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SABAN KARDAS: "TURKEY HAS TO DEVELOP LARGE FIRMS IN ORDER TO BECOME AN ACTIVE PLAYER IN ENERGY SECTOR"
Journal of Turkish Weekly
http://www.turkishweekly.net/news/130443/saban-kardas-turkey-has-to-develop-large-firms-in-order-to-become-an-active-player-in-energy-sector-.html
Jan 24 2012
Journal of Turkish Weekly (JTW) conducted an exclusive interview with
Saban Kardas. Saban Kardas is assistant professor at TOBB University
of Economics and Tecnology in Ankara. He is also assistant editor
of Insight Turkey, a quarterly journal in circulation since 1999,
which is published by SETA Foundation.
Q: Would Turkey not be successful if it pursued its energy policy
through TPAO, equipped with specific power and well-designed by
the state, rather than extending state aid? In this context, is
the Azerbaijan SOCAR (State Oil Company of Azerbaijan Republic)
a successful model? Is it possible for Turkey's energy policy to be
changed substantially?
A: To start with, Turkey and Azerbaijan's energy policies are
different, and will be misleading to start analysis of Turkey's energy
policies with a comparison between them. While as an energy rich
producing country Azerbaijan envisions a different set of priorities
in its energy policies, Turkey's energy policy is driven by first
and foremost a concern to meet its own needs. Beyond that, Turkey
works to assume a role in energy policies as a transit country. The
shaping of energy policies in the countries of origin on the one hand
and transit countries, i.e., countries that host the transportation
routes, on the other, as well as specific institutional structures
they devise take place in different settings.
Going back to the core issue raised in your question: whether Turkey
should develop its energy policies by moving to a private-sector driven
model or a model based on some form of state control or intervention
in the market. Alongside TPAO, BOTAS needs to be mentioned in the
context of transit projects. There are market pressures on BOTAS to
reduce its market share. There is also a similar expectation from
external players, especially the EU. Turkey is responding to these
expectations and reducing state involvement but it is difficult
to say that it has progressed to an extent that it can satisfy the
demands coming from outside. There are different arguments made in
support of the opposing models, referring back to your question. As
it is sometimes underlined in the ongoing discussions in Turkey, it
makes sense to reduce the element of state intervention to the extent
possible. From a liberal logic, one can make the argument that a more
effective and efficient system can be developed by this approach.
However, as a counter line of thought argues, in markets regulating
strategic commodities, energy being one of them, there are some reasons
to adopt some degree of state-control. The key concern in Turkey is
that if such a strategic commodity is left to market forces alone,
it is hard to develop competitive national players. Such concerns on
Turkey's part have been underlined in the debate taking place in the
energy markets. It is widely believed that as it seeks to assert its
importance in energy geopolitics, Turkey has to develop large firms
in order to become an active player in this field. Firms with big
capital need to emerge for global competition. It is not unlikely to
occur in free market conditions, but it will be difficult.
The best way to do so would be to develop an energy giant with state
support. For this reason, Turkey, as in the case of BOTAS, was for some
time resisting the pressures to move to a free market-oriented model
and retain it as a major player, despite the pressures coming from
outside. Recently, as it has been brought to the public's attention
in the context of gas purchase contracts from Russia, Turkey in fact
has started to reduce the monopoly over natural gas imports.
Similarly, the domestic distribution grid has been privatized to
a large extent. Granted, overall, Turkey is heading to a more
market-oriented model. Yet, as stated by Energy Minister Taner
Yıldız on several occasions, despite a market-oriented model,
Turkey wants to retain a decisive capacity for the state to make
critical interventions in the operation of market. This appears to
be the official prognosis for the future of the state in energy market.
Going back to the question on the SOCAR (State Oil Company of
Azerbaijan Republic) model, it is early to answer this question,
in the sense that the process of SOCAR's consolidation in the
market has yet to be finalized. In this context, what SOCAR is
trying to do is in essence to replicate GAZPROM model of Russia,
i.e., using its position as a major producer to develop projects
aiming to penetrate into downstream markets and gain control over
transportation and distribution networks, so that it can maximize
profits. The Trans-Anatolia agreement is the most obvious example
for SOCAR's quest to play such a prominent role. Seen from that
perspective, this model is not applicable to Turkey, given that Turkey
does not stand a chance to become a player in the chain running from
the source or producing nations to the distribution networks. So,
it is hard to compare Turkey's energy sector to SOCAR model, given
the structural differences.
Since the SOCAR model is still in the making, one has to wait and see
how it will come into full fruition and whether it will accomplish
its objectives. It is early to make a realistic assessment. But so
far, Azerbaijan is exporting oil and gas and in addition to that it
has undertaken major investments in Turkey's energy sector. So, one
can safely say that it has accomplished some progress in downstream
markets as well. To sum up, in Azerbaijan, one might expect the
emergence of a structure similar to the one in Russia and it has
recorded some progress in that regards.
At this point, one has to note some problems with the GAZPROM model,
assuming that SOCAR also pursues a similar approach. In this model,
there are debates as to the fusion of the state and business interests;
i.e., political authorities shaping the economic decisions or economics
dominating political decisions, all the while GAZPROM and other energy
giants being at the center of these intermingling relations. If
SOCAR follows a similar route to the Russian model, in the mid- to
long-term, how the relationship between politics and economics will be
forged and whether interest groups formed around energy industry may
eventually hinder democratization and good governance are issues that
beg closer inspection. If Azerbaijan might be opting for this model,
such questions also need to be discussed more candidly.
Finally, Turkey will unlikely to follow these models. As underlined,
while moving toward a market-oriented model, Turkey will develop a
structure that enables effective state interventions into the market,
through the control of a critical share by the state.
Q: The signing of the agreement regarding the Trans-Anatolian pipeline,
which included Azerbaijan and Turkey, can be considered a blow to
Nabucco on the one hand, and giving permission to South Stream might
make Europe more dependent on Russia on the other. Was it a reaction
against France because of the political air in recent months?
A: Personally, I do not think the recent developments regarding
pipeline projects are directly related to the Armenian allegations.
For instance, France has not been particularly supportive of Nabucco.
On the contrary, the French are somehow involved in South Stream,
having overtaken some of the shares in the project. So, it is difficult
to argue that Turkey wanted to hurt France by thwarting Nabucco. There
is no such direct connection, and Turkey's decision(s) are not
intended to convey a message to Europe. Both the Trans-Anatolian
and the South Stream pipelines should be assessed based on their
particular conditions, as well as from Turkey's own perspective, and
how Turkey sees them in line with its priorities in energy policies.
I don't think Trans-Anatolia is a blow to Nabucco. Turkey is a country
that has always supported the Nabucco as a strategic project and
clearly has expressed its commitment. Nabucco continues to play a
key role in Turkey's objectives to become an energy hub. But there
are certain structural problems in the Nabucco project itself, and
unfortunately, they have not been clearly resolved so far. As is
well known, uncertainty over dedicated supplies, lack of financing
and lack of unequivocal purchase commitments are other major hurdles.
Previously, there used to be uncertainty over the transit regime
which occasionally led to crises between Turkey and the EU. Through an
understanding Turkey reached with the Europeans earlier, it eliminated
those problems.
One of the drivers of the Trans-Anatolian pipeline is Azerbaijan's
quest for an independent role in energy markets, which I underlined
earlier. Turkey has taken a step in support of Azerbaijan's role. But
while providing this support, Turkey also reiterated the fundamental
rationale of the Nabucco, i.e., giving approval to a direct corridor
from the Caspian basin to European markets traversing Turkey. Turkey
hereby sent a signal and reiterated its earlier position that it will
not be an obstacle to the so-called Southern corridor. There were some
uncertainties regarding the future of the Nabucco project as originally
envisaged, which obviously delayed its realization. There had been
concerns that the original design might be overambitious and aim at
unrealistically high capacity. The joint Azerbaijani-Turkish initiative
now enables a reconfiguration of Nabucco in more manageable scales. It
is difficult to say that this route is altogether dead, as the
rationale underpinning it also is at the core of the Trans-Anatolia.
Turkey's support for South Stream is a separate debate, because there
is a direct competition with Nabucco there. Turkey has taken similar
complementary steps in the past as well. After supporting Nabucco,
Turkey demonstrated that it would not be the country that prevents
South Stream. In that regards, we can say Turkey has not adopted a
new position. The recent moves towards Trans-Anatolia and South Stream
is a continuation of the previous position in the recent context.
Q: The energy agreement signed by Turkey in recent weeks further
brought Azerbaijan and Turkey together. In the coming years, will
Ankara develop an Azerbaijan-oriented policy despite Yerevan, or
create its own policy regarding energy?
A: Based on the previous discussions, it is worth emphasizing a few
points. Firstly, it is difficult for Turkey to develop independent
energy policies under the current conditions. If we are talking about
supply security in this context, it has different implications. If
we are discussing this question in the context of Turkey's goal
of becoming an energy transit corridor, it needs to be handled
differently.
If we try to answer your question in this second dimension, i.e.,
energy transportation, it is difficult for Turkey to develop energy
policies independent of Azerbaijan in the short to medium term. For
Turkey to emerge a transit corridor and develop major transit routes,
the producers of oil and gas have to give their approval. Azerbaijan
is the first and only viable option at this point. In this sense,
the Trans-Anatolian agreement signed with Azerbaijan, and the earlier
agreements signed at the High Level Strategic Cooperation Council
summit between Prime Minister Recep Tayyip Erdogan and President
Ilham Aliyev, finalized Turkey's first real transit agreement in
natural gas markets. Although we have been proud of becoming a hub
country, so far it remained at the rhetorical level and has yet to
be realized. The compromise reached subsequent to the treaty signed
with Azerbaijan allows Turkey to become a natural gas transit route
for the first time. In this context, it is difficult for Turkey to
develop a policy completely independent of Azerbaijan.
Apart from this, which alternative players are there? Exporting natural
gas reserves in northern Iraq through Turkey has been on the agenda of
the northern Iraqi leaders. However, there are problems between Baghdad
and provinces as to how to use the natural resources of Iraq. The
other option is obviously Iran. Tehran's strained relations with
America, among other factors, limit the ability of Iran to emerge
as a major alternative for Turkey's ambitious to become a transit
hub. On the other hand, Russia does not want to market its natural
gas through Turkey.
However, it can be said that Turkey has a growing role at present
regarding the oil transportation. The Yumurtalik-Kirkuk pipeline, the
Baku-Tbilisi-Ceyhan pipelines or tankers through the sea lanes play
an important role in the transportation corridors controlled by Turkey.
Beyond these developments, Turkey also has achieved limited progress in
terms of reaching its ambitions. Especially, concerning the transport
of Kazakh and Russian oil through Turkey, major issues remain. In
short, as of now, talking about a role independent of Azerbaijan
is difficult.
Going back to the other issues raised in the question, yes, there
has been a rapprochement between Turkey and Azerbaijan. Particularly,
the current government's policy is in favor of close relations with
Azerbaijan and we might expect the continuation of this policy. There
is no reason for Turkey to give up its Azerbaijan-oriented policy
in the upcoming years, especially if the economic partnership
continues to deepen between them, as is the case currently. These
ties between Turkey and Azerbaijan, in a sense, create disincentives
for a possible rapprochement between Armenia and Turkey. For Turkey
to be drawn into normalization process, the Armenian side, in its
approach towards Turkey, has to understand that there is not only
an emotional dimension in the Turkish-Azerbaijani relationship,
or a strategic dimension, but there is also a very strong economic
dimension. It would be advisable for Armenia to consider its position
on Turkey by taking into account these various angles.
Tuesday, 24 January 2012
Journal of Turkish Weekly
Journal of Turkish Weekly
http://www.turkishweekly.net/news/130443/saban-kardas-turkey-has-to-develop-large-firms-in-order-to-become-an-active-player-in-energy-sector-.html
Jan 24 2012
Journal of Turkish Weekly (JTW) conducted an exclusive interview with
Saban Kardas. Saban Kardas is assistant professor at TOBB University
of Economics and Tecnology in Ankara. He is also assistant editor
of Insight Turkey, a quarterly journal in circulation since 1999,
which is published by SETA Foundation.
Q: Would Turkey not be successful if it pursued its energy policy
through TPAO, equipped with specific power and well-designed by
the state, rather than extending state aid? In this context, is
the Azerbaijan SOCAR (State Oil Company of Azerbaijan Republic)
a successful model? Is it possible for Turkey's energy policy to be
changed substantially?
A: To start with, Turkey and Azerbaijan's energy policies are
different, and will be misleading to start analysis of Turkey's energy
policies with a comparison between them. While as an energy rich
producing country Azerbaijan envisions a different set of priorities
in its energy policies, Turkey's energy policy is driven by first
and foremost a concern to meet its own needs. Beyond that, Turkey
works to assume a role in energy policies as a transit country. The
shaping of energy policies in the countries of origin on the one hand
and transit countries, i.e., countries that host the transportation
routes, on the other, as well as specific institutional structures
they devise take place in different settings.
Going back to the core issue raised in your question: whether Turkey
should develop its energy policies by moving to a private-sector driven
model or a model based on some form of state control or intervention
in the market. Alongside TPAO, BOTAS needs to be mentioned in the
context of transit projects. There are market pressures on BOTAS to
reduce its market share. There is also a similar expectation from
external players, especially the EU. Turkey is responding to these
expectations and reducing state involvement but it is difficult
to say that it has progressed to an extent that it can satisfy the
demands coming from outside. There are different arguments made in
support of the opposing models, referring back to your question. As
it is sometimes underlined in the ongoing discussions in Turkey, it
makes sense to reduce the element of state intervention to the extent
possible. From a liberal logic, one can make the argument that a more
effective and efficient system can be developed by this approach.
However, as a counter line of thought argues, in markets regulating
strategic commodities, energy being one of them, there are some reasons
to adopt some degree of state-control. The key concern in Turkey is
that if such a strategic commodity is left to market forces alone,
it is hard to develop competitive national players. Such concerns on
Turkey's part have been underlined in the debate taking place in the
energy markets. It is widely believed that as it seeks to assert its
importance in energy geopolitics, Turkey has to develop large firms
in order to become an active player in this field. Firms with big
capital need to emerge for global competition. It is not unlikely to
occur in free market conditions, but it will be difficult.
The best way to do so would be to develop an energy giant with state
support. For this reason, Turkey, as in the case of BOTAS, was for some
time resisting the pressures to move to a free market-oriented model
and retain it as a major player, despite the pressures coming from
outside. Recently, as it has been brought to the public's attention
in the context of gas purchase contracts from Russia, Turkey in fact
has started to reduce the monopoly over natural gas imports.
Similarly, the domestic distribution grid has been privatized to
a large extent. Granted, overall, Turkey is heading to a more
market-oriented model. Yet, as stated by Energy Minister Taner
Yıldız on several occasions, despite a market-oriented model,
Turkey wants to retain a decisive capacity for the state to make
critical interventions in the operation of market. This appears to
be the official prognosis for the future of the state in energy market.
Going back to the question on the SOCAR (State Oil Company of
Azerbaijan Republic) model, it is early to answer this question,
in the sense that the process of SOCAR's consolidation in the
market has yet to be finalized. In this context, what SOCAR is
trying to do is in essence to replicate GAZPROM model of Russia,
i.e., using its position as a major producer to develop projects
aiming to penetrate into downstream markets and gain control over
transportation and distribution networks, so that it can maximize
profits. The Trans-Anatolia agreement is the most obvious example
for SOCAR's quest to play such a prominent role. Seen from that
perspective, this model is not applicable to Turkey, given that Turkey
does not stand a chance to become a player in the chain running from
the source or producing nations to the distribution networks. So,
it is hard to compare Turkey's energy sector to SOCAR model, given
the structural differences.
Since the SOCAR model is still in the making, one has to wait and see
how it will come into full fruition and whether it will accomplish
its objectives. It is early to make a realistic assessment. But so
far, Azerbaijan is exporting oil and gas and in addition to that it
has undertaken major investments in Turkey's energy sector. So, one
can safely say that it has accomplished some progress in downstream
markets as well. To sum up, in Azerbaijan, one might expect the
emergence of a structure similar to the one in Russia and it has
recorded some progress in that regards.
At this point, one has to note some problems with the GAZPROM model,
assuming that SOCAR also pursues a similar approach. In this model,
there are debates as to the fusion of the state and business interests;
i.e., political authorities shaping the economic decisions or economics
dominating political decisions, all the while GAZPROM and other energy
giants being at the center of these intermingling relations. If
SOCAR follows a similar route to the Russian model, in the mid- to
long-term, how the relationship between politics and economics will be
forged and whether interest groups formed around energy industry may
eventually hinder democratization and good governance are issues that
beg closer inspection. If Azerbaijan might be opting for this model,
such questions also need to be discussed more candidly.
Finally, Turkey will unlikely to follow these models. As underlined,
while moving toward a market-oriented model, Turkey will develop a
structure that enables effective state interventions into the market,
through the control of a critical share by the state.
Q: The signing of the agreement regarding the Trans-Anatolian pipeline,
which included Azerbaijan and Turkey, can be considered a blow to
Nabucco on the one hand, and giving permission to South Stream might
make Europe more dependent on Russia on the other. Was it a reaction
against France because of the political air in recent months?
A: Personally, I do not think the recent developments regarding
pipeline projects are directly related to the Armenian allegations.
For instance, France has not been particularly supportive of Nabucco.
On the contrary, the French are somehow involved in South Stream,
having overtaken some of the shares in the project. So, it is difficult
to argue that Turkey wanted to hurt France by thwarting Nabucco. There
is no such direct connection, and Turkey's decision(s) are not
intended to convey a message to Europe. Both the Trans-Anatolian
and the South Stream pipelines should be assessed based on their
particular conditions, as well as from Turkey's own perspective, and
how Turkey sees them in line with its priorities in energy policies.
I don't think Trans-Anatolia is a blow to Nabucco. Turkey is a country
that has always supported the Nabucco as a strategic project and
clearly has expressed its commitment. Nabucco continues to play a
key role in Turkey's objectives to become an energy hub. But there
are certain structural problems in the Nabucco project itself, and
unfortunately, they have not been clearly resolved so far. As is
well known, uncertainty over dedicated supplies, lack of financing
and lack of unequivocal purchase commitments are other major hurdles.
Previously, there used to be uncertainty over the transit regime
which occasionally led to crises between Turkey and the EU. Through an
understanding Turkey reached with the Europeans earlier, it eliminated
those problems.
One of the drivers of the Trans-Anatolian pipeline is Azerbaijan's
quest for an independent role in energy markets, which I underlined
earlier. Turkey has taken a step in support of Azerbaijan's role. But
while providing this support, Turkey also reiterated the fundamental
rationale of the Nabucco, i.e., giving approval to a direct corridor
from the Caspian basin to European markets traversing Turkey. Turkey
hereby sent a signal and reiterated its earlier position that it will
not be an obstacle to the so-called Southern corridor. There were some
uncertainties regarding the future of the Nabucco project as originally
envisaged, which obviously delayed its realization. There had been
concerns that the original design might be overambitious and aim at
unrealistically high capacity. The joint Azerbaijani-Turkish initiative
now enables a reconfiguration of Nabucco in more manageable scales. It
is difficult to say that this route is altogether dead, as the
rationale underpinning it also is at the core of the Trans-Anatolia.
Turkey's support for South Stream is a separate debate, because there
is a direct competition with Nabucco there. Turkey has taken similar
complementary steps in the past as well. After supporting Nabucco,
Turkey demonstrated that it would not be the country that prevents
South Stream. In that regards, we can say Turkey has not adopted a
new position. The recent moves towards Trans-Anatolia and South Stream
is a continuation of the previous position in the recent context.
Q: The energy agreement signed by Turkey in recent weeks further
brought Azerbaijan and Turkey together. In the coming years, will
Ankara develop an Azerbaijan-oriented policy despite Yerevan, or
create its own policy regarding energy?
A: Based on the previous discussions, it is worth emphasizing a few
points. Firstly, it is difficult for Turkey to develop independent
energy policies under the current conditions. If we are talking about
supply security in this context, it has different implications. If
we are discussing this question in the context of Turkey's goal
of becoming an energy transit corridor, it needs to be handled
differently.
If we try to answer your question in this second dimension, i.e.,
energy transportation, it is difficult for Turkey to develop energy
policies independent of Azerbaijan in the short to medium term. For
Turkey to emerge a transit corridor and develop major transit routes,
the producers of oil and gas have to give their approval. Azerbaijan
is the first and only viable option at this point. In this sense,
the Trans-Anatolian agreement signed with Azerbaijan, and the earlier
agreements signed at the High Level Strategic Cooperation Council
summit between Prime Minister Recep Tayyip Erdogan and President
Ilham Aliyev, finalized Turkey's first real transit agreement in
natural gas markets. Although we have been proud of becoming a hub
country, so far it remained at the rhetorical level and has yet to
be realized. The compromise reached subsequent to the treaty signed
with Azerbaijan allows Turkey to become a natural gas transit route
for the first time. In this context, it is difficult for Turkey to
develop a policy completely independent of Azerbaijan.
Apart from this, which alternative players are there? Exporting natural
gas reserves in northern Iraq through Turkey has been on the agenda of
the northern Iraqi leaders. However, there are problems between Baghdad
and provinces as to how to use the natural resources of Iraq. The
other option is obviously Iran. Tehran's strained relations with
America, among other factors, limit the ability of Iran to emerge
as a major alternative for Turkey's ambitious to become a transit
hub. On the other hand, Russia does not want to market its natural
gas through Turkey.
However, it can be said that Turkey has a growing role at present
regarding the oil transportation. The Yumurtalik-Kirkuk pipeline, the
Baku-Tbilisi-Ceyhan pipelines or tankers through the sea lanes play
an important role in the transportation corridors controlled by Turkey.
Beyond these developments, Turkey also has achieved limited progress in
terms of reaching its ambitions. Especially, concerning the transport
of Kazakh and Russian oil through Turkey, major issues remain. In
short, as of now, talking about a role independent of Azerbaijan
is difficult.
Going back to the other issues raised in the question, yes, there
has been a rapprochement between Turkey and Azerbaijan. Particularly,
the current government's policy is in favor of close relations with
Azerbaijan and we might expect the continuation of this policy. There
is no reason for Turkey to give up its Azerbaijan-oriented policy
in the upcoming years, especially if the economic partnership
continues to deepen between them, as is the case currently. These
ties between Turkey and Azerbaijan, in a sense, create disincentives
for a possible rapprochement between Armenia and Turkey. For Turkey
to be drawn into normalization process, the Armenian side, in its
approach towards Turkey, has to understand that there is not only
an emotional dimension in the Turkish-Azerbaijani relationship,
or a strategic dimension, but there is also a very strong economic
dimension. It would be advisable for Armenia to consider its position
on Turkey by taking into account these various angles.
Tuesday, 24 January 2012
Journal of Turkish Weekly