Mehmet Fatih Arslan: “If Russia sells the gas, Europe will certainly buy”

Mehmet Fatih Arslan: “If Russia sells the gas, Europe will certainly buy”
Update: 23 September 2022 16:11
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Turkish monetary policy and negotiation strategy will be crucial in how the country survives this crisis

Nowadays, almost everyone in Europe talks about the gas crisis which may escalate in the winter. Europe does not have the experience of spending a winter without Russian gas. Will the factories be able to work at full capacity, or will this initiate a recession in the economy? The recession would mean an increase in unemployment. Uncertainty makes people restless.

On the other hand, what will Turkey do as we have not joined the sanctions imposed by our Western allies? Almost 10 years ago, Turkey defied the sanctions imposed on Iran. And now it is faced with the biggest problem, CAATSA, which may finalize any moment in the US courts. Will Turkey try to defy the sanctions again?

Mehmet Fatih Arslan is a businessman and politician who specializes in the energy sector. Arslan is also in the shadow cabinet of the Future (Gelecek) Party as the Minister of Energy and Natural Resources.

As Winter is coming, the world has a problem called “Russian gas.” What will happen? Is Russia not going to sell or will the Western allies be able to refuse buying?

Well, I think if Russia sells, Europe will buy. In fact, although there are sanctions in place, they exclude any resource that Europe and the US needs. We know that after the sanctions the oil import from Russia to the US increased.

The other point is that even if Russia says that they stopped sending natural gas via pipeline, they allow China to re-export the gas as LNG. We need to see how serious Russia is when it comes to stopping the gas flow.

What may happen economically to the war in Ukraine if the Western bloc does not buy the Russian gas?

It will be harder to sustain such a war without sustaining the undisturbed flow of income. I think the subject is not the ability to sell but the price of the commodity. I think rather than restraining the export of the commodity which supports the high price, easing it will harm Russia more because in any case selling oil or natural gas will not be an issue. Specifically, Japan, China, India and Turkey can accommodate the market for Russia.

That is why the European Union wants to have a price cap on Russian gas which I think will not make things easier for the European Union.

Without Russian gas, how will production be affected, especially in Eastern Europe? Can factories keep working at full capacity?

Until now because of the reasons I listed before, Europe was able to get Russian gas and fill its storage, but it will have a hard time to sustain the flow of gas. There is a possibility of power cuts, but I think it will not be as people would imagine, like a doomsday scenario. In Eastern Europe, Russian gas has stopped flowing already. For example, Bulgaria, Poland, Latvia, Lithuania now don’t receive any Russian gas. I think Eastern Europe is much more prepared than Western Europe. Poland depends on coal while the rest rely on LNG.

How will Turkey be affected by this gas crisis? Regarding your expectations, what will the gas price be in the winter?

This situation allowed Turkey to get discounted prices for oil and use different means to provide gas supplies. Until now, we did not have the chance to pay for the gas using a credit scheme with rubles. This decreased the need to rush to find US dollars and helped to ease the financial stress that we are experiencing. However, the prices are still very high compared to the prices before; that’s why we will have a difficulty subsidizing the price that the industry and the households pay. I again think that there will be an increase in electricity and gas prices, but it is difficult to give a range because the prices are determined by political motivation.

What should Turkey do this winter?

The energy policy is not determined on a daily basis. However, we urgently need a good monetary policy to eliminate the impact of Turkish Lira’s depreciation. Then, we need to focus on price negotiations on oil and gas with Russia, including the right to get re-export rights for natural gas. We need to make sure that we can find alternative ways to deal with gas supply shortages that can be caused by Iran, as they did last year. The Ministry of Energy should prepare and declare an emergency action plan in case of a sudden gas supply halt that can be caused by Iran during the winter months so that we will not get caught unprepared. 

*Mehmet Fatih Arslan
Born in Istanbul in 1986, Mehmet Fatih Arslan graduated from high school at Robert College (2006) and graduated from Istanbul Technical University and State University of New York at Buffalo (2010). He also attended various executive programs at Harvard and Tufts universities. Between 2010 and 2013, he managed the construction projects of the family company abroad. Between 2013 and 2015, as the vice president, he took part in the execution of the Basaksehir City Hospital Project, the largest PPP hospital project in Europe. He took an active role in non-governmental organizations. As a member of the MUSIAD (Headquarters) Board of Directors, he served as the Chairman of the Overseas Infrastructure-Superstructure Project Development Committee. He served as the vice president of the Senegal Business Council at DEIK. He also took charge of Canada and Uzbekistan Business Councils within DEIK.