The High-Level Cooperation Council, established during Russian President Dmitry Medvedev’s visit to Ankara in May of last year, held its second meeting during Erdoğan’s trip to Moscow. A wide array of issues, ranging from bilateral trade to energy and agriculture, and from tourism to foreign policy, was discussed during the meeting. The borders, agreed on March 16, 1921 with the Friendship and Cooperation Agreement, popularly known as the Moscow Agreement, were opened to visa-free travel 90 years later.
As developments rapidly unfold, citizens of both countries have started to prepare their luggage, something that would have been unthinkable during the Cold War. While Russians are preparing to stream to the south for a vacation in Turkey, Turkish businessmen will enter the Russian market, which has twice as much purchasing power with a population of over 140 million. Citizens of both countries will be exempt from visa requirements for up to 30 days starting on April 17. It is expected that more than 4 million Russian tourists will visit Turkey this year. Culture and Tourism Minister Ertuğrul Günay earlier said that if the potential is well used, this number could reach 10 million a year. The Turkish economy gains $800-1,000 from each Russian tourist.
It is estimated that nearly half a million Turkish citizens will travel to Russia, largely for business purposes, in 2011. Saving money and time thanks to visa-free travel, Turkish businessmen should be able to maintain a growth rate in Russia similar to the one they have secured in the Middle East. Officials earlier raised the possibility of reaching a trade volume of $100 billion between the two countries in five years, and the excitement of some 500 Turkish and Russian businessmen who participated in the Turkey-Russia Business Forum during Erdoğan’s visit to Russia proved that this is not a dream. A small business owner from Aydınlı brought several pairs of shoes to Moscow and got an initial order of 2,000. He has already become a symbol of the relationship between Turkish and Russian businessmen.
Intense discussions and bargaining continue in giant projects in energy sectors which are expected to significantly contribute to the economy of both countries. Russia and Turkey will in the upcoming weeks lay the foundation of the Mersin-Akkuyu nuclear plant, which was brought to the agenda after a possible nuclear disaster in quake-hit Japan. A Russian investment of $20 billion will provide important opportunities for small companies. Intense trading also continues on the Samsun-Ceyhan oil pipeline project, in which Turkey’s Çalık Group and Italian Eni have joint stakes. The deputy prime minister of Russia recently announced that the deal for the pipeline, a $4 billion project in which Russian oil companies Rosneft and Transneft will join, will be signed very soon. Moscow is demanding Ankara lower the transit prices, which will reduce oil tanker traffic in the Bosporus Strait. Ankara also wants Moscow to increase the 25 million tons of oil supply it previously pledged. The two countries are expected to agree on common terms soon.
One of the most important agenda items in the cooperation council meeting between Turkey and Russia was the South Stream gas pipeline, which was brought up during a meeting between Turkish officials and Russian Prime Minister Vladimir Putin. Moscow is concerned over the fact that Turkey has yet to give permission for geological and seismic research for the construction of the pipeline.
Expenses over the South Stream gas pipeline, which observers consider an alternative to the 11 billion euro Nabucco gas pipeline that will carry Caspian and Central Asian gas resources to Europe, also raise questions over the fate of the project passing through Turkish territory. Energy Minister Taner Yıldız assuaged concerns during his visit to Kazan this week after Russian Deputy Prime Minister Igor Sechin said Russia could not fathom prolonging the permission process. However, Russian energy giant Gazprom has not submitted the necessary documents to Turkey.
New calculations revealed that expenses for the South Stream will be 15.5 billion euros, a much higher amount than the previously estimated 10 billion euros. Observers, however, claim that expenditures will be even higher, considering bumpy and mountainous areas in the Balkans that will further complicate the construction of the pipeline. Noting that Russia is trying to keep prices at a minimum, Sechin said his country could also establish alternatives to the pipeline. This statement has reverberated among energy industry circles as a cancellation of the pipeline project and brought up the issue of establishing liquefied natural gas (LNG) facilities in the Black Sea.
Putin also demanded that Russian Energy Minister Sergei Shmatko provide alternative calculations for LNG tanker transportation costs, further evidence that alternatives to the South Stream are feasible. Energy sector observers claim that in natural gas transportation carried out over 2,500 kilometers, using LNG tankers is more advantageous than pipelines. It seems that Moscow will leave the official announcement of the pipeline’s cancellation to the president, while the country has already started feasibility preparations for the establishment of LNG facilities.
LNG tankers will pass through the strait instead of oil tankers. While observers state the impossibility of Q-Flex or Q-Max model giant tankers that reduce the cost of LNG transportation crossing the Turkish straits, they also note that Russia could get involved in the Nabucco pipeline or start the construction of the Blue Stream-2 pipeline. Ankara has previously invited Russia to participate in Nabucco, an offer Russia has not declined.
