Interview with Hasan Mercan, Turkish Deputy Minister of Energy

Little hope for European markets to promote a change in the short-term and a Turkish involvement in African economic rise are the two main points made by Hasan Murat Mercan, Turkish Deputy Minister of Energy & Natural Resources, during an interview in Bruges. The Turkish politician expressed Ankara's intention to play a role in booming investments in Africa. Turkey is definitely eyeing new opportunities, and his politicians are studying the situation. Mercan listed some alleged political mistakes made by European institutions in the energy field. According to the Turkish Deputy Minister, these mistakes would soon translate into lost competitiveness for the Old Continent. In the interview at the sidelines of the conference What Future(s) for European Energy Governance?, we also spoke about Turkey's relation with Israel, Cyprus and Russia. 

In your speech, you mentioned Africa. Do you think Turkey can become an energy hub for Africa? If so, how? In general, can Turkey step up cooperation with African countries?

Africa is the next generation of development, globally speaking. This means a lot of investments in infrastructures, especially in the field of energy. Unfortunately until now not much investments had been made to develop infrastructures. They have oil, mineral resources and gas, but excluding North Africa very tiny percentage of people enjoy the benefits. So it is this global trend that you need to overview. We have to consider it. The rise of energy demand in Africa will definitely impact on the energy supply routes. For that reason, when developing energy strategies, everybody should take into consideration this increase in demand in Africa.

Don’t you think that this increase in demand will go hand in hand with a rise in supply?

Of course, it is the chicken or the egg causality dilemma. Demand brings supply and supply increases demand. For its geography, Turkey could not be a hub for energy supply, but it definitely can play a role in fostering these investments in African countries. It can help them in investing in their infrastructures.

So you are basically saying that rather being an energy hub, Turkey can be a financial hub for energy infrastructures in Africa, right?

Financial, intellectual hub.

You also spoke about energy imbalances in Europe. What is the way out now? Are there any solutions in the short-term?

I have to confess you that no, because I think that European energy policies are usually very reactionary policies, and they take measures that they regret afterwards. For instance, the subsidies to renewable energies had repercussions on the entire economy. Yes, it might have had positive consequences on the renewable sector, but in general it had a negative impact on the competitiveness of the entire Europe economy. Then for instance Europe stopped almost all its nuclear investments because of Fukushima and some major engines of the European economy such as Germany decided to close down their nuclear power plants. In my opinion, it is the wrong reaction because the world is not Europe-only. Europeans have to live in a global world where they interact. So the right energy policy is a balanced mix of all resources, including coal. For instance, Europe doesn’t use coal anymore.

I think that is not entirely the case. Poland’s Prime Minister argued that coal has to play a role in the energy mix. Warsaw’s reliance on coal would be impossible to overcome overnight. In a sense, his opinion is coherent with your viewpoint. On top of it, Donald Tusk is extremely in favour of shale gas in the framework of a balanced energy mix.

Yes, but Poland is probably one of the few exceptions within Europe. I know for instance that some companies are very hostile to exploration of shale gas. I know for example that some European companies refrained from investing in nuclear plants. I know for example that many European companies stopped producing coal. It definitely created imbalances.

Would you blame the companies or the politics?

At the end of the day, it is the politics. Of course, companies have conflicting interests. The right thing would have been to strike a balance between these conflicting interests and to come up with a balanced solution. Now. You might argue that energy imbalances affect only manufacturing jobs. But that is not the case. Eventually, high energy costs increase the service costs and service costs reduce the competitiveness. You will see European service companies relocating overseas.

During the conference, you said that there will be a shift from West to East and due to these imbalances jobs will be lost in OECD countries. What’s the time span you are referring to? How long do you think it will take?

It is even happening now. For instance, there is a French steel company closing now and reopening in the United States. It is happening right now, because gas prices here in Europe are three times higher than in the States. Investors would definitely go to low cost regions.

Your speech widely hinged on the concept of diversification. As Europe, Turkey is equally dependant on Russia. What’s the solution for Turkey? What are the other possible sources of gas? What about Azerbaijan?

Diversification means nuclear power plants…

Sorry, I was referring to diversification in relation to gas supplies.

In terms of gas, Turkey will develop new routes. Right now, Turkey has three main sources: Russia, Azerbaijan and Iran. Through the TANAP project, Turkey is set to increase its Azeri intake. At the same time, we are in a dialogue with Iraq for Iraqi gas. East Mediterranean seems to have a great potential as well. Hopefully, political problems between Turkey and Israel will go away. I hope Israel will meet the three demands pushed forward by Turkey.

But you are not referring to Cyprus. What about the relationship with Cyprus?

Cyprus’ gas is minimum or its field is relatively small. It is one third of the Leviathan basin. The rest of the Leviathan basin is much more important. So I hope that South Cyprus will take this into consideration to facilitate a solution.

Some papers - Jerusalem Posts for example - wrote that with the annexation of Crimea, Turkey faces a stronger and bolder Russian naval power in the Black Sea. Can it be an obstacle for a long-term cooperation between Turkey and Russia?

Russia already held a very strong naval power in Crimea. So, I am not quite sure whether Crimea annexation will increase Russian naval power. I doubt that Russia and Turkey will end up in a conflict very soon or in the coming future.  

In conclusion, Gazprom and Turkey are looking into possible increase in Blue Stream capacity. Do you think it will happen? How and how long it would take?

It is a negotiation process and if the price is right then we will consider it. It is an economic rather than a political decision. 

Sergio Matalucci