Turkish Nuclear Tender Faces Uncertain Future

Publication: Eurasia Daily Monitor Volume: 6 Issue: 177

On September 25 Turkey’s Energy and Natural Resources Minister Taner Yildiz announced that a decision on the tender to construct the country’s first nuclear power plant has been postponed for two months, and that the final decision would be taken by November 24.

For over one year the project has caused great controversy within Turkey. In September 2008, when the deadline for the submission of proposals ended, all but one potential bidder failed to submit an offer, because they found the tender requirements were too difficult to meet. In January, the energy ministry announced the sole bidder, a consortium composed of Russian companies AtomStroyExport, Inter Rao UES JSC and Turkey’s Ciner Group’s Park Teknik, as the winner of the tender to build a nuclear power plant in Mersin’s Akkuyu district and its operation for a 15-year period. The Turkish government’s decision to pursue the deal despite the lack of competition over the tender, provoked criticism from the energy sector. Since the price Turkey would pay to the consortium was found to be above the average electricity prices, the costs of the project also raised concern. Although the consortium reduced its price from the original 21 cents per kilowatt hour (kwh), Ankara remained dissatisfied with the offer. More importantly, there remained legal uncertainty as to whether this price revision would be acceptable under the tender regulations. Therefore, if the government finally decides to award the tender to the Russian-Turkish consortium, there is a high probability that a legal case for its annulment might be lodged (EDM, January 26).

Under the original rules for the tender, the price offer by bidders would remain valid for a one year period. This ended on September 24, and in the weeks preceding this deadline discussions on the project had intensified.

Following his appointment as the energy minister, Yildiz raised several questions about the project, and admitted that serious problems existed. Nonetheless, he argued that Ankara would not be able to ignore the Russian offer, and that the government would do its best to complete the process in a manner that met its expectations, while abiding by the legal regulations. Yildiz expressed his own discomfort over the tender, mainly due to the high price that Turkey would pay for the electricity. Noting that the revised price offer of 15 cents per kwh was still above the average electricity costs in the Turkish domestic market, Yildiz even raised the possibility that the financing of the project could be restructured to make the price more affordable. He suggested that instead of the construction of the plant by the private sector only, the public sector could also join the consortium as a partner with shares as high as 25 percent (Anadolu Ajansi, August 19).

As the deadline was approaching, Yildiz indicated that Ankara might extend the tender process. He highlighted three considerations that affected the government’s policies on the issue. First, the decision had a "strategic" dimension, meaning that Turkey should take the right steps in a timely manner. Since, this would be its first nuclear power plant, the strategic aspects of the decision were particularly important. Second, the process should proceed in conformity with the existing legal norms and regulations. Finally, the price should be agreeable to the Turkish government (Anadolu Ajansi, September 21).

On September 25, Yildiz announced that the deadline for a decision on the tender had been postponed for two months, with a final announcement planned by November 24. During this period, the technical, strategic and legal aspects of the issue will be examined thoroughly before reaching a decision. Negotiations will also continue with the Russian company involved. "Since this is a competition, we cannot say to Russia ‘we award you the contract, and now are preparing its legal basis…’ Let me state clearly that we cannot say yes or no [to the Russian side] at the moment." Yildiz underlined that this decision was taken in consultation with Moscow, arguing that both sides had agreed that more time was needed to discuss the details. Yildiz added that the government’s determination to build the country’s first nuclear power plant remained intact (ANKA, Cihan, September 25).

The AKP government’s decision to proceed with the construction of a nuclear plant after decades of discussions was a welcome development for those arguing for the necessity of opting for nuclear energy. However, the handling of the tender process was far from perfect, and the government has put itself in a risky position "technically, strategically and legally."

Despite the many flaws bedeviling the tender process, some observers speculated that several reasons would compel the government to proceed with the current tender (www.cnnturk.com, September 17). First, although Turkey has complained about the high price involved, if the tender process is renewed the new price might well be above the existing offer. Given the global economic crisis, the financial costs of the project might also be higher. Second, considering the flourishing strategic ties between Turkey and Russia, canceling the project might prove politically costly. The Russian side places a high premium on winning this contract and the Russian Prime Minister Vladimir Putin has eagerly tried to convince the Turkish political leadership to finalize the deal. It is rumored that when Putin agreed to sign landmark energy deals with his Turkish counterpart Recep Tayyip Erdogan during his visit to Turkey in August (EDM, August 7), he conceded to some of the Turkish demands on the expectation that Ankara will reciprocate on the nuclear issue and approve the tender. If it reneges on its commitments, it might also strain Turkish-Russian ties.