Turkey explores nuclear plant payments to settle gas debt with Russia

Turkey is exploring several alternatives to process gas payments to Russia following Washington’s sanctions on Gazprombank last month, including taking loans from Russian banks and settling payments through expenditures related to the Akkuyu Nuclear Power Plant.

Sources familiar with the matter told Middle East Eye that Ankara was not caught off guard by the US Treasury’s sanctions, which targeted the bank and its six foreign subsidiaries over the Ukraine war.

According to these sources, US officials had informed Ankara about the impending measures prior to the public announcement and had even held discussions on potential paths forward. The sanctions provide a wind-down period until 20 December.

Turkish Energy Minister Alparslan Bayraktar said last month that Turkey would seek an exemption from the sanctions, as it would otherwise struggle to make payments for the billions of dollars’ worth of gas it imports from Moscow.

Last year, over 40 percent of Turkey’s gas consumption was supplied by Russia.

“The Americans are unlikely to grant Turkey an exemption,” one of the sources said. “Instead, they suggest Ankara use smaller Russian banks that are still permitted to handle energy payments under existing waivers.”

However, it remains unclear whether Russia would agree to such a solution.

As an alternative, Turkish officials are considering other options, such as bartering agricultural products for gas – though this would likely fall short of covering the full payments – or securing loans from unsanctioned Russian financial institutions.

The nuclear option

One specific proposal involves settling payments indirectly through the Akkuyu Nuclear Power Plant, which is owned and developed by Russia’s state-owned nuclear company, Rosatom.

“Rosatom is required to purchase certain high-cost equipment for the plant’s construction,” one source explained. “Turkey could buy this equipment on behalf of Rosatom, using the transaction to indirectly fulfill its gas payment obligations.”

Although Rosatom and Gazprombank are separate state entities, they share significant business interests, with the Akkuyu project being one of them.

For instance, in 2022, Rosatom signed a $9.1bn loan agreement with Gazprombank to finance the construction and development of the nuclear power plant.

In theory, Turkey could utilise Rosatom as a channel to settle its outstanding gas payments, though such a mechanism would require approval from Russian officials.

Turkey’s banking industry has faced challenges from sanctions since last December, when the US imposed secondary sanctions on financial transactions involving sanctioned Russian banks.

Turkish banks, wary of potential repercussions, have been overcompliant, often blocking legitimate transactions that are technically allowed under exceptions, out of an abundance of caution.