Following his first election victory in 2002, Turkey’s energy policy formally aimed to reduce dependence on “Russian” gas to 30% of imports. The motivation was political, heeding Washington warnings against becoming too dependent on Russia. There was much talk, now forgotten, of transiting natural gas from Russia and fresh water from Turkish rivers to Israel, through pipelines laid outside the Syrian exclusive economic zone.
The scope of Turkish external relations today compared with that of only six or seven years ago is nothing short of breathtaking. Contractors have been removing minefields on Turkey’s long frontier with Syria; visa-free travel is now the norm; predominantly Kurdish northern Iraq has become an important trading partner, as has Iran. To the east, linked by crude oil and natural gas pipelines, Azerbaijan and Georgia have been enlisted as strategic partners. There have been moves to befriend Armenia (although nothing, it seems, will be achieved before implicit claims to a Greater Armenia can be laid to one side).
When the Turkish-Israeli axis foundered with Israel’s winter 2008-09 Gaza war, with Operation Cast Lead, many observers blamed hastily forged understandings between Israel, Greece and Cyprus on Erdogan’s harsh and personal rhetoric, saying “so much for zero problems with neighbours”. The prime minister’s harsh language may have served to discount Ankara’s legitimate grievances, from ill-judged Israeli meddling in Iraqi Kurdistan to Cast Lead itself, which put an end to the Turkish-sponsored negotiations between Israel and Syria. (Turkey had not been warned about the offensive.)
Since then, some friends of Israel have suggested that Erdoğan’s government is “going east”. The charge is mainly directed at Turkey’s western allies, and the pro-Zionist lobbies among them, and aims to undermine the Israel-Turkey alliance, a relationship that had served Turkish diplomacy well over several decades. However, the “Turkey going east” warning did not register in the US, reluctant to take on new challenges in the Middle East and clearly wanting to see Turkey “inside the tent”, not out.
But has Turkey really gone east? Or was the perception to do with the government’s acknowledged religious activism, or the desire to expand business with Arab neighbours among Erdogan’s domestic constituency?
In reality, the transformation of Turkish foreign policy draws from many disparate elements. Take energy for example. In an earlier article (1) I pointed out that over recent years Russo-Turkish energy cooperation has gradually been taking on aspects of medium-to-long-term inter-state accommodation. Turkey is Russia’s second largest gas importer, after Germany. In May 2010, an agreement was signed for a Russian-built nuclear power station on Turkey’s Mediterranean coast. There are also reports that Turkey has agreed to favour Gazprom’s South Stream gas pipeline over Nabucco, an EU-sponsored plan with no confirmed source of natural gas. Ankara has since contributed its own confusing signals to the EU’s feeble efforts to somehow find access to “non-Russian” gas, by signing documents supporting Nabucco one week and South Stream the next (1).
However, recent reports suggest that the Turkish government has yet to give formal consent to South Stream being laid on the Anatolian shelf on its way to the Balkans. Turkey is seeking a downward revision of the price it pays for Russian gas and wants to modify the rigid take-or-pay agreements signed before the AK government came to power in 2002. Gazprom has baulked and the train of energy-related agreements that were to follow has run into the buffers (2).
Over recent years, perceptions of Turkey in the international arena have been subtly altered, along two parallel tracks. Strong year-on-year economic growth (6.6 average GDP growth between 2001 and 2008) has attracted attention. So has sound monetary governance and rapid recovery after the low-growth years of the 2007-09 crash: GDP shrank by 4.7% in 2009 and grew by nearly 9% in 2010 (3). In parallel, the intelligent diplomacy of foreign minister Ahmet Davutoğlu has aimed to reduce tensions with neighbouring countries and to mediate in regional conflicts. (Admittedly, Turkey’s intercession between the US and Iran has backfired, giving hawks in Israel’s foreign ministry unexpected ammunition in the matter of “Turkey going east”. Clearly, there is a problem in defining Turkey’s east.)
As well as acknowledging Turkey’s potential as a future major energy conduit, commentators suggest it is an indispensable partner to the West in economic and security matters (4). With this year’s Arab spring, the Turkish regime has been held up as a model of stable, prosperous democracy. But while the economy is strong, Turkish unemployment levels (which send shivers down the backs of EU negotiators braving what remains of Turkey’s accession negotiations) and income disparities of unseen proportions have been overlooked, as has the position of dissenting media.
Much of Turkey’s economic growth is based on increasing imports of crude oil and natural gas. And the country’s current account deficit, 6.5% of GDP in 2010, is rising rapidly with increasing oil prices; an article in the pro-government Today’s Zaman said that Turkey’s current account deficit jumped 127% in February to $6.12bn (5). Bankers often maintain that a country’s ability to repay its debts is not an immediate concern; what matters is the country’s ability to service that debt. Since its own banking upheaval of 2001-02, Turkey appears to have serviced its obligations in an orderly manner. The country needed about $53bn in aid from the IMF between 1999 and 2008 and has since declared itself not to be in need of further assistance. It is rated Ba2 at Moody’s and BB by Standard and Poor, two levels below investment grade. One obvious cause of the yawning gap in Turkish finances is rising energy prices, not helped by the exorbitant prices extracted by Gazprom.
One has to acknowledge the audacity of the government of a populous country, in a dangerous neighbourhood and with a relatively small economy and a large external debt, playing a hard-edged game with two superpowers at once. With the IMF sidelined and some very powerful lobbies in Washington and elsewhere now hostile, both Turkey’s growth rates and its increasingly bold diplomacy seem to hang on how its finances are viewed by the international markets.
In late autumn 2010 – before the latest rise in oil prices, which caused successive $5bn and $6bn monthly current account deficits this January and February – yields on Turkey’s international bonds had already risen to nearly 6% (6). That is clearly some way off the 17%+ being currently charged for Greek government debt by Greece’s EU allies. But it suggests that rates charged for Turkish government debt in international markets need careful watching.
Notes and References
Professor Rafael Kandiyoti is Senior Research Fellow at Imperial College London and author of Pipelines: Oil Flows and Crude Politics, IB Tauris, London, 2008.
(1) Rafael Kandiyoti, “Europe’s energy diplomacy all at sea”, Le Monde diplomatique, English edition, Diplomatic Channel, 11 March 2011.
(2) Rafael Kandiyoti, “Pipeline chess across the Black Sea”, idem, 19 January 2011.
(3) “Turkey: Overheated”; Financial Times LEX column, 17 April 2011;
(4) ISN Security Watch, 7 April 2011.
(5) “February current account deficit soars 126.7 pct”, Today’s Zaman, Istanbul, 12 April 2011.
(6) M Patterson and S Bryant, “Turkey Bonds Are Biggest Losers in Worst Rout Since 2008”, Bloomberg, 1 March 2011.