Reduction of oil imports from Iran positive in the long run, experts say
Even with the 20% reduction in oil purchases from Iran, Turkey remains highly dependent on its neighbour for energy.
By Erisa Dautaj Şenerdem for SES Türkiye in Istanbul -- 05/04/12
The announcement last week by Turkish Petroleum Refineries (TÜPRAŞ), Turkey's national oil refinery, to cut oil imports from Iran by 20% is the latest sign of deepening cracks in their relationship, as Western sanctions targeting Iran's nuclear programme gain traction.
Trucks hauling diesel from Iran to Turkey commonly line the roads to the eastern province of Van. [Reuters]
Energy Minister Taner Yildiz followed the announcement by saying that Turkey, which bought 50% of its oil imports (9 million tonnes) from Iran last year, had agreed to import 1 million tonnes of oil each year from Libya. Meanwhile, the government continues to negotiate with oil-giant Saudi Arabia to make up for supply losses.
"This does not look like a decision taken overnight, but rather one taken after considering all possible alternatives," Hasan Selim Özertem, an energy expert at the International Strategic Research Organisation (USAK), told SES Türkiye.
He said Turkey had received guarantees from Libya and possibly other countries such as Saudi Arabia to substitute reductions in its oil imports from Iran before making such a big decision.
Turkey has been under increasing pressure by the US and EU to reduce oil and gas purchases from its neighbour. The government's official stand is that Turkey is bound only by UN Security Council sanctions, not unilateral decisions by the US and EU.
Under US sanctions meant to halt Iran's nuclear programme, foreign institutions like TUPRAS would be subject to financial restrictions for their dealings with Iran's central bank, which acts as the clearinghouse for Iran's oil sales.
Turkey has asked to be exempt from sanctions which make it difficult to conduct business with Iran. Last week's move could be an attempt to show the West it is taking steps to reduce oil purchases in order to gain exemption status.
The EU has also implemented sanctions, with several countries having already stopped buying Iranian oil before a full EU embargo goes into effect on July 1st.
"We notice [Turkey's] policy is being changed under pressure by the US," Necdet Pamir, an energy expert and former member of the World Energy Council's Turkish National Committee, told SES Türkiye.
Pamir questions official claims that diversifying energy resources was behind the decision, arguing that if diversification had been the aim, then Turkey would have done this sooner.
He adds that already strained diplomatic relations between Turkey and Iran, especially over Syria and a NATO missile defence radar, would be exacerbated.
However, Volkan Ediger, an Istanbul-based energy expert and professor at Kadir Has University, argues that factors in addition to sanctions determined Turkey's decision to reduce oil imports from Iran.
Apart from international pressure, the current state of bilateral relations with Iran, as well as efforts to diversify energy resources, are other determinants Turkey considers before making such decisions, he said.
"Importing oil from Libya to substitute cuts in Iranian oil might affect the Turkish [economy] negatively due to higher transportation costs," Ediger said, but underlines that it could be advantageous if Turkey plans to import from Libya in the long run.
Minister Yildiz also said purchasing oil from Libya would support the country's economic stabilisation following the ousting of Libyan dictator Colonel Muammar Qaddafi last year.
Meanwhile, Ozertem points to an ongoing dispute over gas prices as another reason for Turkey to reduce its energy dependence on Iran. He says the Iranians have not met Turkish expectations during negotiations on natural gas prices, which may have prompted Turkish officials to cut Iranian oil imports.
Turkey purchases about 18% of its natural gas from Iran at a higher price compared to other countries. Turkey applied for arbitration regarding Iranian gas prices last month, arguing that talks had not helped solve the issue.