Erbakan’s legacy and gas deal with Iran

I dined with late Necmettin Erbakan, former leader of the Felicity Party (SP) and father of political Islam in Turkey, in his private residence in the Balgat district of Ankara, only two months before he passed away on Feb. 27 at the age of 84. We had a long conversation about many issues, on which he could shed much light, since he was privy to classified information and confidential documents.He had a stack of books piled up on the right corner of the long dining table, all marked with brightly colored stickers on different pages. They were about global Jewish conspiracy theories with some clearly anti-Semitic subjects. He talked at length about the so-called “The Committee of 300,” which some allege is a Jewish-run international council which helps shape politics, commerce, banking, media, and the military for centralized global efforts.

He even claimed that the frayed relationship between Turkey and Israel as well as Prime Minister Recep Tayyip Erdoğan’s tough line with the Jewish state were all part of a facade to deceive the Turkish public. He argued that the ruling Justice and Development Party (AK Party) was in the hands of the worldwide Zionist movement and explained that the rise of the AK Party is part of the international Jewish conspiracy. Though he was having great difficulty in his bodily movements, he vowed that he will fight back to stem the Zionist grip on the neck of Turkey.

Though I did not share his description of world affairs heavily laced with Jewish conspiracies and did not believe a bit in the claim that the AK Party government in Turkey was run by Jewish Zionists, the occasion was a great opportunity for me as a journalist to ask him many questions that are still relevant today. After all many leading politicians in today’s governing party were campaigning with him at one time or another. I wanted to understand, for example, why Erbakan had a soft spot for no-good neighbor Iran while despising the Jewish state, a former ally of Turkey. I was surprised for example to see him making a difficult trip in a wheelchair to attend a National Day reception for Iran in the Swissôtel Ankara in 2010 while opting out on other countries’ receptions. I’m still bewildered why he made the first trip to Iran as prime minister in 1996 and again went to Iran in 2009 as soon as an 11-year long court ban on his political career was lifted.

He fathered the idea of establishing the Developing Eight (D-8), which is made up of a group of very diverse countries, Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey, in 1997. The D-8 has so far failed to find a proper voice for itself in a geography that is crowded with many other global, regional and sub-regional groups, but rather it has served as a platform for Iran to promote its own national interests. Is it a coincidence that the key person who has been delivering results for Iranian foreign policy goals in the D-8 a veteran Iranian diplomat named Bagher Asadi also commands the position of secretariat director in the organization? I hardly think so. Iran’s role in the D-8 will be further boosted when Iran will take the rotating post of secretary general of D-8 member states in 2013 for four years.

It was Erbakan’s unreciprocated love affair with Iran that landed Turkey an unfair natural gas deal in August 1996, an agreement that Turkey pledged to purchase 10 billion cubic meters of gas annually from Iran for a quarter of century. It was his deal that made Turkey dependent on Iran for one-fifth of its gas imports, an unnecessary leverage that Iranian hawks never fail to bring up every time they talk about Turkey’s reliance on Iran. Did we get a fair shake from this supposedly lucrative trade deal? I do not believe we did, judging from the past hiccups on the volume and quality of Iranian gas.

The deal was off to a rocky start from the beginning. According to the original agreement between the Turkish Pipeline Corporation (BOTAŞ) and the National Iranian Gas Company (NIGC), the gas was supposed to begin flowing on January 1999 but it did not. Because Iran did not complete building the Bazargan Metering Station on the Iranian side of the border, it was postponed to July 2001. Iran only started pumping the gas in December 2001, after many delays. Now from Doğubayazıt at the border to capital Ankara at the heartland, many cities like Erzurum, Sivas, Nevşehir, Kırşehir, Aksaray, Kayseri, and Konya are for the most part dependent on the Iranian gas pumped through the 1,491 km-long Eastern Anatolia Natural Gas Main Transmission Line.

But unlike with the other countries that supply gas to Turkey, such as Russia, Azerbaijan and Algeria, Turkey has continued to experience problems with Iranian gas deliveries. Because of the poor infrastructure of Iranian lines, the gas supply from Iran has often been interrupted, especially in harsh winters, during which Iran has simply diverted the gas for its own domestic consumption, leaving Turks out in the cold. Though the agreement warranted Iranian gas delivery of 29 million cubic meters on a daily basis, the deliveries to the Turkish side remain far below that threshold many times and in poor quality, providing ample opportunity for Turkey to cancel the gas agreement according to Article 26. Because of heavy reliance on Iranian gas and booming consumer demand in Turkey, Ankara never used that option to cancel the contract.

But that is not the only problem Turkey is facing with Iran. The price issues have often became a point of contention between the parties with Iranian side resisting to any compromise whatsoever. According to the agreement, BOTAŞ has a right to ask for price revisions depending on the market conditions and supply-demand fluctuations. When Turkey invoked the relevant article in the deal in July 2003, asking for price adjustment, Iran balked at the request, prompting Turkey to take the matter to arbitration through the International Chamber of Commerce (ICC) in Switzerland in March 2004. The arbitration lasted five years and ICC ruled in favor of Turkey, determining that Iran did not fulfill its obligations in the contract and levied a hefty $760 million fine unto the Iranian gas company.

While Russia and Azerbaijan, both adjusted their prices last year with Turkey as the natural gas prices came down in global markets, Iran again rejected Ankara’s complaint that the price was too high. According to information gathered from sector representatives by Today’s Zaman, the price Turkey pays for 1,000 cubic meters of gas from Iran exceeds $500, almost $100 more than the price Turkey pays to Russia for the same amount of gas. Therefore, Turkey was forced to take Iran to the ICC on Jan. 16 due to the excessive pricing as well as inadequate amount of natural gas the country exported to Turkey.

It seems Turkey continues to experience problems with only one supplier: Iran. Thanks but no thanks go to Erbakan. Iran is currently Turkey’s second largest gas supplier with a share of 24.3 percent, only behind Russia, which provides 45.6 percent of all natural gas imports. Turkey also buys 14.2 percent of its gas from Azerbaijan, 12.2 percent from Algeria and 3.7 percent from Nigeria. Considering that Turkey meets 98 percent of its gas needs from outside sources, it urgently needs to reduce its reliance on Iran for the supply of natural gas, which should push the government to look for alternative routes. One alternative is to secure Turkmen gas using the Caspian route through Azerbaijan and Georgia rather than the Iranian route. After all, Iranians are simply buying Turkmen gas at substantially low prices and reselling it to Turkey with a huge mark-up. For that to happen, Turkey needs to take a proactive role in sorting out disputes between Azerbaijan and Turkmenistan over the Caspian Sea.

Another option is to develop Iraqi gas fields so that they can be connected to a grid in Turkey. Iraq holds 126.7 trillion cubic feet of undeveloped gas reserves and the country has for years burned off the gas largely because it lacked adequate facilities to process it. The state-owned Turkish Petroleum Company (TPAO) is currently working on two fields in Iraq to extract natural gas. One is Siba Gas Field in Iraq’s southern oil hub of Basra, estimated to have 1.1 trillion cubic feet gas reserve, which was awarded to Kuwait Energy (60 percent share) and TPAO (40 percent share) consortium at a value of $1.2 billion. The second field is the $2.7 billion-worth Mansuriya Gas Field Development Project, operated by a consortium including TPAO (50 percent share), Kuwait Energy (20 percent) and KOGAS (Korea Gas Corporation with 30 percent share) and estimated to have a 4.6 trillion cubic feet gas reserve. Both of the deals were signed in June 2011. Turkey should mend the fences with the central government in Baghdad in order to ensure there is no risk of these deals collapsing.

In Azerbaijan, the TPAO is participating in two natural gas development projects. The TPAO has nine percent share in the Shah Deniz Project, which is located in the South Caspian Sea, off the shore of Azerbaijan and about 70 kilometers southeast of Baku. As part of the agreement for Phase 1, Turkey is expected to receive 8.6 billion cubic meters of gas per year for 15 years, once it becomes fully operational. The gas started flowing in 2007 and the TPAO extracts 29 million cubic meters of gas on a daily basis from four wells. As part of Phase 2, it is estimated that a construction decision will be taken in 2013 and the first gas delivery will be realized in 2017.

The TPAO is also pursuing the stalled Alov Exploration Project (with a 10 percent share) in Azerbaijan that covers three different prospective structures named Araz-Alov-Sharg in the middle of the Southern Caspian Sea, which was estimated to have reserves of 385 billion cubic meters of natural gas.

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