As Turkey Shunned Russian Gas, Its Companies Amassed Debt
Ankara reduced its reliance on energy supply from Moscow, but seven Turkish companies are saddled with combined debt of about $2 billion to Gazprom
be saddled with debt 빚을 지다
Turkish companies committed to buying large amounts of gas from Gazprom. Workers inspect a gas pipeline operated by a joint venture with Gazprom.PHOTO: OLIVER BUNIC/BLOOMBERG NEWS
By
David Gauthier-Villars
A string of (다수의) Turkish companies have accumulated debt of about $2 billion to Russian state energy giant PAO Gazprom, according to people familiar with the matter, liability that could hinder Ankara’s drive to reduce its reliance on Russian natural gas, in part by boosting imports from the U.S.
Seven private Turkish companies, which have committed to buying large annual amounts of gas from Gazprom under long-term “take-or-pay” (의무인수)contracts, purchased less than 15% of agreed volumes last year, and failed to meet payment obligations stemming from uncollected(징수하지 않은) quantities, the people familiar with the matter said.
The companies, which have sought to coordinate their positions, are in talks with Gazprom to find a solution without resorting to (의지하다) arbitration, the people said.
Although the debt, which kept growing this year, is owed by private entities, it will likely become a national issue in Turkey, the people familiar with the matter said, because the companies are struggling to pay it and Gazprom holds letters of credit—a form of payment guarantee—for about $600 million issued primarily by Turkish state banks.
Turkish President Recep Tayyip Erdogan, right, and his Russian counterpart Vladimir Putin, left, met in Istanbul in January.PHOTO: PRESIDENTIAL PRESS SERVICE/ASSOCIATED PRESS
The debt issue could amplify economic concerns over Turkey’s capacity to roll over (빚의 상환을 연장하다) its large external financial liabilities. It also risks adding to tense relations between Ankara and Moscow, which have sought to expand trade ties in recent years despite being entrenched (자리매김하다) on opposite sides of two deadly wars, in Syria and Libya.
“It will become part of broader negotiations between Turkey and Russia, that is between the two nations’ leaders,” one of the people said, referring to President Recep Tayyip Erdogan and his Russian counterpart, Vladimir Putin.
The office of Mr. Erdogan didn’t respond to messages seeking comment. Gazprom and the Turkish banking regulator, known as BDDK, declined to comment. The Savings Deposit Insurance Fund of Turkey, TMSF, a state investment vehicle which owns shares in two of the companies, also declined to comment.
Mr. Erdogan made rebalancing Turkey’s portfolio of gas suppliers a geopolitical priority in 2015, after the downing of a Russian jet fighter by the Turkish air force in the Turkey-Syria border area brought Ankara and Moscow close to a military confrontation. At the time, Russia supplied more than 55% of Turkey’s gas needs, according to Turkish energy regulator EPDK.
“The Russian plane incident marked a turning point,” said Erdinc Ozen, a Turkish energy consultant. “The government made a strategic decision to increase Turkey’s capacity to import liquefied natural gas,” or LNG.
Energy Chessboard
Long heavily reliant on Russian natural gas, Turkey has diversified its portfolio of suppliers with new pipelines and LNG terminals.
Sources: Turkey’s Ministry of Energy and Natural Reserves (gas lines); World Energy Council Turkish National Committee (terminals)
Relations between Turkey and Russia took a warmer turn the following year, in 2016, when Mr. Putin was among the first leaders to comfort Mr. Erdogan after a failed coup, inviting him to Russia and offering to reboot bilateral trade. Sealing the rapprochement, Turkey received advanced Russian-made S-400 missile systems last summer, a move that angered the U.S. and other members of the North Atlantic Treaty Organization. In January, Messrs. Erdogan and Putin attended a ceremony in Istanbul to inaugurate a new pipeline laid across the Black Sea to bring Russian gas directly to Turkey.
Still, acting on Mr. Erdogan’s 2015 instruction to diversify gas supply, Turkish state energy firm Botas Petroleum Pipeline Corp. and other companies commissioned special vessels that can function like floating terminals for receiving LNG. Two vessels have come into service, and a third one is expected to be delivered next year.
The investment has started to pay off.
The share of gas piped from Russia in Turkey’s overall imports fell to 24% in the first quarter from 52% in 2017, according to EPDK, the energy regulator. In contrast, LNG shipped from the U.S., which was negligible three years ago, accounted for 10% of total imports in the first three months of the year. EPDK data for the month of March showed Russia and the U.S. were almost on a par, with respective shares of 9.9% and 9.4%.
The shift toward LNG accelerated during the coronavirus pandemic because a global drop in demand drove spot LNG prices far below those of piped gas.
“At the moment, spot LNG is four times cheaper than gas from pipeline imports,” said Eser Ozdil, a Turkish energy consultant. “It’s a buyer’s market.”
MORE ON TURKEY-RUSSIA RELATIONS
- In Syria, Erdogan Brushes Up Against Limits of Pivoting to Putin (Feb. 28, 2020)
- After Syria, Turkey Seeks to Partner With Russia in Libya (Dec. 21, 2019)
- NATO Faces a Fresh Quandary as Turkey Tips Toward Russia (Dec. 25, 2019)
- In Russia-Turkey Pact, Putin Wields His Geopolitical Skills Anew (Oct. 23, 2019)
Meantime, however, the seven Turkish companies, which had signed separate but similar long-term contracts with Gazprom under which gas was delivered at between $250 and $300 per 1,000 cubic meters last year, according to the people familiar with the matter, found themselves squeezed.
They had committed to buying 10 billion cubic meters of gas from Gazprom in 2019 but the Russian gas was more expensive than what it could be sold for on the Turkish market, where retail prices hovered between $220 and $280 per 1,000 cubic meters.
In the course of last year, the companies—Akfel Gaz Sanayi ve Ticaret AS, Avrasya Gaz AS, Bati Hatti Dogalgaz Ticaret AS, Bosphorus Gaz Corp., Enerco Enerji Sanayi ve Ticaret AS, Kibar Enerji AS and Shell Enerji AS—only took deliveries of 1.3 billion cubic meters of gas, according to the people familiar with the matter and data released by EPDK.
“Gazprom is asking to be paid,” an official with one of the Turkish companies said. “But the debt is huge.”
Under the contracts, payment obligations apply to 80% of the 8.7 billion cubic meters of uncollected volumes, the people said, putting the value of the 2019 debt at between $1.74 billion and $2.09 billion.
“The companies landed in a tough spot,” said Arif Akturk, a Turkish energy consultant. “But risk is also on Gazprom’s shoulders because if they don’t make financial concessions, they may lose significant market share in Turkey.”