Türkiye-Turkmenistan Gas Deal Opens Possibilities for New Routes

Executive Summary:

• In mid-February, Türkiye and Turkmenistan signed an agreement facilitating the flow of natural gas through Iran, a step to enhance Türkiye’s energy security and diversify its supply.
• Iran’s technical issues in infrastructure and the increased chances of U.S. sanctions bring risks of supply disruptions, as has occurred in the past.
• Türkiye aims to establish itself as a key energy trade hub and create additional export routes, while Turkmenistan can export more gas through new routes, particularly to Europe.

On February 14, Türkiye’s Energy Minister, Alparaslan Bayraktar, announced that a new energy agreement was signed with Turkmenistan, strengthening the bilateral relations between Ankara and Ashgabat. The main stakeholders of the agreement are Türkiye’s state-owned pipeline operator BOTAŞ and Turkmenistan’s state-owned Turkmengaz. The new agreement envisages 2 billion cubic meters (bcm) of natural gas flow from Turkmenistan to Türkiye through Iran via its existing natural gas network, which began on March 1 (Caspian Post, February 14; Anadolu Ajansı, March 2). The new swap agreement is a remarkable milestone in enhancing Türkiye’s energy security and attempts to diversify its supply sources.

Türkiye is keen to reinforce its role as a key energy trade hub and create additional export routes, particularly for energy-rich but isolated Turkmenistan (Turkish Minute, February 11). For example, on February 5, Türkiye inaugurated another gas pipeline linking its Iğdır province with Azerbaijan’s Nakhchivan exclave in partnership with the State Oil Company of Azerbaijan (SOCAR), which will transport approximately 730 million cubic meters of natural gas annually (see EDM, January 22; IPLOCA, March 3).

Considering Türkiye’s growing energy consumption and Turkmenistan’s energy-export issues, both sides initially agreed to move on with the agreement back in 2024. Due to unforeseen circumstances, however, BOTAŞ signed an agreement with France’s TotalEnergies to import 1.6 bcm per year of liquefied natural gas (LNG) from the United States, resulting in a delay in the Turkmen gas agreement (Eurasianet, September 23, 2024). Nevertheless, amid a deepening energy deficit in Europe and security uncertainty, Ankara and Ashgabat managed to sign the swap agreement.

Certain risks exist in using Iran as a transit country despite enthusiasm in Ankara and Ashgabat regarding the new energy deal. For many years, Iran experienced severe infrastructure problems to ensure the smooth flow of contracted volumes of natural gas to Türkiye within the bilateral partnership framework (Turkish Minute, March 4). Since 2001, Iran has been transmitting relatively smaller volumes of Turkmen gas via its territory to Türkiye, but this frequently experienced difficulties in meeting annual contract volumes (S&P Global, March 3). Technical limitations of Iran’s gas infrastructure, namely outdated pipelines, periodic drops in domestic gas production, and constant electricity deficit with mass blackouts, result in interruptions to gas supplies to Türkiye. As such, the new swap deal is vulnerable to the same disruptions that have plagued past agreements (Iran International, January 20, 2022).

Amid geopolitical fluctuations in the Middle East, the active participation of the Iranian proxy network increases the chances of additional U.S. sanctions on the Iranian energy sector. This would eventually restrict gas deliveries from Turkmenistan to Türkiye via Iranian territory (OSW, February 20). The new agreement seemingly holds particular significance as it provides Ankara with an additional cost-competitive supply without Russian involvement and influence as a part of its energy diversification efforts. Türkiye aims to capitalize on the broader shift in Europe’s gas supply landscape, however, as production from traditional hubs such as the North Sea transfers to newly emerging regions, including the Black and the Mediterranean seas (Anadolu Ajansı, February 17). Exploring new offshore gas fields would also require Türkiye to liberalize its natural gas market to achieve tangible results in a short period of time. The successful implementation of new gas projects will likely push European countries toward Türkiye to purchase more gas, considering that the country possesses the necessary pipeline infrastructure to facilitate it.

Unlike Türkiye, Turkmenistan has very narrow export options for its natural gas as the country remains heavily reliant on revenues from gas exports to the People’s Republic of China (PRC), which amounted to $2.4 billion in 2024 (Daryo News, April 22, 2024). Russia’s steadily growing presence in the PRC gas market since 2022, however, pushed the Turkmen government to seek alternative export routes despite Türkiye offering only modest compensation compared to the PRC (see EDM, April 12, December 5, 2023, November 13, 2024). An additional option for Turkmenistan in the mid-term is to start bigger gas exports through Azerbaijan and Türkiye to Europe through a pipeline across the Caspian Sea.  Numerous attempts by Türkiye and Azerbaijan to develop a new pipeline on the Caspian Sea with Turkmenistan, however, have failed (see EDM, June 5, 2024). In addition to Ashgabat’s isolationist policy, there are an array of other crucial factors that prevent the establishment of energy infrastructure on the Caspian Sea, such as Russian and Iranian opposition citing fragile ecosystem, strong PRC leverage over Turkmenistan’s energy sector, high costs of pipeline construction under the sea, and others (institutDE, February 14).

At this stage, the export of Turkmen gas via Iran seems to be the most viable option for Türkiye, despite technical and security complications, and it will be a test for Ashgabat’s more ambitious energy plans.