FOCUS ON MEGAPROJECTS

The landslide victory of the ruling Justice and Development Party (AKP) in snap parliamentary elections on November 11 will give new life to the Turkish economy. A period of political instability began after the failure of an attempt to create a coalition government after the June 7 elections. This had a negative affect not only the domestic economy, but also placed under doubt the realization of some major projects.

First of all it needs to be said that the AKP's victory renewed the trust of local and foreign investors in the Turkish national currency. The increase in the value of the Turkish lira in relation to the dollar might be short-lived, but after the AKP's landslide victory the exchange rate for the lira has increased rapidly since 2008. 

Since the AKP came to power in 2002, it has used the financial assets in its possession in a very logical way. The result of current Turkish president Recep Tayyip Erdogan's policies is the reduction of the national debt from its high point of 77.9 per cent of GDP in 2001 to 33 per cent of GDP in 2014. With the arrival of two million Syrians seeking refuge in Turkey, this year has been a hard one for the Turkish government. One only need keep in mind that the European Union has faced political and social unrest even though the number seeking refuge in wealthy European countries in 2015 is only a little over one million. 

The continuation of Erdogan's policies, in which the interests of the country's business circles are placed above political motives, has allowed the Turkish economy to remain afloat. The Turkish administration was able to withstand pressure from the US and the EU, and declined to join the sanctions against Russia. In the end Turkey was able to preserve the flow of tourists from Russia and increase the volume of Turkish fruits and vegetables to Russian markets. 

A meeting between Turkish president Erdogan and Russian president Vladimir Putin is expected by the end of the year. During the meeting it is entirely possible that an agreement will be signed on the realization of the Turkish Stream project. Readers may remember that the Russian side stopped the negotiation process over the Turkish Stream because they expected a political crisis in Turkey, since the agreement had to be approved by the Turkish parliament. Now, after the AKP's landslide victory, expanded economic cooperation between Russia and Turkey can be expected, including the signing of an agreement to begin the construction of the Turkish Stream, which will move 32 billion cubic metres of gas a year. No one should expect that Russia's military involvement in Syria will cause a break in Turkish-Russian relations.

During a November 2nd meeting between Russian minister of economic development Aleksey Lyukayev and Turkish minister of economics Nihat Zeybekci it was announced that an "Agreement on a Free Trade Zone between the Russian Federation and Turkey" might be signed in 2016. Moreover, diligent work is ongoing on a Russian-Turkish agreement for economic and investment cooperation between the countries for 2016-2019. Incidentally, the Rus-sian and Turkish sides are making efforts to complete the preparation of an intergovernmental agreement on the Government High Council of Russian and Turkey, which is expected to meet by the end of the year. Of course, the Turkish government is taking steps not only to ramp up bilateral cooperation, but also cooperation within international organisations like the Eurasian Economic Union (EEU) and the Shanghai Cooperation Organization (SCO). 

One project particularly promising for Turkey is the Chinese initiative for the Silk Road Economic Belt. The launch of rail travel as part of the Baku-Tbilisi-Kars rail project, which will link Azerbaijani and Georgian railroads with Turkish ones and is scheduled for next year, might contribute to the Silk Road initiative. Turkey will have quite a stake in increasing transit of cargos from China to Italy as part of a Trans-Caspian transport route, which by 2020 might exceed 300,000 containers per year. Of course, for this to happen there will be far-from-easy talks on coordinating the work along the entire multi-part China-Kazakhstan-Azerbaijani-Georgia-Turkey chain, which includes railroads, Caspian ports, land routes and terminals to provide for quality service, including optimal delivery dates, multi-mode transport solutions, and a competitive tariff policy.  

To increase the attractiveness of the Turkish economy Turkish president Erdogan will be forced to take harsh measures against any terrorist groups within the country. Of course, most of all this means militants from the Kurdistan Workers' Party (PKK) and Islamic State terrorists. 

A few days ago the Turkish government announced its intention to accelerate work on the Trans-Anatolian Gas Pipeline (TANAP). However, it is entirely clear that two explosions on the South Caucasus Pipeline (a pipeline from the Azerbaijani oilfield Shahdeniz to the Turkish city of Erzurum) in the Turkish province of Kars on August 4 and August 24 of last year show that it is essential that the security problems in eastern Turkey finally be solved. 

TANAP will give Turkey not only the ability to increase its purchases of comparatively cheap Azerbaijani gas, but also give it more significant chances of becoming a gas hub. Out of the 16 billion cubic metres of gas planned for export as part of "Stage 2" of extraction from Shahdeniz, six billion will be bought by Turkey, with the remainder going to Europe. Morever, in future TANAP will allow the delivery of Turkmen, Iranian, and Iraqi gas. 

It is important to remember that President Erdogan is counting on stable increase in the Turkish economy, and therefore needs reliable and cheap fuel. In this connection there can be no doubt that work building the Akkuyu nuclear power plant will be accelerated. The project for the first atomic power plant is estimated at 20 billion dollars and includes the construction of four atomic reactors, each energy block of which will produce 1200 megawatts. As of today three billion dollars have already been invested in the construction of the Akkuyu nuclear power plant, and the first block will go live in 2020. Once all of Akkuyu's units are launched in 2023, it will produce up to 35 billion kilowatts per hour of electricity. 

The only threat which could negate Erdogan's economic successes, which has turned Turkey into one of the region's rapidly developing countries, is that of terrorist acts, which have swept the country recently. And if Turkey is able to deal with the terrorist threat, the realization of megaprojects will bring not only a renewal of the Turkish economy, but also a strengthening of Ankara's political influence in the region.