Abstract: In its approach to foreign policy and diplomacy, Turkey separates trade from regional conflicts. This is most evident in the signing of the Turkish Stream natural gas pipeline at a time when Russia is using military force to oppose Turkey’s objectives in Syria. Part I of this article argues that despite the economic benefits of the project to Turkey, Turkish Stream will facilitate the expansion of Russian influence into Europe and constrain Ankara’s foreign policy options. This conclusion is reached by analysing the impact of Turkish Stream within the wider context of Russia’s energy trade with Europe in general and Germany in particular. Germany’s ability to continue protecting Western interests are found to depend on the ability of leaders such as Angela Merkel to keep voices from Eurosceptic political parties, business lobbies and her own grand coalition focused on the domain of public discussion and not foreign policy. Berlin’s support for increasing Europe’s energy dependency on Russian imports is also identified as a reason behind growing tensions with the U.S. and EU. Part II will propose changes to Turkey’s energy policy and strategic investments that would mitigate these risks.

The global energy industry falls outside of the international institutional architecture that governs global trade and investment. This is due to the structure of the United Nations Charter, which grants governments full sovereign control over their mineral resources. Hence, the rules and regulations that govern global trade and investment through the World Trade Organisation do not apply to the energy trade. Institutions such as the IMF and World Bank use financial assistance and development loans in attempts to entrench free market principles within the global energy order. These attempts are not always successful, especially when large producers and consumers are independent of these institutions. Hence, energy trade and investment is often governed by bilateral contractual arrangements between producers and consumers. The lack of international enforcement mechanisms for these arrangements can lead to parties dishonoring contractual commitments. To improve governance, producers tend collaborate through cartels while consumers tend to seek to improve their negotiating positions by working through collaborative institutions such as the OECD and the EU. This article analyses the impact of the recent Turkish Stream deal in the context of weak global energy governance.