How Decision to Use Rubles in Russo-Turkish Gas Settlements Benefits Ankara and Moscow
19:24 GMT 19.09.2022 (Updated: 17:14 GMT 31.07.2023)
© Alexey BelikovOne rouble
© Alexey Belikov
The agreement on payments for a quarter of Russian gas supplies to Turkey in rubles will come into force in the near future, Turkish Energy Minister Fatih Donmez has recently said, as quoted by Yeni Safak. According to Donmez, the scheme will reduce the need for dollars and reduce costs.
"In a challenging time like this, maintaining friendship with such an important [energy] supplier as Russia is essential," explained Volkan Aslanoglu, a Turkish energy specialist.
The scheme envisaging 25% ruble payments for natural gas was proposed by Russian President Vladimir Putin on September 16 during a meeting with his Turkish counterpart Recep Tayyip Erdoğan on the sidelines of the Shanghai Cooperation Organisation (SCO) summit in Uzbekistan.
"In addition to being very significant from a psychological point of view, this decision is also a move that will reduce the deficit in dollar terms," Aslanoglu said. "Furthermore, confidence in bilateral trade with Russia, not only in the field of energy but other resources as well, will be strengthened. Let's not forget that Russia is a very important player in terms of resources; thanks to this decision, our country will be less affected by the crisis associated with interruptions in the supply of Russian-made goods."
Turkish Energy Minister Fatih Donmez told reporters on Monday that the central banks of Turkey and Russia are preparing to arrange partial payments for Russian gas supplies to Ankara in rubles, as agreed by the presidents of the two countries.
Meanwhile, Russia is also set to capitalize on ruble payments, according to Aslanoglu.
"Russia has long sought to remove the ruble from the influence of the dollar, so the decision made is in line with Russia's long-term goals and will help it protect itself from the impact of the sanctions that Europe imposes in the financial sector," the energy expert argued. "Of course, [Russo-Turkish] interactions at the time when [western countries] are trying to isolate Russia globally in all areas will cause great concern in the West. On the other hand, while the Europeans try to cope with soaring gas and electricity prices this winter, we [the Turks] will be able to spend this period in comfortable conditions."
Russia's natural gas is flowing to Turkey through two major routes: the Blue Stream and the TurkStream pipelines. With a total capacity of over 46 billion cubic meters of gas per year, the two pipelines run under the Black Sea. Russia's energy giant Gazprom uses part of this network to send gas to Europe.
After the beginning of the Russian special operation to demilitarize and de-Nazify Ukraine, US and European countries slapped unprecedented sanctions on almost all sectors of the nation's economy and announced an energy embargo against Moscow. However, after the US, the UK and the EU slashed their hydrocarbon imports from Russia, gas and oil prices went up further, accelerating the already soaring inflation.
19 September 2022, 07:51 GMT
Regardless of repeated calls from the West, Turkey refused to abandon Russia's energy supplies with Ankara, making it clear that it cannot jump to the western sanctions' bandwagon to the detriment of its own economy. In 2021, Russia accounted for about 45% of Turkey's natural gas imports.
In August, Deputy Secretary of the Treasury Wally Adeyemo informed the American Chamber of Commerce in Turkey that Turkish companies were at risk of US restrictions if they did business with sanctioned Russians.
However, the Turkish newspaper Daily Sabah highlighted last month that trade between Ankara and Moscow "has been booming since spring", with the value of Turkish exports to Russia between May and July rising by nearly 50% from last year. The newspaper explained that Turkish companies stepped in to fill the void created by EU businesses which left Russia after the beginning of the special military operation in Ukraine.
In addition, Donmez told Yeni Safak that the construction of the Akkuyu Nuclear Power Plant would go ahead at an accelerated pace, with the first unit of the station expected to be launched in 2023. Russia's Rosatom State Corporation is implementing the project together with the Turkish side.
Likewise, the latest SCO Summit in Uzbekistan translated into new lucrative deals for Russia and other members of the Eurasian organization. Participants of the Samarkand gathering inked over 40 agreements. As Forbes remarked last Friday, SCO members account for half of the world’s population and at least 25% of global GDP.