Key economic developments in Turkey in 2015

Key economic developments in Turkey in 2015
22:07 29 Dekabr 2015
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Baku, Azerbaijan, Dec. 29

By Rufiz Hafizoglu – Trend:

Over the past 13 years, Turkey has pursued an active policy to become an energy hub in the region.

Ankara, in order to get rid of energy dependency, has been constantly diversifying the energy supply sources. Below are the key developments that took place in energy market and economy of Turkey in 2015.

Laying the foundation of TANAP, and cancellation of the Turkish Stream

Foundation was laid for the Trans-Anatolian Natural Gas Pipeline (TANAP) on March 17, 2015 in the Turkish province of Kars.

Turkey, along with starting implementation of the TANAP project together with Azerbaijan, was negotiating with Russia on gas pipeline project called Turkish Stream.

Turkish Stream was at the time considered an alternative to the Azerbaijani project TANAP.

Meanwhile, after the incident involving the downing of the Russian Su-24 bomber, the political project Turkish Stream finally lost its urgency.

In his last statement, Turkey’s President Recep Tayyip Erdogan said the Turkish Stream isn’t in the interests of Ankara, and eventually the project got canceled for this reason.

Azerbaijan’s TANAP differs from other projects for being the only sustainable energy project.

Meanwhile, the crisis in relations between Russia and Turkey, has forced Ankara to concentrate more on the diversification of energy supply to the country.

Currently, Turkey believes that despite its losses of at least $9 billion due to crisis in relations with Russia, Ankara isn’t a losing side.

Ankara and Doha signed an agreement on deliveries to Turkey of 1.2 billion cubic meters of liquefied gas. The deal was signed during a visit of Turkish president to Qatar in early December.

Turkish lira rate’s fall

Earlier, the Turkish lira was considered one the most stable currencies in the region. But on March 6, 2015, the national currency of Turkey hit its historical record, reaching 2.6862 Turkish lira to the dollar.

The growth of the dollar rate in Turkey was assessed by the government as erroneous monetary policy. At the same time, former Deputy Prime Minister for Economic Affairs of Turkey Ali Babacan said earlier that the central bank conducts right monetary policy. As one example of the changes in the economic situation, he mentioned the growth of the dollar in a number of European and other countries.

The growth of the dollar rate in Turkey led to the fact that a number of major financial companies said that in case of further devaluation of the Turkish lira, they may reconsider their operation in the Turkish market.

In addition, the growth of the dollar rate worsened the situation in Turkey before the parliamentary election. That’s because the ruling Justice and Development Party (AKP) has always been proud in its 13 year rule that the authorities were able to create a favorable economic situation in the country.

A number of analysts in Turkey believes that the economic chaos that reigned in the country before parliamentary election had a negative impact on its outcome.

Turkey held parliamentary election June 7, and the Justice and Development Party (AKP) gained 40.87 percent of the vote. After that, Turkey for the first time in 12 years faced the necessity to form a coalition government. Political parties failed to form a coalition government, and Turkey held parliamentary re-election Nov.1.

Arbitrary court between Turkey and Russia

On Feb. 27, Turkish Energy and Natural Resources Minister Taner Yildiz said Moscow and Ankara agreed on a 10.25-percent discount on the Russian gas supplied to Turkey.

An agreement on the gas discount was expected to be signed in March, but Turkey refused to sign the document.

The reason was that the Russian side urged Turkey to make an additional concession on the construction of the Turkish Stream pipeline, BOTAS, the Turkish state pipeline company, told Trend.

BOTAS expected that Russia will make 10.5-percent discount for the gas supplied to Turkey. However, Gazprom agreed to make a discount only for private Turkish companies which account for over one third of imported Russian gas.

Around 25 percent discount was made for gas to Turkey’s private sector in the first quarter and an additional 15 percent discount in the second quarter of 2015.

As a result, the Russian gas cost the Turkish private companies around $260 per 1,000 cubic meters in May.

The Turkish authorities considered Gazprom’s gas discount to the private companies as an attempt to put pressure on Ankara.

Ankara appealed to the International Court of Arbitration Oct. 27.

Uncertainty in Akkuyu nuke plant construction

Apparently, the crisis in Ankara-Moscow relations also affected the construction of the Akkuyu nuclear power plant in Turkey.

The intergovernmental agreement between Russia and Turkey on cooperation in the fields of construction and operation of the country's first nuclear power plant Akkuyu near the city of Mersin in southern Turkey was signed in 2010.

The first Turkish nuclear power plant includes four VVER reactors. The installed capacity of each power unit at the nuclear plant will be equal to 1,200 megawatt. The project’s cost nears $20 billion.

Turkey’s Ministry of Environment and Urban Planning approved the report on the environmental impact assessment of the project for construction of the nuclear power plant in December 2014 when the Russia-Turkey relations were flourishing.

The groundbreaking ceremony for the offshore structures of the Akkuyu nuclear power plant was held in April 2015. It was planned to start the plant’s construction in late 2016.

Apparently, like the Turkish Stream, this project has also been removed from the agenda.

Earlier, Turkey’s Deputy Prime Minister Numan Kurtulmus said that if Russia doesn’t resume the talks on constructing the Akkuyu plant, there are countries which can build it.

It is not ruled out that if this project is cancelled, Turkey can discuss the plant’s construction with France and Japan.

Russia’s economic sanctions: Turkey’s tourism sector under threat

The total number of Russian tourists visiting Turkey has exceeded 15 million people, according to the statistical data for the last four years.

Turkey has offered special privileges in order to increase the number of tourists from Russia. It is expected that 2016 will be unfavorable for Turkey in terms of tourism.

In one of his recent statements, Turkey’s Prime Minister Ahmet Davutoglu said that the country’s authorities will make every effort to substitute Russian tourists.

Meanwhile, Turkish authorities state that Russia’s sanctions against Ankara won’t significantly affect the revenues from tourism.

Earlier, head of the Association of Turkish Travel Agencies (TURSAB) Basaran Ulusoy said that Russia’s sanctions against Turkey’s tourism sector won’t strongly affect the country’s potential in this sphere.

He noted that tourists from such countries as Germany, the US and others also visit Turkey.

The country’s revenues from tourism stood at $12.2 billion in ten months of 2012.

Some experts believe that Turkey’s revenues from tourism can decrease by almost 50 percent in 2016.


Rufiz Hafizoglu is the head of Trend Agency's Arabic news service, follow him on Twitter: @rhafizoglu

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