Energy

Turkey asks US to allow payments to sanctioned Russian bank

November 27, 2024, 4:21 PM

Moscow, Russia. 21st Dec, 2022. Russian President Vladimir Putin attends the launch ceremony of the Kovykta gas field and part of the Power of Siberia gas pipeline from Kovykta to Chayanda via video link from the Kremlin — Russian President Vladimir Putin attends a Gazprom launch ceremony; sanctions on one of Turkey’s major energy sources could have a detrimental effect on its industrial needs

Dependency on Russian gas
Potential impact on economy
Precedent for exemption

Turkey is seeking an exemption to new sanctions imposed against Moscow by the Biden administration that would mean payments for imports of Russian natural gas are blocked, potentially cutting energy supplies and undermining the Turkish economy.

Washington announced sanctions against Gazprombank, which is part-owned by Russian state gas producer Gazprom, on November 21 this year. Under the sanctions, payments for natural gas supplies can no longer be made into the bank’s accounts by entities that have any exposure to the US financial system.

Responding to the new sanctions, Alparslan Bayraktar, the Turkish energy and natural resources minister, said an exemption was essential.

“If we cannot make payments, we cannot purchase gas,” he said. “[An exemption] is vital for our energy security and industrial needs.”

Russian gas pumped through pipelines running beneath the Black Sea accounts for more than 50 percent of Turkey’s pipe-fed gas imports, with Azerbaijan and Iran being the other major contributors. Including tanker-borne shipments, Russia meets roughly half of Turkey’s annual gas consumption of about 60 billion cubic metres.

Turkish officials from its foreign, trade and finance ministries, along with representatives of the central bank, held talks with their Russian counterparts on November 25 to discuss possible measures to ensure the flow of gas continued one way and payments the other.

A Turkish energy ministry official, speaking anonymously, told AGBI that Ankara was hopeful talks with both Russia and the US could bring about a positive outcome.

If not, however, the sanctions could have a significant impact on the Turkish economy, he warned.

“The timing is poor since demand will increase come winter and industries will need energy,” the official said. “It is easy to impose sanctions in a day, but it takes much longer to reverse them. If an exemption is not granted it would hurt Turkey rather than Russia.”

There is an opening for Turkey to be granted an exemption under the conditions of the new sanctions, with Japan having been given clearance to pay for imports of gas and oil from the Sakhalin-2 energy project in Russia until mid-2025.

Washington has also waived restrictions on Ankara making payments to Iran for gas imports, after broad sanctions had been imposed on financial transactions with Tehran.

While there would be short-term harm to the Turkish economy and to relations with Moscow, professor Şenay Yalçın, energy expert and dean of the Batum campus of Bahçeşehir University, told AGBI that the government has been moving to mitigate the impact of the loss of one of its major energy sources.

“Turkey is developing its own resources and can increase imports from Iran and some of the Turkic republics,” he said. “It also has liquid natural gas deals with Qatar and Nigeria, so does not have all its eggs in one basket.”

It would however take time to ramp up deliveries from other suppliers, meaning the Turkish economy could face a winter chill if Ankara cannot get the sanctions waiver it seeks from Washington.