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Turkey open to hold new Russia oil talks

ISTANBUL - Hürriyet Daily News | 9/4/2011 12:00:00 AM |

Russian firm Transneft says work on the Samsun-Ceyhan oil pipeline have been ‘frozen,’ but Turkey has no intention of letting go. Energy Minister Taner Yıldız says problems could be discussed between governments

Russian oil transportation company Transneft has upped the ante in its game of brinkmanship against Turkey, announcing that studies on the proposed Samsun-Ceyhan oil pipeline have been “frozen.”

The project is “cannot be implemented in the economical sense,” Transneft Deputy President Mikhail Barkov told the Ria Novosti agency over the weekend in a thinly veiled request that Turkey appease Russian companies with possible perks such as tax exemptions.

Turkish Energy Minister Taner Yıldız, however, has refused to give up on the project, telling the Hürriyet Daily News on Sunday that Barkov’s statement did not mean the end of the pipeline.

“Transneft is not the only determinant of the project. However, it has to be taken into account,” said the minister. “We’ve never thought of tax exemptions for Russian companies. However, everything could be discussed between governments.”

The Samsun-Ceyhan pipeline, which would bypass the Bosphorus by linking Turkey’s Black Sea province of Samsun with the Mediterranean port of Ceyhan, could cost $3 billion, according to estimates.

The first joint venture agreement on the pipeline was signed between Turkey’s Çalık Group and Italy’s Eni in October 2009 in Milan. The 550-kilometer pipeline’s project also includes Russian companies Transneft, Rosneft and Sovcomflot. According to estimates, the pipeline would have an annual capacity of between 50 million and 70 million cubic meters.

“The project is being supported by Turkey, but it is not feasible in the economic sense,” Barkov said. “The talks have been frozen. The ball is in Turkey’s court.” The top executive added that Turkey should “provide more favorable terms” for the project to continue.

The comments echo those of Russian Energy Minister Sergey Shmatko, who voiced his expectation of concessions from Turkey in March.

[HH] Russian claims

Russian companies claim that the cost to carry oil through the pipeline would be three times more than the cost of transferring it through the Bosphorus, leading them to repeatedly ask for tax exemptions from Turkey. In October last year, Transneft President Nikolai Tokarev explicitly requested a “privileged tax regime in Turkey” that would guarantee competitive tariffs.

“We expect Turkey, as the host country of the pipeline, to fully cooperate in the development of the project, according to international norms,” Tokarev told Transneft’s internal magazine at the time. “In particular, it is necessary to set up tax privileges to guarantee that the oil transportation tariff on the route is competitive on the tariffs in the Black Sea straits.”

Barkov’s statement comes ahead of President Abdullah Gül’s planned visit to Moscow on Sept. 8.

Yıldız also told the Daily News that the nuclear power plant to be built in Akkuyu, southern Turkey, was completely independent from the oil pipeline discussions. Responding to criticism about increased energy dependence on Russia, Yıldız said the first effect of having nuclear energy would be “to limit purchases of natural gas from Moscow.”

However, an expert said energy issues have always been key determinants in politics and diplomacy. Speaking to the Daily News, Necdet Pamir said Turkey took a wrong step in signing 20 protocols with Russia and Italy in August 2009, bundling together various energy agreements.

“Thus, we don’t know whether Transneft’s opposition is really about Samsun-Ceyhan, or about another part of this bundle, such as nuclear energy,” Pamir said. “In oil, Turkey is 35 percent dependent on Russia. Dependence in nuclear energy is coming. With Turkish company Aksa ‘getting married’ to Gazprom in natural gas distribution, another area of dependence will start.”

Pamir also said Turkey imported $31.5 billion worth of goods – especially energy – from Russia each year, while it exports $6.5 billion worth of goods. “This is a huge imbalance,” he said.

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