The European Investment Bank (EIB) has approved 932 million Euros ($1.15 billion) in loans for the Trans Anatolian gas Pipeline (TANAP) being constructed across Turkey to carry gas from Azerbaijan to Turkish and European markets.
The announcement of the funding for TANAP, which was first mooted early last year and which has been under active consideration by the bank since June, comes despite concerns over the environmental impact of the project, long-standing criticism of the human rights record of Azerbaijan which owns 58 percent of the pipeline equity, and recently stormy relations between Turkey and the European Union.
Last December, 33 members of the European parliament wrote an open letter to EIB President Werner Hoyer, urging him to suspend plans to finance TANAP, citing corruption and human rights concerns in Azerbaijan and Turkey. But confirmation of the loan was never really in doubt.
The TANAP pipeline has long been the cornerstone of the European Union's planned "Southern Gas Corridor" (SGC), designed to carry gas from the Caspian basin to markets in central and southern Europe. It will compete with gas from Russia, which currently enjoys a near monopoly in supply to the region.
As such, the European Commission last year waved away criticism of the SGC to include it in its priority list of "Projects of Common Interest.” TANAP has already received funding from the European Bank for Reconstruction and Development, the World Bank, and the Asian Infrastructure and Investment Bank.
And last month the EIB confirmed loans of 1.5 billion euros – its largest ever – for TANAP's sister project, the Trans Adriatic Pipeline (TAP) to which TANAP will connect on the Turkey-Greece border.
The confirmation of the EIB loan for TANAP also comes at a time when both Ankara and Brussels have been attempting to patch up relations after a series of increasingly bitter diplomatic spats over the past year.
A sharp deterioration in relations had thrown into doubt the future of a 2016 agreement under which the European Union undertook to grant Turkey six billion euros towards the cost of hosting an estimated 3.5 million refugees from Syria, as well as taking steps to halt the smuggling of refugees and migrants from Turkey to Greece and Bulgaria.
That agreement now appears to have been saved with the announcement on March 14 that the European Commission had agreed to release a second tranche of three billion euros in funding for Turkey's refugee program.
However, the commission has yet to deliver on its promise to remove visa restrictions for Turks traveling to Schengen countries.
Although the EIB loan for TANAP has only just been approved, the pipeline is set to deliver its first gas to Turkey in June this year.
That gas, an initial six billion cubic meters per year, will be supplied to Turkey's state gas transmission and import company BOTAS at the line's sole offtake point at Eskisehir, in northwest Turkey.
BOTAS holds a 30 percent stake in TANAP, along with Azeri state oil company SOCAR (58 percent), with the remaining 12 percent held by UK oil giant BP. BP operates Azerbaijan's Shah Deniz gas field, which will supply the initial six billion cubic meters per year of gas to Turkey and another ten billion cubic meters per year for transit to Europe.
That ten billion cubic meters per year will be carried by TANAP to the Turkey-Greece border, where it will be transferred to the TAP pipeline for transit through Greece, Albania and across the Adriatic to Italy, starting when the TAP line is completed in 2020.
A further 15 billion cubic meters per year of capacity in TANAP and 10 billion cubic meters per year in TAP have yet to be allocated with the pipeline developers reported to have been considering gas from a number of sources, including other Caspian gas fields belonging to Azerbaijan, Iraq, Iran and Turkmenistan.
David O’Byrne is an Istanbul-based journalist who covers energy.
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