Turkeys strategic location makes it a natural Energy Bridge between major oil producing areas in the Middle East and Caspian Sea regions on the one hand, and consumer markets in Europe on the other. Turkeys port of Ceyhan is an important outlet both for current Iraqi oil exports as well as for potential future Caspian oil exports. Turkeys Bosporus Straits are a major shipping choke point between the Black and Mediterranean Seas. Finally, Turkey is a rapidly growing energy consumer in its own right. Turkey has experienced a strong recovery from a severe economic contraction it experienced in 2001 due to a devastating financial and currency crisis. In response to Turkeys 2001 economic crisis, the International Monetary Fund (IMF) began working closely with the country. Turkish parliament passed an energy liberalization law aimed at ending the governments monopoly in the energy sector, and also geared towards attracting foreign energy investment. In April 2005, the International Energy Agency (IEA) issued a report on Turkey which said that Turkey has taken steps to implement energy market reforms which have resulted in clear and significant benefits. Turkeys efforts to join the European Union (EU), the country have incorporated numerous EU energy laws and standards into its own national energy legislation. In addition, Turkey has ratified the Kyoto Protocol on global climate change. Turkish oil consumption and imports were down approximately 30,000 barrels per day (bbl/d) from 2000 levels. Around 90 percent of Turkeys oil supplies are imported, mainly from the Middle East (Saudi Arabia, Iran, Iraq, Syria) and Russia. Oil and gas transportation is a crucial and contentious issue in the Caspian Sea/Central Asia regions. For several years, Turkey and the United States had pushed for a Western route pipeline that would carry oil from Azerbaijans port of Baku through Azerbaijan and Georgia and then across Turkey to Ceyhan. In addition to BTC, a Russian-backed Northern route carries oil across the Caucasus to the Russian Black Sea port of Novorossiisk. Other proposals for Bosporus bypass routes include a 1.1-million-bbl/d line from the Black Sea port of Samsun in northeastern Turkey to Ceyhan, the 570-mile, 750,000-bbl/d AMBO line between Burgas and the Albanian port of Vlore, and the SEEL line from Romanias port of Constanza to Italys Adriatic port city of Trieste. Turkey has refining capacity of 802,275 bbl/d at 7 refineries. Turkey consumed 748 billion cubic feet (Bcf) of natural gas (nearly all imported) in 2003, up from 150 Bcf consumed in 1991. In 2003, the Turkish power sector accounted for about 65 percent of total Turkish gas demand, with the industrial and residential sectors accounting for 19 percent and 14 percent, respectively (fertilizer production took the remaining 2 percent). Turkey has hard coal (anthracite and bituminous) reserves of around 1.1 billion short tons, plus lignite reserves around 8 billion short tons. Turkey has substantial renewable energy resources--especially hydroelectric power--and it is currently constructing a series of dams and hydroelectric power plants. As Turkey looks towards possible European Union membership, it will need to continue utilizing this cleaner energy as a means to achieve sustainable economic development. Turkey also has a great degree of potential for energy efficiency improvements.
Turkey has experienced a strong recovery from a severe economic contraction it experienced in 2001 due to a devastating financial and currency crisis. During 2004, Turkeys real gross domestic product (GDP) grew by a rapid 8.9 percent, with an inflation rate of 8.6 percent. For 2005, real GDP growth is forecast at 5.6 percent, with inflation of 8.0 percent. Unemployment was running around 11.7 percent in the first quarter of 2005, down from 12.4 percent in the first quarter of 2004. In response to Turkeys 2001 economic crisis, the International Monetary Fund (IMF) began working closely with the country. In early 2002, the IMF and Turkey agreed to an $18.6 billion Stand-By assistance package. On May 11, 2005, the two parties agreed to a further $10 billion, 3-year package. IMF assistance to Turkey is conditioned on implementation of a variety of reform measures aimed at addressing the root causes of the countrys economic problems. Among other things, Turkey has pledged to cut state spending and subsidies, reform the countrys banking sector, accelerate privatization of state-owned industries, lower the inflation rate, reduce the countrys heavy debt burden, and in general create a stable macroeconomic environment conducive to economic growth. In May 2005, the IMF stated that Turkeys economic performance is the strongest in a generation. The IMF called for measures ranging from continued independence of the central bank to full inflation targeting in order to facilitate further reductions in interest rates and generate sustained growth. Despite the positive signs seen recently, Turkey continues to face numerous economic challenges, including: a large underground economy; sharp income inequalities; a large, inefficient state sector; overly complicated legal and administrative procedures; a relatively inhospitable foreign investment climate; and a stalled privatization program. In addition, Turkeys desire to join the European Union (EU) has increased political debate over such issues as rights for ethnic Kurds, the death penalty and human rights, emergency rule in four eastern provinces, economic reform, and democracy in general. In March 2004, Turkey held local elections, in which the ruling, Islamist-based Justice and Development Party (AKP) won a significant victory.
Prior to Turkeys severe economic difficulties in 2001, the countrys energy consumption and net imports had been growing rapidly. Assuming that the Turkish economy and energy demand return to a rapid growth path, Turkey will require billions of dollars worth of investments in coming years. In 2001, Turkey ratified the Energy Charter Treaty, the international legal framework for energy investment. Also, in early 2001, the Turkish parliament passed an energy liberalization law aimed at ending the governments monopoly in the energy sector, and also geared towards attracting foreign energy investment. In December 2003, parliament passed legislation liberalizing the countrys energy sector. In February 2004, the government raised taxes on unleaded gasoline, diesel, and natural gas as part of a move towards boosting budget revenues in line with IMF recommendations. In November 2004, two former Turkish energy ministers, Cumhur Ersumer and Zeki Cakan, went on trial for corruption in awarding natural gas and power projects. In April 2005, the International Energy Agency (IEA) issued a report on Turkey which said that Turkey has taken steps to implement energy market reforms which have resulted in clear and significant benefits. Now, continued action is needed to see the process through to a successful conclusion. The IEA elaborated that Turkey needs to restructure the state-owned enterprises...create independent electricity and gas operators and to remove cross-subsidies from electricity and gas prices. The IEA report follows an October 2004 European Commission assessment of Turkey, in which the Commission called on Turkey to continue liberalizing the countrys energy sector in line with the single European energy market, and recognized Turkeys role as an important oil and gas transit center. As part of the Turkeys efforts to join the European Union (EU), the country has incorporated numerous EU energy laws and standards into its own national energy legislation. In addition, Turkey has ratified the Kyoto Protocol on global climate change.