Regional Review: Turkey’s ‘Crazy Project’

By Simon West

Since taking power in 2003, first as prime minister then as president, Tayyip Erdogan and his ruling Justice and Development Party, or AKP, have given a green light to dozens of large-scale construction projects in Turkey, a strategy that has been a boon for breakbulk movers.

Flagship projects during the two-decade infrastructure drive have included the New Istanbul Airport, one of the world’s busiest according to developers, the Galataport cruise ship terminal, also in Istanbul, and the 1,850-kilometer Trans-Anatolian Natural Gas Pipeline, or TANAP, a key section of the Southern Gas Corridor venture to transport natural gas from the Caspian Sea to Europe.

One project in particular though, has been garnering the headlines: Canal Istanbul.

If built, the US$15 billion development, first announced a decade ago, would carve out a 45-kilometer shipping channel between the Black Sea and the inland Sea of Marmara, and would run parallel with the Bosphorus, one of the world’s busiest trade corridors.

The canal was formally launched in June with the laying of foundations for the first of six bridges that will traverse the planned route. But work on the waterway, which Erdogan himself has jokily dubbed a “crazy project,” has yet to begin.

“Turkey will become the world’s most important logistics center with the Canal Istanbul. The Black Sea will turn into a trade lake for Turkey,” said Transport Minister Adil Karaismailoglu prior to June’s launch.


Plans Make ‘Little Sense’

Serious questions though remain over its viability, with many claiming the plans make little logistical, environmental or economic sense. Erdogan said in June the canal would take six years to complete.

“This is a very controversial project and no one knows whether it will happen,” said an Istanbul-based logistics executive, who asked not to be named.

The government has insisted that a new passage is needed to ease congestion on the Bosphorus, reduce waiting times for entry that on clear days average 13 to 14 hours, and provide safer transit conditions for vessels. Some 41,000 ships sail through the Bosphorus every year, a number expected to rise to 68,000 by 2039, according to the transport ministry.

But Yoruk Isik, an Istanbul-based maritime analyst, scholar at the Middle East Institute and staunch critic of the new canal, told Breakbulk that over the last two decades, traffic on the Bosphorus has declined, mainly due to fewer tankers transporting oil and gas and larger ships that can carry more cargo, while safety has improved thanks to more advanced vessels and better traffic management.

“Transit is getting slightly smaller, and that is because Turkey builds so many pipelines,” Isik said. “And the Bosphorus is actually safer through technology – the last major accident happened more than 40 years ago. Improving safety does not require new construction.”

According to the plans, the new waterway will be 20.75 meters deep with a minimum width of 275 meters, dimensions that could prove hazardous for larger vessels, Isik said. “Passing through a natural strait like the Bosporus, however challenging it might be, is significantly safer than going through a narrow canal.”


Environmental Impact

Detractors also claim the project would cause irreparable damage to the environment.

According to the ministry, Canal Istanbul would run on a fairly straight route from Karaburun on the Black Sea coast down to the Kucukcekmece Lagoon on the Sea of Marmara’s northern coast. Construction though would entail slicing through marshlands and forest and threatening local ecosystems and water supplies.

“It will fully destroy one of Istanbul’s freshwater reservoirs and expose another one to salination,” Isik said. “Istanbul and Turkey already suffer from drought, while the Black Sea is already very polluted. How this will affect the Marmara Sea if connected by a canal is unknown.”

Istanbul Mayor Ekrem Imamoglu has also joined the chorus of disapproval, claiming the project poses a grave danger to the city’s surface and ground water resources.

“No sensible politician can support a project of this sort, at a time when climate change is causing unprecedented damage to our planet’s water resources,” tweeted Imamoglu, who last year began legal proceedings against the development.

Imamoglu, from the center-left Republican People’s Party, or CHP, also slammed June’s inauguration ceremony as a sham, claiming the start of the bridge construction is part of a separate highway construction project, approved years ago.

The project’s environmental impact could see the government struggle to secure financing.

A Reuters report in April citing unnamed senior bankers said some of Turkey’s largest banks would be unwilling to invest in Canal Istanbul because of the risks. European backers of Turkish banks would unlikely accept Turkey’s environmental approval, they were quoted as saying.


Funding Challenges

Gulcin Ozkan, a professor of finance at King’s College London, agreed that funding for the project remained a major challenge.

“Turkish banks, having signed the UN’s Principles for Responsible Banking framework, which requires signatories to ‘avoid harming people and the planet,’ would not be able to provide the financial backing for the project. Other signatories of the principles would be similarly constrained,” Ozkan said.

Chinese, Dutch and Belgian banks have been cited as potential investors, although concrete plans have yet to take shape, Ozkan added.

China secured a foothold in Turkey’s shipping industry six years ago after a consortium led by state-run COSCO Pacific bought a 65 percent stake in Kumport, Turkey’s third-largest container terminal, located on Istanbul’s Ambarli coast.

However, given the enormous financial and environmental challenges, and the substantial public opposition, Ozkan said it was “unlikely” that the canal would be built. “It is difficult to see how such a project could and whether it should go ahead.”

Isik was even more damning in his appraisal. “On a scale of one to 10, the possibility of this canal getting built is minus one. There is absolutely no financial logic to build such a canal. There is no natural need, no customers, no demand.”


Alternative Project Options

Should Erdogan’s “crazy project” come unstuck, as so many experts predict, forwarders in Turkey have plenty of alternative options springing from the government’s construction push.

“Investments continue non-stop in some key areas,” said Emre Eldener, managing director at Istanbul-based Kita Logistics, and president of the Turkish Forwarders Association. “There are underwater LNG storage projects, upcoming Black Sea oil exploration projects and of course, the Akkuyu nuclear power plant (NPP).”

Akkuyu, Turkey’s first NPP, is being built in southern Mersin province by Russian nuclear conglomerate Rosatom, with work on the first of four 1.2 gigawatt reactors beginning in late 2017.

Once up and running, the US$20 billion plant is expected to provide about 10 percent of Turkey’s electricity demand, with completion of all four reactors slated for 2026. Russia-based transport group FESCO is providing heavy-lift logistics services for the project.

Last year, the group shipped four steam generators weighing 358 tonnes each from manufacturing facilities at Volgodonsk in southeast Russia to the Black Sea port of Rostov-on-Don, and on to a terminal near the port of Mersin.

Another site that has been offering forwarders significant cargo-carrying work since it broke ground in early 2017 is the 1915 Canakkale Bridge and Motorway Project, a €3 billion venture that developers claim will incorporate the longest mid-span suspension bridge in the world.

The bridge and approaching viaducts will stretch 4.6 kilometers across the Dardanelles in northwest Canakkale province, south of the Marmara Sea, and is slated for completion in March 2022, some 18 months ahead of schedule. The venture has called for the transport of dozens of heavy-lift components, including bridge foundations, tie beams and 700-tonne mega-block decks.

“The bridge is almost complete, so I believe the transport will be finished when the last two pieces of the main bridge are delivered by barge,” Eldener said. “There are still opportunities until the end of this year.”


Election Wrinkles

Turkey’s infrastructure boom meanwhile is unlikely to be hampered by the outcome of presidential elections in 2023.

Erdogan’s two victories in 2014 and 2018 preclude him – on paper at least – from running for a third term. But with the AKP’s power over the courts, the president would likely prevail in any constitutional scrap with opposition lawmakers.

“No judicial authority, I think, would dare to reject Erdogan’s demand to run for the third time,” said Toygar Baykan, assistant professor of politics at Turkey’s Kirklareli University.

Furthermore, the AKP’s widespread use of patronage – the use of state resources to reward loyal supporters – could mean Erdogan, sitting atop this tightly interwoven network, has no option but to run for another term. “Even if he wants to retire, his responsibilities to his broad network of supporters would stop him from doing so,” Baykan said.

“In the case of a change in the government, the new ruling party or coalition would hesitate to introduce dramatic measures to transform the Turkish economy. The construction business would continue to occupy a central position.”

That is, with one major exception. “Canal Istanbul is an extremely contentious and entirely different issue. If the opposition coalition wins elections and forms the government, I think they would cancel it.”

Colombia-based Simon West is a freelance journalist specializing in energy and biofuels news and market movements in the Americas.

IMAGES:

Photo 1: Turkey’s 1915 Canakkale Bridge and Motorway Project, incorporating the longest mid-span suspension bridge in the world, is taking shape. CREDIT: SHUTTERSTOCK

Image: Graphic of proposed Canal Istanbul. CREDIT: WIKIPEDIA

Photo 2: Forwarders in Turkey have plenty of project options springing from the government’s construction push. CREDIT: KITA LOGISTICS

Photo 3: The first heavy component of a steam turbine set – the rotor of the high and intermediate pressure cylinder (HP and IP cylinder), more than 12 meters long and topping 107 tons – is delivered to the Akkuyu NPP construction site. CREDIT: AKKUYU NUCLEAR JSC