CEYHAN WILL BECOME THE “ENERGY HUB” OF THE REGION, said Abdullah Gill, the Minister of Foreign Affairs of Turkey

Caspian Energy (C.E.): Mr. Minister, how can you formulate today’s basic priorities of foreign economic course of Turkey? Which relations with neighbour states presently are more prior to Turkey?

Abdullah Gul: Foreign trade plays undoubtedly a crucial role in fostering sustainable economic growth and raising living standards. Developing countries have actually much to gain from improved access to markets of developed countries. Turkey, in this sense, is committed to push forward various liberalization arrangements on multilateral level. Indeed, we seek for a fair, competitive, and predictable trading environment and expect other countries to do the same, following basic rules of the multilateral trade without resorting to unfair trade and competition practices.

Today, the membership in the World Trade Organization (WTO) and the customs union with the EU are Turkey’s two major economic involvements.

Regional integration mechanisms are the most important element of Turkish foreign trade policy. We believe that such structures, being complementary to the multilateral trading system, bring about enormous positive impact on international trade.

To this end, Turkey’s membership to the EU is a process that goes back to the late 1950s. Consolidated over the years, it has been the main pillar of Turkish foreign policy. Following several phases and based on the recognition by the Commission and the Council on 17 December last year to have

met sufficiently the Copenhagen Criteria, Turkey was given a firm a date (3 October 2005) to start the accession negotiations.

The start of the accession negotiations on 3rd of October has opened a new page in Turkey - EU relations. However, economic integration between Turkey and the EU is already quite advanced due to the Customs Union, which entered into force in 1996. As a matter of fact, Turkey is the only country to have entered into a Customs Union before the accession. The EU holds a big share in foreign investment in Turkey. It is also a major trade partner, covering nearly half of the total trade volume of Turkey. Since the establishment of the customs union in 1996, our trade with the EU countries increased 114 percent, reaching 87.3 billion dollars in 2005.

On the other hand, Turkey bridges different groups of countries with respect to their production patterns, economic and political structures, and different geographies and cultures. This fact has urged us to devise regional oriented strategies with a view to further developing trade and investment. We believe that such schemes will also contribute to the stability and welfare of the region. In this context, the “Trade Development Strategy with the Neighboring and Surrounding Countries” was initiated in the year 2000. This strategy that incorporates 50 countries having historic and cultural ties with Turkey, has been yielding promising results.

The ongoing privatization process and huge energy and infrastructure projects have rendered Turkey more attractive to foreign investors in recent years. With its dynamic economy, large internal market, competitive industry and skilled labor force, Turkey actually offers numerous opportunities for multinational firms. Recently, we reduced the corporate tax from 30 % to 20 % which will be further encouraging for foreign firms to invest in Turkey.

C.E.: What are the Turkish priorities regarding participation aspect in regional projects in the territory of the former Soviet Republics, particularly in the Turkic?

Abdullah Gul: Turkey forms a natural energy bridge between the resource-rich countries of the Caspian basin, Middle East and the world markets. As one of the biggest investors in the region having close

historical, cultural and economic ties with the countries of the region, Turkey acts not only along with its commercial interest but also bears the responsibility for supporting these nations in their social and economic developments.

It is with these considerations that the East-West Energy Corridor Project was elaborated. The East-West Energy Corridor essentially aims at transporting the Caucasian and Central Asian energy resources to western markets through safe and alternative routes.

C.E.: How do you estimate an activity of energy transport bridge’s construction between Turkey and Europe and what are the perspectives of Azerbaijan’s gas re-export to Europe?

Abdullah Gul: Concrete steps have been taken for the European connection of the Baku-Tbilisi-Erzurum natural gas pipeline project. For moving gas further towards the Central European markets, efforts are underway to realize the Nabucco pipeline project, stretching from Turkey to Austria via Bulgaria, Romania and Hungary.

On the other hand, the Turkish-Greek Inter-connector project was turned into the Turkey-Greece-Italy Inter-connector.

Realization of these projects will help Turkey become the fourth artery of the EU for natural gas in the years to come.

Regarding the oil transportation, taking into account the capacities of the BTC, the Iraqi-Turkish Oil Pipeline and Samsun-Ceyhan by-pass pipeline which is under development, as well as the oil transported through the Turkish Straits, it is expected that 6 to 7 per cent of global oil supply will transit Turkey. In other words, one barrel in 16 barrels of oil will pass via Turkey to world markets. Moreover, with a possible construction of an oil refinery and an LNG terminal, Ceyhan will likely to become the “energy hub” of the region.

C.E.: What are the perspectives for mutual relations’ development with Caspian nations?

Abdullah Gul: Turkey has set a precedent by recognizing the independence of all countries in the South Caucasus and the Central Asia immediately after the demise of the Soviet Union. We feel strongly affiliated to all these countries.

Over a decade and a half since their independence, these countries have built the capacity to stand on their own and proven their viability. Despite a multitude of internal and external threats, they have consolidated their independence and sovereignty and have covered significant ground toward full-fledged democratization, albeit at different paces. They have grown economically and further integrated with the global economic system, diversifying the routes to transport their natural resources to world markets, thereby earning higher revenues to upgrade the living standards of their populations. Each country in the Caspian basin is in pursuit of its national goals, thus perceives the current state of affairs from a different angle. However, it is important for them to develop a common vision. In this vein, they become increasingly aware of their interdependence and complementary nature of their economies. This awareness brings about new perspectives to bolster regional economic co-operation and development, which would, in turn, pave the way for closer political relations.

Since the collapse of the Soviet Union, Turkey seized every opportunity to intensify its bilateral relations with all young republics born in the South Caucasus and the Central Asia, the two important sub-regions of the wider Eurasian entity. Notwithstanding this effort, we regret to observe that Armenia continues to isolate itself from regional co-operation initiatives, by pursuing aggressive and hostile policies towards its neighbors in defiance of the basic principles of international law.

Turning to the Caspian basin, it is worth mentioning that numerous mechanisms have been devised to deepen bilateral and regional co-operation in the region. The Caspian basin has now risen to prominence, largely thanks to its vast oil and natural gas resources.

However, domestic and inter-state conflicts delay the long-awaited economic boom of the Caspian nations.

Today, democratization is a precondition to fully integrate with the developed nations. These conflicts severely undermine democratization efforts. Therefore, we spare no effort to facilitate conflict resolution processes. We will maintain this responsible attitude.

The Turkish perspective towards this region is dominated by an open, transparent and sincere political thinking. We will sustain our efforts in assistance to the quest of the Caspian nations to adopt democratic values, establish democratic institutions, upgrade their economic infrastructure and further integrate with the international community.

In conclusion, we are optimistic about the future of the Caspian nations, in as much as they abide by the basic principles of the international law and allow the spirit of cooperation to prevail. Turkey is a member of the Caspian nations family and it will continue working for the good of all family members.

C.E.: What does mean the mega projects such as Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum named after Heydar Aliyev to the Turkish economy?

Abdullah Gul: These projects, while helping Caspian oil and natural gas to be transported to Western markets regularly and reliably, will also add to the strategic importance of Turkey. It will provide our national industries with regular inflow of oil and gas, thereby contributing to the growth of the Turkish economy. While getting certain amount of oil and gas from these pipelines, Turkey will also get transit fees for the transportation of these resources.

C.E.: How do you see the future of Turkey? How do you estimate the relations with EU nations, which projects are being conducted and the speed of their realization?

Abdullah Gul: Oil and gas together will account for more than 60% of the growth in global energy demand between now and 2030. By 2030, the EU’s natural gas import dependency will have increased by 80% compared to 50% at present. By 2030, OECD Europe’s natural gas dependency is expected to have increased by 65%.

The recent developments in the global energy sector demonstrated the vulnerability of the markets. It highlighted the need to diversify transport routes as well as supply sources. Given its geographical proximity to the energy-rich regions where three-fourth of the world oil and gas resources are located, Turkey has an important role to play. Turkey can substantially contribute to the global energy security as well as that of Europe.

In this context, Turkey is trying to strengthen its role as an energy hub and a transit country in the region.

C.E.: Does the contract-legal base between Turkey and Azerbaijan economic cooperation enough?

Abdullah Gul: As the first country which recognized Azerbaijan in 1991, Turkey gives special importance to economic relations with Azerbaijan.

The legal basis of our economic relations with Azerbaijan has been constituted by agreements signed during the 1990s.

The “Agreement on Trade and Economic Cooperation” signed in 1992, together with the “Agreement on Avoidance of Double Taxation” and “Agreement on Promoting and Protecting Investments” both signed in 1994, constitute the basic legal framework of economic relations between Turkey and Azerbaijan.

Additionally, cooperation agreements on specific areas, including health, agriculture, technical assistance and small and medium enterprises have already been signed between the two countries.

Another important agreement on long term economic cooperation between Turkey and Azerbaijan was signed during President Mr. llham Aliev’s official visit to Turkey in 2004.

These agreements constitute a comprehensive legal basis for efficient economic cooperation between our countries.