrary, active pioneers even in very challenging circumstances. While we have a significant degree of investments in Azerbaijan, I firmly believe that we can and should do more. There is untapped potential and the authorities of both countries should sit down and determine what more could be done to further enhance the investment climate both in Turkey and Azerbaijan. We need to make a healthy analysis as to where we can improve things for our businessmen. This will obviously entail work on areas such as customs procedures; tax regulations; specific incentives for investors; and the legal/judicial system. I am not only talking about Azerbaijan in this regard, but certainly have Turkey in mind as well. At the end of the day, our businessmen need to have confidence in the investment circumstances in both our respective countries. These equations and issues are never one sided and I am sure that there are expectations Azerbaijan has in terms of its investments in Turkey. This, for example, is a topic that we regularly discuss with SOCAR. They are making big investments and have certain needs in taxes and customs areas, just as we do in Azerbaijan. So, we are trying to accommodate such needs and have, for example, granted the Star Refinery a strategic investment title. It is the first time we have granted such a license, which entails certain tax benefits and incentives. So while the current investment climate is positive, I believe we should seek to enhance it even further. I therefore continue to urge the Azerbaijani and Turkish authorities to work closely together in order to establish even better conditions for our business circles.


Efforts undertaken by Kazakhstan and Turkmenistan on the other side of the Caspian are important.


CE: What are Turkey’s expectations from the currently developed Baku-Tbilisi-Kars line? How will this project be interrelated with Marmara project’s entry to the EU markets? 

Alper Coskun: When considering the biggest projects that Azerbaijan and Turkey have realized together, we immediately think of energy projects such as the Baku-Tbilisi-Erzurum gas pipeline and the Baku-Tbilisi-Ceyhan oil pipeline. And now we are working on TANAP. These are obviously extremely important projects. However, I sincerely believe that the Baku-Tbilisi-Kars (BTK) railway project may overshadow them. It has the potential of being equally, if not even more strategic and possibly longer lasting in effect. The BTK, which we refer to as the modern version of the historical Silk Road, involves a part of the world towards which the epicenter of the global economy is shifting. When you look at the many statistics, be it volume of trade; level of investments; energy potential; even the intensity of civil aviation traffic, you will see that the global epicenter is shifting towards Asia. Azerbaijan and Turkey sit more or less in the very heart of this trend. When we finalize the Baku-Tbilisi-Kars railway, which will hopefully take place by the end of this year, and become commercially active in 2016, we will have established a very important line of communication both in terms of commerce, as well as in terms of human connectivity. And it will have implications beyond Turkey and Azerbaijan, as it also involves the Marmaray connection in Istanbul, linking Europe and Asia, and the trans-Caspian route reaching out to Kazakhstan, Turkmenistan and beyond. Together with the Chunnel between France and the UK, we will have effectively connected London to Beijing. Naturally, this is a giant project and every component needs to be synchronized and developed efficiently. The western leg, including the connection in Istanbul is already operational. When Baku-Tbilisi-Kars is finalized, the trans-Caspian element will become critical. Therefore, efforts to enhance the infrastructure and bolster capacity in Azerbaijan, as well as similar work undertaken by Kazakhstan and Turkmenistan on the other side of the Caspian are important. When all this work is completed, the logistical centers that will be established along this line will promote new economic dynamism. This will be extremely beneficial not only for the countries through which Baku-Tbilisi-Kars railway will pass on an east-west axis, but also for those situated to the north and south of the line. In any case, one has to consider the possibility of north-south connections that can be made to the BTK which could lead to widening circles of cooperation and economic activity in this part of the world. So, I sincerely think it is a very strategic and commercially significant project. As far as China is concerned, this route will provide a useful outlet for its growing economy. When compared to the northern route, the Baku-Tbilisi-Kars route, also referred to as the middle corridor will bring advantages both in terms of duration and costs.


The European Union should have opened the energy chapter with Turkey in the context of its full membership negotiations.


CE: Does the present situation in Greece have an impact on the international projects that Azerbaijan and Turkey implement?

Alper Coskun: As far as Turkey is concerned, the situation in Greece has no repercussion on the projects which we are undertaking with Azerbaijan, namely TANAP. Of course, the idea is for Shah Deniz gas to travel through the South Caucasus Pipeline to Turkey and then through Turkey via TANAP which will be linked to TAP which would then carry the gas to Europe. The initial throughput capacity of TANAP will be 16 bcm, of which Turkey will be buying 6 bcm. The remaining 10 bcm. will go to Europe. For this last phase, TAP or some other means of infrastructure needs to be in place to carry the gas beyond Turkey. In this context, it is obviously necessary to realize TAP. All I can say is that various European countries and companies which have their capital base in some EU countries have signed an agreement with the consortium to buy gas from Shah Deniz 2 for 25 years. This decision was taken in 2014. So, to make this commitment a reality, it is necessary to implement this project. Certain investment and commercial decisions have been taken and these are very big and long-term commitments. Sporadic difficulties here and there do not necessary mean that the overall project will fail. The energy needs of Europe are growing. Meanwhile, Europe has made the strategic choice to diversify its sources of energy. Its natural gas needs are obvious and Azerbaijan is the only new immediate and reliable source of energy, particularly natural gas. That gas will arrive in Turkey through TANAP. I cannot imagine that European countries would feel comfortable not benefiting from such an opportunity. So, I am sure that despite difficulties here and there, market realities as well as demand and supply forces will ensure that Azerbaijani gas will somehow find its way to Europe and be put at the disposal of European consumers.


CE: Will Turkey do its best in order to have the Southern Gas Corridor implemented on time despite the difficult situation in Greece?

Alper Coskun: As far as we are concerned, the situation in Greece has no bearing on the realization of TANAP.


CE: Does it mean that you do not bear responsibility for the whole project? Turkey is a considerably big and influential country in order to stay aside from all processes that run in the world…

Alper Coskun: I can only say this; if and when there is a need for Turkey to provide its support in terms of realization of the Southern Gas Corridor and if we find it in our interest to do so, we will take the necessary extra steps. But currently we are not an investor in TAP. So I am not in a position to say anything more as far as TAP is concerned. But if you look at this issue from the other side, we are actually faithfully doing our part in terms of realizing the Southern Gas Corridor. Turkey is the second biggest investor in TANAP after SOCAR. We are not only facilitating and actively contributing to the realization of TANAP within Turkey, but we are also investing upstream at the source, in Shah Deniz. Meanwhile, we are also an investor midstream, as a partner of the Southern Caucasus Pipeline which will bring the gas to Turkey. By contributing to every phase of this project including TANAP, Turkey is doing everything within its power to make it a reality. The construction in Turkey is going as planned, without any delay. So I am not sure what else we can do in terms of making sure that the Southern Gas Corridor is made a reality. Of course Azerbaijan may have more at stake in TAP, given its interest in making sure the additional the volume of gas they want to sell has an outlet from Turkey. We obviously fully understand this need and support them. But currently Turkey is not in a position to influence that last phase of the project since we are not a party to the debate. If we had stakes or if we had made any investments in TAP, then I would be at liberty to say something more concrete.


Turkey is currently the oil hub for the European market and the country is also going to become a gas hub. Which countries are potential gas partners of Turkey?

Alper Coskun:  Upstream countries and those on the routes of the pipelines will be our immediate natural partners. When you look at the countries from which Turkey imports its energy, particularly gas, more than 50% comes from the Russian Federation. We also import gas from Iran, Azerbaijan, Algeria and Nigeria, some volumes in the form of LNG. So our supply spectrum is rather wide, but there is potential to widen it. Obviously, Iraq bears such a potential, and circumstances availing, Iran’s weight in the equation could increase. Turkmenistan is also on the top of the list of potential partners for us. When you look at the TANAP project, it has been designed to meet a capacity that goes beyond the current proven resources of Shah Deniz 2. The idea is to enable the highest possible volumes of gas to flow through TANAP. Its capacity goes beyond 30 bcm, though currently agreements have been made for only 16 bcm. The required volumes can be provided from new resources to be found in Azerbaijan, as well as from places like Turkmenistan, Iraq and Iran. Moreover, there have been new findings in the Eastern Mediterranean and if the political hurdles can be surmounted, additional supply sources could come into play.

Turkey has the infrastructure already in place. It is a stable country, a reliable partner and is the most efficient and natural route through which all these sources and pipelines could go. We are trying to enhance that position of Turkey for our own benefit in the sense that this will ensure diversification of sources and routes from which we get our energy. But we have also been acting in a very responsible manner by hosting such routes and intend to continue to be a reliable partner for Europe and beyond. I should add that it is unfortunate that the European Union (EU) has not been able to open talks on the energy chapter with Turkey in the context of our full membership negotiations. Given the history and future potential of our cooperation with the EU in this regard, it has been a mistake on the part of the EU.


CE: Are there plans to have Iran and Iraq joined the Southern Gas Corridor?

Alper Coskun: Of course; the gas is there, as will be the corridor. Naturally, they may be in a position to join the project. When it comes to Iran, the sanctions regime imposes certain limitations but we are hopeful of a positive outcome from the negotiations. As for Iraq, there are some internal difficulties and dynamics around energy issues but at the end of the day it is in the collective interest of Iraq to export their natural resources. Likewise, it is in consumers’ interest to have access to additional resources. So, if the circumstances avail, as far as Turkey is concerned, we would encourage this to be made a possibility.




Southern Gas Corridor and Turkish Stream can complement one another…


CE: To what extent are the interests of the Turkish Stream and Southern Gas Corridor in Turkey complementary to each other?

Alper Coskun: Well, we have to understand the different nature of these two projects. TANAP is a project, as I have just explained, that Turkey has made political and financial commitments to. Together with Azerbaijan and the other relevant investors, Turkey has a strong sense of ownership in this project. This is why we are fully determined to make it a reality. It is our first and foremost priority.

Turkish Stream, coined as such by President Putin is another case. It was announced for the first time by President Putin during his visit to Turkey after the idea of the Southern Stream project through Bulgaria collapsed. It was devised by the Russian side and presented to us. It envisages four pipelines, with a total capacity of 63 bcm. It is supposed come through the Black Sea, hit land in Turkey and then go to Greece. It is a Russian conception. The first pipeline is envisaged to replace the current line that feeds Turkey from Russia through Ukraine. This current gas pipeline brings 15 bcm of natural gas to Turkey. The new one, that Russia has proposed, will bring 16.75 bcm. So, there will only be a small increase of supply to Turkey, to be exact of 1.75 bcm of gas, if this project is realized.

Russia has announced that their agreement with Ukraine expires in 2019 and that they are planning to shift to a new route. The other three pipelines that are to be a part of Turkish Stream have nothing to do with Turkey, except for the fact that they will pass through our territory. Russia has asked us to facilitate their passage through Turkey and we have told them that we may examine the project, based on the necessary feasibility studies. But we also said that we would not bear any responsibility in terms of investment. If Russia wants to make this project a reality, it will need to finance it and bring the pipelines to Turkey. Once it hits land in Turkey, we may work with them and establish a joint company to enable the transit of gas through the other three pipelines. But, of course, for that to be a reality there has to be a demand on the other side. There should be companies willing to buy gas that Russia wants to bring with those three gas pipelines, which again have nothing to do with Turkey. So, as a result, I can say that these two projects are very different.

Let me also add that when Turkish Stream was first mentioned by the Russian Federation, there was a lot of speculation as to whether it may have negative implications for TANAP. That is absolutely not the case, because, as I explained, in terms volume there will be a small increase. Second, TANAP is our project. We have put political will and financial capital in that project. We have made the strategic choice to buy increasing amounts of gas from Azerbaijan. And we will make it a reality. Therefore, in terms of complementarity, yes, as far as the interests of Europe are concerned and as far as the interests of Turkey are concerned, they may complement one another. We are already buying almost the same volume of gas from Russia without Turkish Stream. If this gas comes from another pipeline with a small increase, that is fine. That will and cannot have an impact on TANAP. And as far as Europe is concerned, in addition to Russian gas, they will have access to Azerbaijani gas, which I believe will be good for the EU in terms of diversification.


CE: Mr. Ambassador, how do you assess the influence of European Commission on all those processes that run across the Southern Gas Corridor?

Alper Coskun: I have no specific assessment on the role and influence of the Commission. Maybe I can answer this question once Turkey is a full member of the EU.

But I may add just one point that could be useful. First of all we are aspiring to become a full member of the European Union which is naturally an important partner for us. No doubt, the European Commission is also an important body and interlocutor. In its quest to become a full member of the European Union Turkey has incorporated many of the acquis within the European Union and has adapted its own national legislation in accordance with this acquis. It is an important point of reference for us and we are cooperating with the European Union and European Commission in many areas including in the energy sector. A good example to that is the recent meeting that we had in Turkmenistan together with Azerbaijan and the European Commission, which was also attended by Vice President of the European Commission Maros Sefcovic. So we have an ongoing and continuing cooperation with the European Union in this regard.


CE: Are you concerned about the present situation in the European Union? Iceland has withdrawn its application for entry into the EU. Great Britain will hold a referendum in 2017, plus the situation in Greece. Has not Turkey been disappointed in the EU?

Alper Coskun: As far as our relationship with the European Union and our full membership goal is concerned, the true point of reference is the program that our Government presents to the public. Turkish Governments, including in the run up to the recent elections, have consistently and explicitly declared that one of the leading priorities of Turkish foreign policy is to become a full member of the European Union. We maintain this position. Obviously while doing so, we also observe and assess what is happening within the European Union and accordingly ask questions and draw conclusions.

As to the pros and cons of a full membership in the European Union, the fact of the matter is that we are quite confident that it is not only in Turkey’s interests for us to join the European Union, but it is actually maybe even increasingly in the interest of the European Union to have a country like Turkey as a full member. So at the end of the day of course when we finalize the negotiation process, when all the chapters are closed and we will come to the point where Turkey has completed all of the formalities in terms of becoming the full member of EU, it will again be up to Turkey to decide whether it wants to take that final step or not.

On the other hand in certain European Union countries there have been decisions taking which actually contradict their obligations towards Turkey in the sense that they have said that when it comes to that stage they may hold a national referendum on Turkey’s membership.


CE: How does Turkey estimate the latest achievements of the negotiation process on the Caspian Sea status?

Alper Coskun: Yes, we are following that process very closely. It is obviously our greatest hope that the littoral states to the Caspian can find a common and sustainable solution ensuring that the Caspian remains a unifying sea and that it is an area wherein there is no tension. So, we encourage all of the parties to continue the negotiations process. We are not a party to that process, but are following it closely and hope that it can mature to the point where the resources of the Caspian Sea can be put to the benefit of the all of the littoral states and beyond.


Iran has a great potential


CE: Which economic dividends will Turkey get after the sanctions against the Iranian economy have been lifted?

Alper Coskun: Iran is our neighbor, it is an important country and it has a large economy with great potential. The sanctions regime has been affecting Iran for quite some time now and this is not something to be advocated. You will remember that Turkey has been quite active in the past in trying to work with Iran and the international community to ensure that outstanding issues are resolved and the sanctions regime can be lifted. In fact, we came very close to a solution in our efforts with Brazil. We hear of positive developments nowadays and hopefully the nuclear file again can be brought to a mutually acceptable solution in  a manner conducive to enhanced security and stability in our part of the world, and that the sanctions regime can be brought to an end and. If that is possible, the enormous economic potential of Iran can be untapped. This would benefit not only Iran, but also its neighbors and other actors in terms of economic and commercial activities with Iran. In todays globalized and interconnected world, the security, stability and welfare of other nations, particularly your neighbors are critical for your own sustainable security, stability and welfare. We believe that Turkey possesses the potential to bring added value to its economic partners, in this case Iran, and that Iran can bring add value to Turkey. So we would very much welcome such a development and would see it beyond just an economic benefit but also as a welcome development in terms of political stability and sustainable peace in our part of the world.


The fact that we are poor terms of our oil and gas reserves is a disadvantage, but Turkey has been able to turn that into advantage. So I am proud of that


CE: How important are for Turkey its own oil and gas sources in the Black and Mediterranean Seas? How would you estimate the possibilities of cooperation with international oil and gas companies?

Alper Coskun: Well, as I said Turkey is almost 90% import reliant in terms of oil and almost 100% reliant in terms of natural gas. These are very tough statistics particularly for a country with a relatively large economy that is poised to grow even further, and is also therefore thirsty for energy. So our energy bill is very high and it exceeds 60 billion dollars annually. That is clearly a very large expense.

There seems to be oil and gas in the immediate vicinity around Turkey, but we haven’t been able to find much within our own territory. But of course technologies are developing and we are continuing exploration in the Black Sea and in the Mediterranean Sea, as well as on land. Hopefully one day we will find gas and oil. We will continue cooperating with international organizations, international corporations and leading oil companies in this regard. But I think the important thing to note here is that even against such a background, we are a country which is currently the 16th biggest economy in the world; a country that aspires to move in the ranks of the top ten global economies; a country currently holding the G20 Presidency. We have been able to achieve all of this despite the fact that we have no energy resources of our own and Turkey still possesses untapped potential. I think Turkey deserves strong recognition for this success. Credit goes to Turkish investors and businessmen and to our innovative thinkers who have been the engine behind our growth and economic success. If we were to be able to find new energy resources today and make even better use of renewable energy, with such an economic base I believe Turkey would grow exponentially. So the fact that we are poor in oil and gas reserves is a disadvantage, but Turkey has been able to turn this into an advantage by establishing a competitive and versatile economy. So I am proud of that.


Thank you for the interview





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