SGC is also the main diversification tool for our security of energy supply
Caspian Energy (CE): Your Excellency, you have been the Director for North Africa, Middle East, Arabian Peninsula, Iran and Iraq at the European External Relations Service (EEAS) since 2011. Over 50% of global hydrocarbon reserves are concentrated in this region. How important is this region for the EU? What role does Turkey play in the region? What will be the role of Turkey in the transit of these energy resources?
Christian Berger, Head of EU Delegation to Turkey and Turkmenistan: According to BP’s “Statistical Review of World Energy” and International Energy Agency’s “Key World Energy Statistics” reports, almost two-third of global hydrocarbon reserves are located in the vicinity of the EU and Turkey. The EU, however, has set very assertive energy targets with a view to decarbonizing its economy through short and long term policies such as the 2020 and 2030 strategies as well as 2050 Road Map. In other words, the EU is fully committed to shift its economy towards a low carbon economy by 2050. It means that more efficient, cleaner and renewable sources will be prioritized and promoted during this transition period. Gas, due its advantages as the least polluting and safest hydrocarbon, could nevertheless play a key role in this transition period. In the meantime, according to the EU’s recent projections, the share of natural gas in total primary consumption is expected to remain stagnant or slightly increase. Therefore, the EU will need more gas mostly to replace its domestic production, which is forecasted to gradually decline in the decades to come. In short, the EU will be dependent on more imported gas and significant amount of this gas is planned to come through the Southern Gas Corridor (SGC). With its dynamic economy, important regional role and its contribution to the EU's foreign policy and energy security, Turkey is also a key partner for the enhancement of the EU's security of energy supply through the development of the SGC. The EU and Turkey need to continue to cooperate in the development of the SGC, therefore, with a view to establishing a stable international legal framework that would govern gas supply outside of the EU territory. In particular, the uptake of larger volumes of gas, as they become available, would need to be regulated in a stable and transparent manner. Turkey and the EU would also need to prepare for market integration, by addressing remaining legal and technical obstacles, through joint strategic planning and closer cooperation of relevant administrations and actors. The approximation of the Turkish legal framework is key to this and the EU is ready to offer support.
CE: Turkey is a natural geographical bridge between the Middle East and the Eastern Mediterranean on the one hand and the Caspian region on the other. Does the EU support a further increase in the Turkey's transit potential and will the EU diversify directions? Which advantages do you see for the EU and Turkey?
Christian Berger: The EU supports Turkey and has been supporting it for years in terms of its transit potential and its important role in contributing to the EU’s security of supply. In that respect, the EU encourages Turkey to improve the investment climate in its energy sector and thus make it easier to attract foreign investments. Once the infrastructure is in place, there will be ample opportunities for the further strengthening of security of supply for both sides and for further market integration, providing lucrative business opportunities. The EU has an advanced model for the development of the internal energy market, which could greatly benefit Turkey in its objective to establish a competitive energy market. Turkey is facing important challenges regarding market reform and the establishment of a transparent and non-discriminatory legal framework for gas transit. Therefore, an integrated gas market would create a favourable climate for trading, technology transfer and security of supply for both sides, which would first and foremost reinforce Turkey's position as a gas transit or energy hub.
On the other hand, EU-Turkmenistan consultations on energy cooperation within the bilateral Memorandum of Understanding on Energy are ongoing. A ministerial EU-Azerbaijan-Turkey-Turkmenistan meeting in 2015 adopted a Declaration on the cooperation in the energy field, establishing a Working Group, the membership of which was later expanded to Georgia. The EU continues working with Turkmenistan and its objective to diversify the gas export routes, notably to the EU, which would allow expanding the Southern Gas Corridor, with the first gas to arrive in the EU as of 2020.
CE: Do you think it possible to create a Southern energy hub in Turkey?
Christian Berger: In order to be an energy hub, two prerequisites are essential: the functioning of an energy market, and interoperated and interconnected energy infrastructures. Once these two prerequisites are met, any country could become a hub, including Turkey.
CE: Do you see a new format of cooperation between the EU and Turkey? Are there any fundamental economic preconditions for Turkey's integration into the European markets?
Christian Berger: The EU and Turkey have similar energy policy goals: achieving a sustainable energy future, improving security of energy supplies and ensuring competitive energy markets. However, they have very limited synergies in formulating their energy strategies. Therefore, there is an urgent need for formulating a longer term energy policy in line with the country's economic, foreign policy and security goals. In this sense, energy cooperation within the context of a shared vision over a common energy policy and strategy would be mutually beneficial to both. The Commission with this goal wishes to establish a strategic energy partnership with Turkey, as mentioned both in the Energy Union and Security of Supply Strategies, including through the High-Level Energy Dialogue. The Dialogue was launched in 2015 and held its second meeting in Istanbul in January 2016. The third meeting is expected to take place in the last quarter of 2017. This new initiative has proven to be a successful formula for reinvigorating EU-Turkey energy relations in the absence of negotiations on the energy chapter in the context of accession. Approximation of energy policies and legislation along with integration of energy markets will, as mentioned above, bring ample mutual benefits for both sides in terms of economy, trade and security of supply. In this respect, we don't see any fundamental economic preconditions.
CE: Do you agree with President of the European Commission Jean-Claude Juncker, who excluded Turkey's accession to the European Union “in the foreseeable future”?
Christian Berger: As you well know, the EU’s accession criteria are clear and transparent and should be fulfilled and implemented by any candidate country who wishes to be a full member of the EU. Once the European Commission finds that these criteria are satisfied by candidate countries, it proposes full membership. The ultimate decision is for the EU Council to take.
CE: If settled, how will the Caspian status issue impact the investment attractiveness of the Caspian region countries?
Berger Christian: When it comes to the EU interests, an agreement of the Caspian states on the Caspian Sea status should facilitate the discussions on establishing further commercial relationship between the EU and Turkmenistan. I hope that the Caspian states will come to an agreement on the Caspian Sea status at the summit scheduled for the first half of 2018 in Kazakhstan.
CE: For now many transport projects have been implemented in the region, including Baku-Tbilisi-Kars, Azerbaijan-Iran, Iran-Turkmenistan-Kazakhstan. Will the EU support their further extension to the EU?
Christian Berger: The valid EU Strategy for a new Partnership with Central Asia, adopted in 2007, and the most recent Council Conclusions on the EU strategy for Central Asia adopted on 19 June 2017 clearly state that when it comes to infrastructure and transport sectors, cooperation between the EU and Central Asia should prioritise the integration of the Central Asian countries with each other and into international markets and transport corridors.
TANAP’s construction level stands at 95%
CE: As the Head of EU Delegation to Turkey and Turkmenistan how do you assess the implementation of such large-scale project as the Southern Gas Corridor? Does the EU welcome Turkmenistan’s joining this corridor? How will the delay in the construction of the TAP’s section in Italy affect the whole project?
Christian Berger: As already indicated above, the SGC is a strategic initiative to bring Caspian, Central Asian, East-Mediterranean, Middle East and the Black Sea gas resources to European markets. According to the European Energy Security Strategy, the SGC is also the main diversification tool for our security of energy supply. Being the flagship project of the SGC, TANAP remains a political priority for Turkey, as expressed by public officials, and its completion would indeed introduce a completely new delivery route and gas source to the European Union. The construction of the first phase is expected to be completed before the end of 2017, with the current completion level standing at 95%. According to the current progress and the foreseen schedule, the commissioning of the first phase which will deliver gas to the Turkish market, is set to be launched in the first quarter of 2018 (late February or March) and first gas deliveries to Turkey are expected to arrive in June 2018. However, the interconnector with TAP is currently scheduled for a year later in June 2019, considering the delay in the TAP project. Naturally this delay would have an impact, particularly on South Eastern European gas markets, which will receive a new gas source with delays. However, due to positive progresses in transportation via LNG terminals, as well as improved interconnections along with significant storage capacities, I believe this impact will remain limited in the short run.
The June 2017 Council Conclusions on the EU strategy for Central Asia emphasize that the EU will continue to seek to extend the Southern Gas Corridor to Central Asia, and to further promote the EU's multilateral and bilateral energy cooperation with Central Asia. The modalities of Turkmenistan’s joining this corridor still need to be discussed, including at the next bilateral meeting on the subject in Ashgabat later this year.
CE: How real is the Trans-Caspian gas system project against the backdrop of the construction of the East-West gas pipeline by Turkmenistan?
Christian Berger: The EU commended Turkmenistan for its efforts in the diversification of energy export routes, including through the inauguration on 23 December 2015 of the East-West pipeline, a practical mean to diversify export routes. I have already referred to the EU's continued commitment to extend the Southern Gas Corridor to Central Asia, including to Turkmenistan. We will continue discussing all these issues with our Turkmen counterparts.
CE: Could you please tell about the export-import transactions between the EU and Turkey and between the EU and Turkmenistan in figures?
Christian Berger: Turkey is the EU’s 5th trade partner (2016), representing 4% of the EU's total foreign trade, being the 4th largest export market and 5th largest provider of imports. Turkey and the EU have been exchanging nearly € 140 billion worth of goods annually. The EU is by far Turkey's number one import and export partner. The EU received about 48% of Turkey’s exports in 2016. Thanks to the EU-Turkey Customs Union, the EU, being the largest integrated market and trading block in the world, remains a secure and open market for Turkish exporters.
In terms of energy, Turkey exported 500WM, while imported 650MW electricity in 2016. As regards gas, Turkey exported 0,670 bcm to Greece and there were no imports from European gas markets.
The EU is one of Turkmenistan’s largest trade partners globally, joining China and Turkey as the country's top 3 trading partners. There is still a lot of potential for expanding EU trade with Turkmenistan though. In 2016, the bilateral trade volume was about €1,78 billion, out of which the EU export made up €1,16 billion. Most of Turkmen exports to the EU remain mineral fuels and mining products (91%), while Turkmen imports from the EU are much more diversified and consist mainly of manufactured goods.
CE: Do you think that Turkey, Turkmenistan and the EU should develop cooperation directly with the EU, in addition to strengthening the bilateral relations with the European countries separately?
Christian Berger: The European Union adopted a mandate to negotiate a legally binding treaty between the EU, Azerbaijan and Turkmenistan to build a Trans Caspian Pipeline System in September 2011. This was the first time that the European Union has proposed a treaty in the support of an infrastructure project. Following this mandate, a Declaration, which is called the "Ashgabat Declaration", on the development of cooperation in the field of energy between Turkmenistan, Azerbaijan, Turkey and the European Union, was adopted on 1 May 2015. The main objectives of this Declaration are to ensure reliable natural gas supplies from Turkmenistan to Europe through Azerbaijan, Georgia and Turkey. This initiative is a naturally an indication of the format which is foreseen for the structure of the cooperation.
I also believe that the extension of the Southern Gas Corridor to Central Asia, including to Turkmenistan, provides for future Turkey, Turkmenistan and EU cooperation. There might be also opportunities for future cooperation in construction, infrastructure development, private sector development (notably SMEs), and agribusiness.
CE: What is the total amount of funds the EU has extended to Turkmenistan up to now? What are the conditions on which these funds are allocated?
Christian Berger: EU–Turkmenistan relations have strengthened in the recent years. The reinforcement of the EU's bilateral cooperation with Turkmenistan includes funding from the EU’s Development Cooperation Instrument (DCI). Since 2007, the EU has allocated a total of €118 million to Turkmenistan for development initiatives. Turkmenistan is currently one of the few countries in the world which keeps on benefitting from EU bilateral cooperation in spite of its graduation to an Upper Middle Income Country in 2014. The main principle for the allocation of the funds is the EU support for reforms in the economic, social and institutional sectors, as announced by the Turkmen leadership.
CE: What are the priority areas in the cooperation between the EU and Turkmenistan? How real is it for Turkmenistan to start export of agricultural products to the EU countries? Could you please tell EU’s conditions and criteria for imports?
Christian Berger: Currently, the EU continues providing bilateral support to Turkmenistan for the funding period 2014-2017 to support human capital development, with particular focus on vocational education. Three new projects started their activities in late 2016, addressing respectively secondary and vocational education, public administration reform and agro-food processing and marketing for an overall amount of €12 million. I hope that the successful implementation of the EU-funded project that supports sustainable agriculture and rural development will beef up Turkmenistan's capacity to start exporting its agricultural products to the EU. This is in line with the government's priority of gradually increasing the export of non-hydrocarbon products and reducing the country's current dependence on the hydrocarbon products export. Turkmenistan also benefits from a number of regional EU-funded projects, for example the Central Asia Drug Action Program (CADAP), Border Management for Central Asia (BOMCA), Education Platform, Rule of Law Platform, Environment, and Water and Climate Change Platform. Turkmenistan also benefits from the regional blending facility called IFCA (Investment Facility Central Asia). In this context, EC grants can be blended with loans from eligible financial institutions (notably the EBRD in Turkmenistan) in order to support SME development or promote investments in key infrastructures. Two IFCA projects are currently running in Turkmenistan. When it comes to the EU’s conditions and criteria for imports, I want to recall that back in 2012, 2013 and 2014 the World Bank classified Turkmenistan as an upper-middle income economy. Despite Turkmenistan being a beneficiary of the EU`s Generalized Scheme of Trade Preferences or `GSP system`, from 1 January 2016 Turkmenistan is, therefore, no longer eligible for such a preferential treatment. The EU is strongly encouraging Turkmenistan's WTO accession and stands ready to provide technical assistance for this purpose.
CE: Does the EU support development of SME in Turkey?
Christian Berger: Turkey has been receiving pre-accession assistance from the EU since 2001. As far as the energy sector is concerned, the overall objective of this assistance is to achieve a secure, liberal and transparent Turkish energy market, in line with the EU acquis and sustainable energy strategies. Under the first phase of the Instrument for Pre-Accession Assistance (IPA - 2007-2013), € 133.2 million have been allocated to the energy sector, out of which some € 67 million were committed or spent up today. With IPA II (2014-2020), an envelope of € 93,5 million has been earmarked for energy. The objectives of IPA II financial assistance in the energy sector are to (1) improve Turkey’s interconnectivity and integration with European electricity and gas markets, to (2) promote energy efficiency and renewable energies in line with the EU resource efficiency and climate action targets and to (3) enhance the regulatory and operational framework of nuclear safety, in line with EU standards.
Under the 2012 and 2013 programming years, the first jointly managed programmes between the EU-World Bank (WB) and between the EU and EBRD were launched. Projects with a total budget of around €50 million are currently successfully ongoing in the energy sector. The main objectives of the projects, among others, are to align Turkey's energy legislation with EU's electricity, natural gas, energy efficiency and renewable energy acquis. In addition, under the energy efficiency and renewable energy components, the main objectives are, inter alia, to support private sector (particularly SMEs) through business development services, including feasibility studies for investors who need them. In that respect, several SMEs have been benefiting from these funds and improved their technical and administrative capacities with a view to reaching more funds from international financial institutions. Additional funds to support SMEs will be available in the coming years.
EU calls for the preparation of a new Strategy for Central Asia
CE: In spring this year Ashgabat hosted the workshop on the issues covering the relations of Turkmenistan with the European Union. Which vectors of cooperation were identified after this workshop? Do you already have certain results?
Christian Berger: Let me recall that while the EU Strategy for a new Partnership with Central Asia, adopted in 2007, is still valid, it is time to review and renew the EU relationship with Central Asia, taking into account new geopolitical realities and the evolving needs and capacities of our Central Asian partners. This is why the June 2017 Council Conclusions on the EU strategy for Central Asia call for the preparation of a new Strategy by the end of 2019 in accordance with the EU Global Strategy. The EU intends to involve the Central Asian partners in the preparation of this new strategy. As a first step, a seminar on EU-Turkmenistan relations was organized by the EU Special Representative for Central Asia, Ambassador Burian, in close cooperation with the EU Liaison Office in Turkmenistan, in Ashgabat this April. The conclusions and recommendations of the seminar (and similar seminars with the other four Central Asian partners), which reflect the views of our Turkmen partners on the priority areas of EU-Central Asia cooperation under the new strategy, will also be reflected in the process of drafting the new strategy. These priority areas for cooperation include, among others, energy security and energy, border management, education, improvement of good governance, law-making, rule of law, further development of the rights and freedoms of citizens and democratization, development of the agriculture sector, improvement of trade and investment climate, development of trans-regional transport. We will continue to closely engage with our Central Asian partners during the preparation of the new strategy to define the final elements of the new EU-Central Asia strategy.
Thank you for the interview
