Sanctions Pose Threat to EIB Loan to Turkey

Loans from the European Investment Bank (EIB) for the 31bn m³/yr TransAnatolian Pipeline (Tanap) project totalling $600mn, could be affected by the bank's decision to follow the recommendations of the European Council to restrict its lending operations to Turkey. 

The bank told NGW that its board had approved two tranches of loans totalling $270mn and $330mn in March last year and will be paid through Turkey's state gas transmission operator Botas, which holds a 30% stake in the project. 

The EIB said it had signed the first tranche of $270mn in December while the second tranche has yet to be signed, adding that neither has yet been disbursed as both are still "subject to the signature of the project implementation agreement" for which negotiations are still ongoing.

The EIB had already indicated in a  separate written response that sanctions could be applied to loans which had already been approved as they are subject to "prior agreement" by the bank's decision taking bodies, but did not state directly that this was its policy.

It also confirmed that the bank plans to take "a restrictive approach" towards submissions for new lending in Turkey and that it is planning a full review of its lending operations in Turkey to be conducted later this year. It is anyway planning to halt all loans for fossil fuel projects from end-2020, deeming them incompatible with Paris Agreement objectives.

The EIB has yet to respond to questions from NGW as to whether delays to loans payable for Tanap could be implemented as part of a sanctions approach by the bank, and to confirm whether any such decision has been taken.

A spokesman for the Tanap project company declined to comment on the issue pointing out that it would be inappropriate as the loans were directed to the project through Botas. The European Council announced limited sanctions against Turkey following the arrival of the Turkish drill ship Yavuz in an area of the eastern Mediterranean claimed by Cyprus as part of its exclusive economic zone, the second Turkish drill ship to begin exploration within that area. 

The council criticised Turkey's drilling campaign as "illegal" and confirmed that it would end high level meetings with Turkish officials, reduce pre-accession assistance to Turkey for 2020 and that it was inviting the EIB to review its lending activities in Turkey, "notably with regard to sovereign-backed lending". 

The 31bn m³/yr capacity Tanap has been developed by a consortium of Azerbaijan's state oil company Socar (70%), Botas (30%) and BP (12%), and forms a major part of the European Union backed Southern gas Corridor being developed as an alternative to imports from Russia. 

Construction of the first phase of the project – a 31bn m³/yr capacity line as far as Eskisehir in north west Turkey – was completed in July last year with the supply of up to 6bn m³/yr of gas to Botas under 15 year deal starting the same month.

Construction of the second phase of the line, a 25bn m³/yr capacity stretch from Eskisehir to the Turkey-Greece border was completed last month, with first gas expected to flow next year following the completion of the 20bn m³/yr Trans Adriatic Pipeline (TAP) running through Greece, Albania and across the Adriatic to Italy.

Currently Tanap has commitments of only 16bn m³/yr from Azerbaijan's BP operated Shah Deniz Caspian gas field, of which 6bn m³/yr will be supplied to Botas and the remaining 10bn m³/yr will be transited via TAP to Italy. 

No plans have been confirmed for filling the remaining 10bn m³/yr of capacity in the line, although Azeri officials have consistently stated that they want the spare capacity to be filled with gas from other Azeri fields in the Caspian.