Ukraine and Turkey: the European energy coup

If Russia ends up building natural gas storage facilities in Turkey—an idea for which Gazprom expressed interest earlier this year—Turkey will lose its chance for maximum political leverage. This past winter, Gazprom redirected natural gas from its storage facilities in Europe after a spike in demand in Turkey. This prompted a Russian justification for potentially building storage facilities in Turkey ostensibly to come to the rescue when supplies are insufficient. In theory, though, this would represent an increased Russian energy footprint in Turkey that would negatively impact Turkey's energy hub ambitions and would only help to solidify its dependence on Russian supplies, which amount to about 58% of Turkey's total supplies. An LNG deal with Ukraine would give Turkey greater access to additional alternative supplies, and this, combined with an anticipated increase in Azerbaijani supplies from Shah Deniz will allow Turkey to become a true, diversified energy hub.

Qatar is heavily courting both Ukraine and Turkey for LNG through the Bosporus. From Qatar's perspective, if Qatari LNG is allowed to pass through the Turkish-controlled Bosporus, this will deal a heavy blow to Iran. As such, Qatar recognizes Turkey's role here as a key geopolitical power broker on the energy scene. Along this same line of thought, Qatar's perception is that Russia is not capable at this time of preventing a Turkey-Ukraine energy deal focused on Qatari gas.

For Turkey, though, such a deal would allow it to further diversify its supplies, reducing reliance on both Russian and Iran—the latter which has been unreliable in terms of supplies over recent years.

Such a deal also further underlines the extent of political leverage Ukraine and Turkey would enjoy well beyond Europe, and into the Middle East.

Geopolitically, if Ukraine and Turkey were to bring Qatari gas through the Bosporus and on to European markets, this would help balance the power of a Russian-Iranian axis. It would reshape geopolitical dynamics, with Turkey the driving force through its strategic position as a Middle East-Europe energy hub.

Turkish and Ukrainian interest can either merge, or diverge to be counter-productive both to their gas supply needs and to European energy security. The perceptions of competition between Ukraine and Turkey are there, however, it is only through the combined, complementary force of the two that we will see a new energy powerhouse emerge.

LNG is the future, and globally we are looking at a major upswing in demand, including for Europe in the medium-to-long term.

As becomes clearer every year, pipeline gas delivery is hindered severely by economics and geopolitics. It limits room for consumer maneuvering, especially for those who are reliant on few, or single, sources. LNG can avoid much of these same hurdles, despite the investment cost associated with LNG facilities. There is a great deal of market flexibility to be found in LNG due to the absence of piping contracts.

LNG will become the key fuel of the future, and the forces that grasp the Black Sea market for LNG first will be among the most influential players on the global energy market. There is also the Black Sea marine industry to consider here, and the future is likely to see this converted to LNG - with new and converted transport vehicles and vessels running on LNG.