Turkey's Energy Policy: Between East and West

A Strategic Imperative: Turkey's Energy Challenge

Energy security stands at the forefront of Turkey's national priorities, driven by the country's significant economic growth, industrialization, and increasing population. As a nation with limited domestic hydrocarbon resources that meets approximately 75% of its energy needs through imports, Turkey faces substantial challenges in ensuring reliable and affordable energy supplies while reducing its external dependencies and environmental impact.

This analysis examines Turkey's multifaceted energy strategy, which seeks to balance geopolitical considerations with economic imperatives, environmental goals, and the ambition to transform the country into a regional energy hub. Turkey's geographic position—bridging energy-rich regions in the Middle East, Caspian Basin, and Russia with energy-consuming markets in Europe—provides both strategic opportunities and complex challenges that shape its energy policy decisions.

The Energy Landscape: Demand, Supply, and Import Dependencies

Turkey's primary energy consumption has grown significantly over the past two decades, driven by economic development, population growth, and rising living standards. Total primary energy consumption reached approximately 155 million tons of oil equivalent (Mtoe) in 2023, representing a doubling since the early 2000s. While per capita energy consumption remains below the OECD average, suggesting further growth potential, Turkey ranks among the 20 largest energy consumers globally.

The country's energy mix is dominated by fossil fuels, with natural gas (28%), oil (29%), and coal (27%) constituting the majority of primary energy consumption. Renewable energy sources, including hydropower, wind, solar, and geothermal, contribute approximately 16% to the primary energy mix, though their share has been growing steadily.

Turkey's high import dependency creates significant economic and security vulnerabilities. The country imports approximately 93% of its oil needs, 99% of its natural gas consumption, and a substantial portion of its coal requirements. This dependency results in a significant energy import bill—approximately $50 billion annually in recent years—that contributes substantially to Turkey's current account deficit and exposes the economy to international price volatility and supply disruptions.

Natural Gas: The Cornerstone of Turkey's Energy Strategy

Natural gas occupies a central position in Turkey's energy strategy, serving as the primary fuel for electricity generation (approximately 30% of total generation) and heating while playing a crucial role in industrial processes. Annual consumption reached approximately 53 billion cubic meters (bcm) in 2023, making Turkey one of Europe's largest natural gas markets.

Turkey has actively pursued supply diversification to enhance energy security and strengthen its negotiating position with suppliers. Russia has traditionally been Turkey's largest natural gas supplier, providing approximately 33% of imports in 2023, down from over 50% a decade ago. Azerbaijan has emerged as the second-largest supplier (approximately 23%), followed by Iran (16%), Algeria and Nigeria (via LNG, 15% combined), and spot LNG purchases (13%).

Infrastructure development has been crucial to Turkey's gas diversification strategy. The Trans-Anatolian Natural Gas Pipeline (TANAP), completed in 2018 as part of the Southern Gas Corridor, delivers Azerbaijani gas to Turkey and onward to Europe. The TurkStream pipeline, operational since 2020, brings Russian gas directly to Turkey under the Black Sea, bypassing Ukraine and other transit countries. Turkey has also expanded its LNG import capacity with two floating storage and regasification units (FSRUs) complementing its two land-based LNG terminals.

Gas storage capacity has been another focus area, though it remains limited relative to consumption. The Silivri and Salt Lake underground storage facilities provide approximately 4.5 bcm of working gas capacity, representing less than 10% of annual consumption—well below the international standard of 20-30% for supply security. Turkey aims to expand its storage capacity to 10 bcm by 2025.

Recent Developments: Black Sea Gas and Market Liberalization

A significant development in Turkey's energy landscape was the 2020 discovery of the Sakarya natural gas field in the Black Sea, with estimated reserves of 540 bcm. Production began in 2023, with initial flows of 10 million cubic meters per day. The government has announced plans to scale up production to 40 million cubic meters daily (approximately 14.6 bcm annually) by 2028, which would meet approximately 30% of Turkey's current gas demand.

This discovery has strategic implications beyond reducing import dependency. It provides Turkey with valuable experience in offshore gas development, potentially applicable to other areas like the Eastern Mediterranean. It also strengthens Turkey's position in negotiations with external suppliers and enhances its energy hub aspirations.

Alongside resource development, Turkey has pursued natural gas market liberalization, though progress has been uneven. The state-owned Petroleum Pipeline Corporation (BOTAŞ) remains the dominant player, controlling approximately 80% of imports and wholesale activities despite legislative efforts to reduce its market share. Recent reforms have included the establishment of a natural gas trading platform (2018), which has increased market transparency and price discovery, and steps toward third-party access to infrastructure.

Oil Sector: Transit Potential and Refining Capacity

Oil constitutes approximately 29% of Turkey's primary energy consumption, primarily used in transportation and petrochemicals. The country produces only about 7% of its oil needs domestically, with production of approximately 70,000 barrels per day against consumption of about 1 million barrels daily.

Turkey's strategic location has made it a significant oil transit corridor. The Baku-Tbilisi-Ceyhan (BTC) pipeline, operational since 2006, transports Azerbaijani and Kazakh oil to Turkey's Mediterranean coast, with a capacity of 1.2 million barrels per day. The Kirkuk-Ceyhan pipeline connects Iraq's northern oil fields to Turkey's Mediterranean port, though its operation has been intermittent due to security issues and political disputes.

The Turkish Straits (Bosphorus and Dardanelles) represent another crucial oil transit route, with approximately 3 million barrels of oil (primarily Russian and Caspian) passing through daily. Turkey has long expressed environmental and safety concerns about this traffic and has promoted alternative pipeline routes like the Trans-Anatolian Pipeline (not to be confused with the gas pipeline of the same acronym) that would bypass the Straits.

In the downstream sector, Turkey has developed substantial refining capacity. The privatized Tüpraş operates four refineries with a combined capacity of 30 million tons annually (approximately 600,000 barrels per day), meeting most of Turkey's refined product needs. The STAR refinery, opened in 2018 by Azerbaijan's SOCAR, added 10 million tons of annual capacity focused on petrochemical feedstocks and diesel production.

Renewable Energy: A Growing Priority

Renewable energy development has emerged as a key pillar of Turkey's energy strategy, driven by the dual objectives of reducing import dependency and meeting climate commitments. Turkey has substantial renewable potential, particularly in hydropower, wind, solar, and geothermal resources.

Hydropower has traditionally been the dominant renewable source, with installed capacity reaching approximately 31 gigawatts (GW) in 2023, representing about 30% of total electricity generation capacity. Major projects like the 1,200 MW Ilısu Dam on the Tigris River have expanded capacity but also generated controversy due to environmental and cultural heritage impacts.

Wind and solar energy have seen rapid growth in recent years. Wind power capacity increased from less than 1 GW in 2010 to approximately 11 GW by 2023. Solar capacity has grown even more dramatically, from negligible levels a decade ago to approximately 9 GW by 2023. This growth has been supported by feed-in tariffs, renewable energy auctions (YEKA), and self-consumption schemes that have attracted significant private investment.

Turkey also leads Europe in geothermal power development, with installed capacity reaching approximately 1.7 GW by 2023. These plants, concentrated in the Aegean region, provide baseload renewable electricity and support district heating applications.

The Renewable Energy Resource Areas (YEKA) model, introduced in 2016, has been a key policy innovation. These auctions award large-scale renewable projects with guaranteed purchase prices and grid connection rights while requiring local content and technology development. The model has attracted international investors and helped drive down renewable energy costs significantly.

Nuclear Ambitions: A Long-Awaited Development

Turkey has pursued nuclear power development since the 1970s, but only recently has made concrete progress. The Akkuyu Nuclear Power Plant, being constructed by Russia's Rosatom under a build-own-operate model, represents Turkey's first nuclear facility. The 4,800 MW plant is scheduled to begin operations with its first unit in 2023-2024, with all four units expected to be operational by 2026-2027.

When completed, Akkuyu is projected to generate approximately 10% of Turkey's electricity, contributing to both energy security and carbon emission reduction goals. The project includes technology transfer components and training programs for Turkish nuclear specialists, though critics have raised concerns about regulatory independence, waste management plans, and increasing energy dependency on Russia.

Turkey has expressed interest in developing additional nuclear plants, with preliminary discussions held with countries including China, Japan, South Korea, and the United States. Sites in Sinop on the Black Sea coast and İğneada near the Bulgarian border have been identified as potential locations for future facilities.

The Energy Hub Ambition: Geopolitical Dimensions

A central ambition of Turkey's energy strategy has been to establish the country as a regional energy hub that not only transits energy from producers to consumers but also plays an active role in pricing, trading, and storage. This ambition leverages Turkey's geographic position between major energy producers in Russia, the Caspian region, and the Middle East and energy consumers in Europe.

Several factors support Turkey's hub aspirations. The country has developed substantial energy infrastructure, including cross-border pipelines (TANAP, TurkStream, BTC), LNG terminals, and the Energy Exchange Istanbul (EXIST) trading platform. Turkey's relatively liberalized electricity market and partially liberalized gas market provide some foundation for competitive trading and price discovery mechanisms essential for a functioning hub.

Turkey has also leveraged its energy relationships for diplomatic purposes. The country has maintained energy cooperation with Russia despite geopolitical tensions, supported Azerbaijan in developing export routes for its hydrocarbon resources, and engaged with potential suppliers like Iraq, Iran, Israel, and Eastern Mediterranean countries despite various political challenges.

However, several challenges constrain Turkey's hub ambitions. Limited gas storage capacity restricts seasonal balancing capabilities. Continued dominance of state-owned BOTAŞ in the gas market limits competition and liquidity. Geopolitical tensions in surrounding regions complicate infrastructure development and resource access. Regional competitors like Greece also aspire to hub status, particularly for Eastern Mediterranean gas resources.

Eastern Mediterranean: Tensions and Opportunities

The Eastern Mediterranean has emerged as a critical arena for Turkey's energy diplomacy following significant gas discoveries off the coasts of Egypt, Israel, and Cyprus since 2009. Turkey's approach to this region reflects both its energy security interests and broader geopolitical considerations, particularly regarding maritime boundaries and the status of Northern Cyprus.

Turkey has asserted maritime claims that overlap with those of Greece and Cyprus, conducting seismic surveys and drilling operations in disputed waters. This assertive approach has increased regional tensions and complicated energy development projects, particularly those involving Cyprus. Turkey has opposed the development of Cypriot offshore resources without agreement on revenue sharing with Turkish Cypriots and has challenged pipeline projects like the proposed EastMed Gas Pipeline that would bypass Turkish territory.

At the same time, Turkey has expressed interest in cooperating on Eastern Mediterranean gas development if its concerns are addressed. Turkish officials have proposed pipeline routes that would transport Israeli and Cypriot gas to Europe via Turkey as more economical alternatives to other export options. Recent diplomatic efforts to normalize relations with Israel and Egypt suggest potential for future energy cooperation, though significant political obstacles remain.

Climate Policy and Energy Transition

Turkey's approach to climate change and energy transition has evolved significantly in recent years. After long maintaining its status as a developing country under the UN Framework Convention on Climate Change (UNFCCC), Turkey ratified the Paris Agreement in 2021 and announced a net-zero emissions target for 2053. The country submitted its first Nationally Determined Contribution (NDC) pledging to reduce greenhouse gas emissions by up to 21% from the business-as-usual scenario by 2030.

Implementation of these commitments faces several challenges. Turkey's electricity demand continues to grow at approximately 4-5% annually, requiring substantial new generation capacity. Coal remains an important element of Turkey's energy mix, with domestic resources promoted for energy security reasons despite their environmental impact. The country's transportation sector remains heavily dependent on oil, with limited electrification to date.

Nevertheless, several positive developments support Turkey's energy transition. The rapid growth of renewable energy capacity has exceeded many projections. Energy efficiency improvements have reduced the energy intensity of the economy by approximately 25% since 2000. The introduction of carbon pricing mechanisms, including a planned emissions trading system, could accelerate the transition to cleaner energy sources.

Policy Challenges and Future Directions

Turkey's energy policy faces several significant challenges in the coming years. Energy import dependency remains high despite diversification efforts, creating economic vulnerabilities and constraining foreign policy flexibility. Energy affordability has become a pressing concern, with currency depreciation and global price increases impacting both households and industries. Balancing energy security, affordability, and environmental objectives presents complex trade-offs for policymakers.

Looking ahead, several trends will likely shape Turkey's energy landscape. The continued growth of renewable energy, supported by falling technology costs and policy incentives, will increase their share in the energy mix. The development of Black Sea gas resources will provide a partial offset to import dependency while strengthening Turkey's negotiating position with external suppliers. Nuclear power will enter Turkey's energy mix for the first time, bringing both new capabilities and new challenges.

The energy transition will require substantial investment in infrastructure, including grid modernization to accommodate variable renewable sources, electricity storage solutions, and energy efficiency improvements. Mobilizing this investment while maintaining energy affordability will require innovative policy approaches and financing mechanisms.

Turkey's aspirations to become a regional energy hub will continue to influence its diplomatic and infrastructure development strategies. Success will depend not only on physical infrastructure but also on regulatory frameworks, market design, and the ability to navigate complex regional geopolitics.

Conclusion: Navigating Multiple Imperatives

Turkey's energy policy reflects the country's unique geographic position and multiple strategic imperatives. As a bridge between energy-rich regions and energy-consuming markets, Turkey seeks to leverage its location to enhance its energy security, economic development, and regional influence.

The country has made significant progress in diversifying its energy supplies, developing indigenous resources, expanding renewable energy, and creating the physical and institutional infrastructure for a more resilient energy system. However, substantial challenges remain, including high import dependency, environmental constraints, regional tensions, and the need for massive investment in energy transition.

Turkey's ability to navigate these challenges while balancing relationships with both Eastern and Western partners will significantly influence not only its own energy security but also broader regional energy dynamics and geopolitical alignments. As global energy systems undergo fundamental transformation, Turkey's strategic location and multifaceted energy policy ensure it will remain a key player in regional and international energy geopolitics.