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Turkey’s energy ‘hub’ dream and Russia’s proposal

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The pandemic, war, geopolitical competition, and political preferences resulted in inefficient use of available resources and thus created the gas crisis. After the Nord Stream 1 and Nord Stream 2 sabotage, the idea that Turkey could play a more effective role in the energy market has been discussed. Due to sanctions restricting the import of Russian gas into the European market, the transport of it to Europe via Turkey is only one aspect of the issue.

In a broader sense, could the energy crisis that broke out with the Russia-Ukraine war have opened a new window of opportunity for Turkey to become a global player in energy? When alternative sources such as Central Asian gas and Iranian gas are added to the equation, it seems to be a serious possibility for Turkey to turn into an energy vein for Europe, at least on paper. The fact that Turkey is the most suitable route for the transport of potential gas in the Eastern Mediterranean to Europe in the medium and long term can be considered as one of the advantages of the “geographical location”, which is frequently mentioned.

Remarks from the leaders

As for the choice of Turkey as the energy hub, Russian President Vladimir Putin said in October “It’s because direct engagement with European partners is very difficult. We can establish a gas center in Turkey very quickly.” and drew great attention. According to Putin, Europe will be willing to buy Russian gas through the transfer center to be established in Turkey.

Speaking at the capacity increase ceremony of Silivri Natural Gas Storage Facility owned by BOTAS in Silivri, President Erdoğan said, “We had important meetings with my dear friend Mr. Putin on this subject. We have taken and are taking our steps and thus Thrace will become a hub in natural gas. We carry out our work on this together with our energy partners in our region,” he said.

These statements do not include technical details. Are the conditions for Turkey to become the main player in the gas market, which is a direct part of geopolitical competition, as convenient as it seems? According to experts; ‘Yes…’ However, the definition of “hub” here needs to be clarified by decisionmakers. Because being a “transit country” where gas comes and goes from Turkey and being one of the international centers such as TTF, NBP or Henry Hub where the price is determined are completely different.

Former BOTAS General Manager Gökhan Yardım, evaluating the issue to Harici, said, “Turkey can be a gas hub. But with current thinking, it’s very challenging. The legal infrastructure is crucial. Both the Westerners and the Easterners will come,” he said, pointing out both the potential and the shortcomings he sees.

What do we know?

Turkey reinforced its transit position with the TurkStream, which came into play in 2018. However, Russia did not provide the parameters necessary for Turkey to be a “hub” based on this project. One of the main factors of being a hub is that the price of gas is determined in the market to be established in Turkey and Turkey being a commercial beneficiary.

“The electronic platform for trading in the natural gas center may be established in the coming months. The price of natural gas for European consumers will be largely determined at the center. It’s crazy what’s happening in Europe’s own centers,” Russian leader Putin said. Would it be wrong to assume that he no longer considers Turkey as a transit country?

“I don’t know the details of the offer,” former BOTAS General Manager Yardım said, “In regard to Putin’s statement, I believe they are thinking of a system like the electronic sales platform they made earlier. As for the possible plan in Moscow’s mind, I believe the Russians are thinking of a system in which they will buy gas, choose the companies themselves, collect the offers themselves and say, ‘You won this much, the average price was this much at the end of the month.’

“It is not an issue to be solved in 3-5 months”

The schedule of the project is another matter. Minister of Energy and Natural Resources Fatih Dönmez has announced that their goal is to start the project to establish gas hub in Thrace within a year. Dönmez noted, “It is not an issue to be dealt with in 3-5 months. Perhaps we can start with a more limited number of markets in the transition period before a permanent market. Then the schedule will be pushed forward a little more” emphasizing the need for time.

Commenting on Dönmez’s prediction of a “one year” period, Yardım believes that the upcoming elections and the balances that the government looks after between the West and Russia are also decisive in this project. “I think this will cool down a bit before the elections,” he said, assessing that Ankara would not want to “get in wrong with the U.S. directly.”

How can it work?

Turkey already has a gas exchange. Its name is Energy Exchange Istanbul (EXIST) or Enerji Piyasaları İşletme A.Ş. (EPİAŞ) by its Turkish name. The website of the institution states that EXIST, which was established on March 18, 2015, works in harmony with Turkey’s goal of “becoming a central country in energy trade” and is on the way to become an energy exchange that is referenced on a global scale.

Former BOTAS General Manager Yardım explains the operation of the system that will be the center as follows:

“In EXIST, the names of the gas suppliers and buyers are not disclosed. Neither the seller nor the buyer is known in the transactions in EXIST. Gases are nationalized to be traded in EXIST. Both seller companies and buyer companies need to establish a company in Turkey and obtain a license in accordance with the legislation of EMRA.”

After this process, buyers and sellers create supply and demand just like in the stock market by trading on EXIST’s Continuous Trade Platform. The price is determined through this mechanism. Buyer and seller bids meet each other without the bidders being known and the price is formed. EXIST guarantees the payments through TAKASBANK.

“Gazprom wants to make the electronic sales platform transactions it has stopped in Europe in Turkey.” Gökhan Yardım clarifies the difference between being a ‘transit’ and a ‘center’ as follows:

“Gazprom will sell gas within its sales platform. Buyers will receive the gas transmitted through Turkey. This does not make Turkey a gas hub as the gas is only transferred through Turkey. Gas should be sold in Turkey. All trading transactions of liquidity should be made in Turkey and the money should remain in Turkey. Turkey has all kinds of infrastructures. All procedures and rules of EXIST are suitable for these steps. If Gazprom desires, it can buy a certain share from EXIST. Other European companies can also do the same. The important thing is to perform these transactions through EXIST.”

Why would Europe buy Russian gas from the Turkish stock market?

Gökhan Yardım explains:

“Europe may take a negative stance at first, but if more gas comes to Turkey, the gas transmitted through TANAP can also be traded here. LNG that is coming from America can be traded here. The bigger the market, the more eager Europe becomes. But if there’s only one player, Russia, then they won’t be willing. If too many players and too much gas come to Turkey, then a different picture will emerge.”

‘Atlantic Council’ analyses

According to Atlantic Council analysis, by Yevgeniya Gaber in December, “Turkey’s desire to play a major role in regional energy infrastructure is not only geopolitically driven but also economically and technically feasible.”

The analysis also highlights Turkey’s gas storage capacity and the advantages of having pipelines at the intersection. However, in the analysis it is advocated that, for Turkey to be an energy hub, “Russian gas can’t be a key part of the plan.”

According to Yevgeniya Gaber, the Ukrainian Foreign Policy Expert; “diversification of existing routes and suppliers, independence in decision-making through an independent institution, market demand and supply that determine prices, and political will of potential partners to get involved in the projects…” are the basic conditions for establishing an energy hub.

Putin’s project to make Turkey a gas hub could increase Ankara’s dependence on Russian fossil fuels and Moscow in strategic issues, and further endanger Ankara’s complex relations with the West, the author says.

Similar views are echoed in another analysis of Atlantic Council on December 20. It is emphasized that Turkey’s dream of becoming a gas hub will not be realized without adopting liberal market principles. In his article, Eser Özdil claims that BOTAS’s dominant role in the Turkish energy market is the most important obstacle to Turkey becoming a gas hub. According to the author, BOTAS’s dominant role should be restricted, its dominance on the market with mass subsidization should end, in short, Turkey’s gas market should be completely liberalized…

Of course, in such a scenario, it is not possible to predict the future of gas price to be consumed by the household in times of crisis.

Available capacities

The Blue Stream has a capacity of 15.75 billion cubic meters. TurkStream’s total capacity is 31.25 billion cubic meters (bcm). Currently, TANAP has a capacity of 16 billion bcm. These pipelines, which meet Turkey’s gas needs, also transfer some gas to Europe. Nord Stream 1 and 2 have a total annual gas transport capacity of 110 billion cubic meters (bcm). From this point of view, it seems inevitable to increase capacity and build a new pipeline.

The European Union (EU) needs around 400 bcm of gas per year. It is impossible for the lines passing through Turkey to respond to this need in its current form. Therefore, the construction of a new gas pipeline or capacity-building opportunities need to be evaluated. Building new pipelines from Russia amidst war environment in the Black Sea is another question. On the other hand, the need for the project in case peace is restored is another point.

Currently, although the seller is different, Europe may not be eager to buy Russian gas from the Turkish stock market. The EU, which imported 43.5 percent of its gas from Russia in 2021, uses 7.5 percent of Russian gas this year. The pressure put by the U.S. on Nord Stream 2 should be considered as well.

In summary, “being a hub” covers Turkey’s right to be a commercial beneficiary of the natural gas that passes through it. Gases from various sources will be traded on EXIST’s stock exchange and will bring buyers and sellers together. The greater the market depth, the greater the hub quality. First, a regional consensus at the initial stage, especially between the EU and Russia, seems essential to becoming a hub.

Since we will be revisiting this discussion, let’s end it here for now with the following questions:

Is the ‘active neutrality’ policy or being in the ‘right place’ geopolitically, being a member of NATO and simultaneously following the ‘Asia Anew Initiative’ policy sufficient to become an ‘energy hub’?

Can Turkey create a different alternative center between Russia’s proposal and the current market regulations?

Or are all these foreign policy orientations opposites that cancel each other out?

Europe

Fico accuses Merz of blackmail over threat to veto EU budget

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Slovak Prime Minister Robert Fico has hit back after German Chancellor Friedrich Merz threatened to veto the EU budget unless funding for Ukraine is secured.

Merz said he would block the EU’s seven-year budget if no agreement is reached on financial assistance for Ukraine.

The chancellor’s intervention has angered Central European leaders who are net beneficiaries of EU funds but do not want to take part in the next round of funding to support Ukraine’s war effort.

“What the chancellor is doing is typical blackmail, and I will not bow to it,” Fico told reporters in Bratislava.

Fico spoke alongside his Czech counterpart, Andrej Babiš, whose government has refused to participate in a future loan to Ukraine.

“I do not know why he said this,” Babiš said, referring to Merz’s stance.

Merz wants EU leaders to discuss Ukraine’s financing needs at a summit in Dublin on Friday.

In a letter to European Council President António Costa, who will chair the meeting, obtained by The Guardian, Merz wrote:

“We must maintain our support for Ukraine in its struggle to defend itself. This is our shared vital interest. Yet bilateral aid provided to Ukraine is distributed unevenly, with the burden shouldered mostly by only a few member states.”

The EU agreed last year to provide a €90 billion loan to Ukraine, intended to cover two-thirds of its military and civilian spending for 2026 and 2027.

Since then, however, Russia’s relentless bombardment has placed a heavier financial burden on Kyiv, prompting President Volodymyr Zelenskyy to ask for €70 billion to plug the budget deficit.

The EU has endorsed Zelenskyy’s figures and pledged to find €45 billion. Ukraine’s other allies, such as Britain and Canada, are expected to cover the rest.

Last year, Merz launched an initiative to tap €210 billion in frozen Russian state assets held in the EU, but the plan fell through due to opposition led by Belgium, which holds most of the funds in Brussels.

The €90 billion loan was the backup plan. Having opted out of that loan, Hungary, Slovakia, and Czechia indicated that they would not take part in the next round either.

Bulgaria joined these three member states following the election of Prime Minister Rumen Radev last April.

The question of funding for Ukraine is now spilling over into the fraught negotiations on the 2028-34 EU budget.

Germany, the largest net contributor, wants substantial cuts to the proposed budget and opposes the EU providing generous funding to member states that refuse to contribute to Ukraine’s financial needs.

Merz states in his letter that a “collective commitment without exceptions” is a “fundamental prerequisite” for closing Ukraine’s financing gap and for “discussing other matters, particularly those with financial implications.”

He also notes that, in the context of the EU’s next seven-year budget, known as the Multiannual Financial Framework, all member states must contribute to a “robust” financial perspective for Ukraine from 2028 onwards.

A German government official said:

“For the Multiannual Financial Framework (MFF) to be successfully concluded, it is vital that all EU member states provide financial support to Ukraine.”

Berlin is also aiming to shift decision-making on funding for Ukraine from unanimity to qualified majority voting, in an effort to prevent a single government from blocking EU decisions.

The letter reflects mounting frustration among the EU’s northern member states, Ukraine’s most generous backers, over lower contributions from other EU countries in Central and Southern Europe.

The task of brokering an agreement on the budget falls to Costa, the former Portuguese prime minister.

Costa wants a deal by the end of the year, ahead of elections in France, Poland, and Italy in 2027 that could complicate the process.

A spokesperson for Costa confirmed receipt of the letter without elaborating on details. “President Costa will dedicate time to the Ukraine issue at the informal European Council meeting in Dublin this week,” the spokesperson said, adding that funding for Ukraine would be addressed at a dedicated summit on the EU budget scheduled for 26-27 November.

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EU expects next Israeli government to adopt less aggressive posture

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The EU expects the next Israeli government to mend its “difficult relationship” with Brussels and adopt a more constructive approach toward Gaza and illegal settlements.

Israeli President Isaac Herzog tasked Gadi Eisenkot, the leader of the anti-Netanyahu bloc, on Sunday with forming a government.

Eisenkot stated that the country faces a “catastrophic diplomatic crisis” as traditional allies begin to reassess their relations with Israel.

Speaking to Rapporteur, several European diplomats stationed in Tel Aviv said they expect ties to get back on track.

“Whatever government comes in, we can try to revitalize relations because Israel is clearly a very important partner,” one European diplomat said, adding that Brussels expects the next administration to be “less aggressive”.

The diplomat noted that relations with Europe are currently “not very good”.

Israel cut off communication with Kaja Kallas, the EU high representative for foreign affairs and security policy, after Rapporteur revealed in June that she had compared Israel to apartheid-era South Africa during a visit to Mexico.

The diplomat stated that this decision, taken ahead of elections, was political in nature. A second European diplomat based in Brussels explained that the announcement came only a few days before an official visit by Dubravka Šuica, the European commissioner for the Mediterranean.

“This could have been interpreted as a tactic to divide Europe, but Israel had asked Kallas to deny the report; she did not do so,” the second diplomat said.

Brussels has repeatedly voiced its frustration with Israel over the humanitarian crisis in Gaza and the expansion of West Bank settlements.

However, EU governments blocked almost all sanctions proposed by the European Commission.

A third diplomat said opposition parties would “almost certainly take the issue more seriously” when it comes to tackling violence by West Bank settlers:

“We see Palestinians being expelled from their homes and new illegal settlements being built in the West Bank. There is a reluctance on the part of the current government to address this issue, which causes problems in our relations.”

The new government is expected to ease pressure on Palestinians and halt construction of the E1 settlement project, a controversial plan to build settler housing in the West Bank east of Jerusalem.

“They will probably try to deal with the problem of extremist settlers in the West Bank,” the diplomat added.

On Gaza, the diplomat described the situation as “a complete nightmare”, with two million Palestinians crowded into an area that accounts for roughly 35% of the territory.

“There are not enough tents for the winter, and not enough vaccines are reaching the area despite an increase in diseases,” the diplomat said.

The European official argued that Donald Trump’s peace plan met all the conditions for Europe. Although the EU had much to offer, neither the US nor Israel appeared interested in EU involvement in the process.

“We are currently training Palestinian police in the West Bank, and if permitted, we could do the same in Gaza,” the diplomat said.

The diplomat disclosed that Israel had agreed with Šuica that Europe would finance two projects aimed at improving sewage and water infrastructure in Gaza, continuing:

“However, none of these projects has started yet because there is a serious problem with dual-use goods. Getting materials into Gaza is very difficult because the Israelis say they could be misused if they fall into the wrong hands of Hamas.”

Israel insists that Hamas must be disarmed before subsequent phases of Trump’s plan can proceed.

With disarmament unlikely to happen in the near term, the EU argues that certain measures can be carried out in parallel.

“We can begin rebuilding sanitation systems in Gaza. We can start building desalination plants. We can begin providing energy and water to Gaza,” one diplomat said.

While Brussels hopes for progress on Gaza and the West Bank, it maintains that expectations regarding the establishment of a Palestinian state need to be “managed”.

The EU continues to advocate a two-state solution, yet most leading Jewish parties oppose the creation of a Palestinian state.

The diplomat noted that the next Israeli government will likely have “a very slim majority and not much room for manoeuvre”.

There is also a “major misunderstanding” between the EU and Israel that must be addressed. According to the diplomat, Europeans fail to recognize the “psychological impact” of 7 October on Israelis.

“This event changed the country and made the two-state solution even more distant than before,” the diplomat said.

In return, some Israeli politicians believe Europe has betrayed Israel despite what they view as a fight against “Islamist terrorism”.

“Their argument is that European politicians are somewhat afraid of the Muslim population in Europe,” the European diplomat said.

Europe strongly opposes Iran and the possibility of Tehran acquiring nuclear weapons, imposing sanctions in response.

However, the diplomat argued that the EU would not participate in a war because it lacks a common army:

“We are a diplomatic and economic power, which is why we resort to sanctions and diplomacy. The expectation that we would take part in a military operation is unrealistic.”

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Germany threatens EU budget veto over long-term Ukraine aid

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Germany has threatened to veto the European Union’s joint budget for the 2028-2034 period, which is currently under negotiation, unless every member state commits to providing financial support to Ukraine in 2027 and subsequent years, German Chancellor Friedrich Merz warned.

According to a report by the Financial Times (FT), Chancellor Merz set out Berlin’s condition for the budget talks in a letter addressed to European Council President António Costa.

In his letter, Merz wrote: “A collective commitment that every single one of us, without exception, will make a fair contribution to closing Ukraine’s budget deficit is an indispensable prerequisite for resolving this budget issue and, in particular, for addressing subsequent matters that carry financial implications.”

The German Chancellor stressed that a formula backed by all member states must be established to provide Ukraine with a reliable, multi-year financial perspective starting from 2028.

Merz also insisted that any agreed solution must cover the interest payments on debts incurred to finance the assistance provided to Kyiv.

Conversely, several countries within the bloc have cut financial aid to Ukraine, and the number of capitals adopting this stance is projected to rise next year.

In December 2025, Hungary, Slovakia, and the Czech Republic approved the EU’s 90 billion euro loan package for Kyiv only on the condition that they would not contribute to its costs themselves.

Alongside these three countries, Bulgaria has also stated that it does not plan to participate in subsequent financial assistance packages for Ukraine.

In France, far-right leader Marine Le Pen, who could potentially win the presidential election scheduled for spring 2027, recently told the FT that Paris has run out of funds.

Le Pen assessed: “The honest approach is to tell Mr Zelensky clearly, and even warn him: ‘Look, we cannot do more. We have already allocated the 90 billion euro EU loan, in which France’s share amounts to 18 billion euros. 18 billion euros is genuinely a huge amount of money.'”

The EU’s 90 billion euro loan, covering the 2026-2027 period, aims to meet two-thirds of Ukraine’s financing requirements.

Brussels expects the remaining 45 billion euros to be covered by other partners, including Canada, the UK, Norway, Japan, South Korea, and Australia.

Germany remains the largest net contributor to the EU budget.

In contrast, the four Eastern European countries seeking to avoid financing Ukraine rank among the largest net beneficiaries of the bloc’s budget.

Leveraging this balance, Chancellor Merz aims to use his influence in the EU budget negotiations to secure uninterrupted support for Kyiv in 2027 and the years beyond.

According to the FT, Berlin is also demanding that future aid packages be decided by qualified majority voting rather than unanimity, which is required under the current system.

A German government spokesperson told the newspaper:

“The issue of Ukraine’s financial needs must be resolved within the framework of the next EU budget. Financial support for Ukraine from all EU members is decisive for the successful conclusion of the budget talks.”

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