Turkey is more than just the second strongest NATO member besides the USA. It is one of the world’s largest crude hubs. With three pipelines running through the country and the Turkish straits made up of the Dardanelles, the Sea of Marmara, and the Bosphorus, millions of barrels of oil transverse Turkey daily.
To get an idea about the effect of the failed coup had on oil prices, crude futures rose 1.5 percent on Friday as the news of the coup became public. Oil prices have settled back down to $44 a barrel from $46 on the July 18th, but the continued counter-purge and growing friction between Erdogan and the other NATO members now cements and ongoing risk for oil shipping.
As of today, shipping has remained normal, but this can change quickly depending on how the events unfold.
“Any uncertainty in that region almost invariably results in an increase in oil prices, particularly given the interaction between what goes on in Turkey with Syria,” Craig Pirrong, director of the Global Energy Management Institute at the University of Houston’s Bauer College of Business, said Friday in a phone interview with GCaptain. “Analysts will be looking for whether there’s a “spillover to the major oil producers,” Pirrong continued.
Ceyhan is Key
Ceyhan, a city of 157 thousand in Southern Turkey is the terminus for three oil pipelines that run through Turkey. It is also the destination point to and from the Turkish Straits for oil tankers. Although the unrest seems to be dying down, any future turmoil in Turkey or the border region with Syria has the potential of affecting this point. If Erdogan goes after the Kurds in southern Turkey and Northern Syria, Ceyhan becomes the prime target of Kurdish counter attacks.
However, there is one thing that protects Ceyhan from potential Kurdish retaliatory attacks, and that is it too is being used by the Kurds of Iraq to ship their oil out below the radar by way of the Kirkuk-Ceyhan pipeline. One of the biggest recipients of Kurdish oil is none other than Israel, which is why Israel’s interest in renewed diplomatic relations with Turkey has become key to ensuring Kurdish oil flows to Israel.
The Ceyhan-Iran Connection
Israel has gone out of its way to empower and build overt and covert relationships with regional players in order to block Iran’s drive westward. The Kurds have always been a moderating and strong force in northern Iraq and have helped with degrading ISIS as well as helping to block Iran.
Another regional partner of Israel is Azerbaijan. The country is both a nemesis of Iran and sits on the strategic Caspian sea. The Baku–Tbilisi–Ceyhan pipeline stretches 1,768 kilometres (1,099 mi) bringing oil from Azeri–Chirag–Gunashli in the Caspian sea to shipping routes in the Mediterranean Sea. The oil field produces 710,000 barrels a day. Although it is lower than its peak of 810,000 daily barrels it is still vital for Azerbaijan.
Israel has a strategic interest in making sure Ceyhan is untouched and the free flow of oil from both of its allies reach their destination.