Eyeing Chinese investment, Turkey launches Istanbul canal project
ISTANBUL – The 45km canal was called “crazy” by its biggest booster when the idea first surfaced ten years ago. But on Saturday, Turkish President Recep Tayyip Erdogan attended the inauguration ceremony of a bridge which marks the first step towards the construction of his favorite “Istanbul Canal” project connecting the Black Sea to the Sea of Marmara, a massive undertaking which he hopes will gain foreign support. , including that of China.
“Today we are opening a new page in Turkey’s development history,” Erdogan said at the ceremony. “We see this as a project to save Istanbul’s future.”
But the project to build a canal parallel to the Istanbul Bosphorus is expected to cost $ 15 billion and has further divided the already severely fractured country. The project also poses geopolitical issues, with much speculation that China or Erdogan’s regional ally Qatar could play a role in its funding.
The canal is designed to reduce traffic in the heavily congested Bosporus, minimizing accidents while providing faster passage for ships, according to Erdogan. Politically, Erdogan is hoping the megaproject will breathe new life into the economy, create jobs, and bolster its popularity ahead of the 2023 presidential elections.
“We should certainly add other strategic elements so that our country plays a more efficient role in world trade and gains a larger share of transport and logistics corridors,” Edrogan added.
By 2050, 78,000 ships are expected to use the Bosphorus, the president said. However, official data shows that traffic in the Strait has steadily declined since 2007, when 56,000 ships passed through. Annual traffic now amounts to around 40,000 vessels.
The controversial project divides the Turkish public on many fronts, encompassing environmental and financial issues as well as national security. Opposition parties are fiercely against the canal, multiplying threats such as oaths not to pay for it and pledging to distance themselves from any country or company that would support it if they came to power.
According to an Istanbul Economics Research poll, 58% of those polled disapprove of the project, up five percentage points from seven months ago.
At the groundbreaking ceremony, Erdogan said the project would cost $ 15 billion, including the six bridges to be built over the canal, which alone are estimated to cost $ 1.4 billion and will be completed in six years. “Canal Istanbul will be financed from the income generated by passing ships, ports to be built and other sources,” Erdogan explained. He described the project as “world class” and taking “nothing from the coffers of the state”.
Earlier in June, the Turkish president launched ideas on building the canal through a program funded by the private sector and supported by income generated by the 500,000 houses that are expected to be built along its route.
However, experts question the commercial feasibility of the Istanbul Canal, highlighting the drop in traffic over the past 15 years and the safe and almost free passage of commercial vessels from the Bosphorus and Dardanelles guaranteed by the Montreux Convention of 1936.
Retired Turkish admirals and diplomats have also warned that the canal could trigger an unwanted challenge to the Montreux Convention, which further regulates the passage of military ships from Turkish straits, potentially disrupting delicate balances, especially in the Black Sea. . The government denies that this is happening.
Ahead of the ceremony, Transport Minister Adil Karaismailoglu told CNN Turk TV on Friday that Chinese, Russian, Dutch and Belgian companies have expressed strong interest in funding the project and that these efforts will be completed this year. Karaismailoglu implicitly drew parallels with China’s Belt and Road Initiative and said the canal project would significantly increase Turkey’s share in world trade.
Turkey has been a strong supporter of the ambitious Beijing-led initiative and signed a memorandum of understanding with China in 2015 to align its own “Intermediate Corridor Initiative” linking Turkey and Europe to China via a east-west transcaspian road. In 2017, President Erdogan attended a Belt and Road Forum in China, and in 2019, on the sidelines of his visit to Beijing, he told China’s Xinhua News Agency that the two initiatives were in ” natural harmony “.
China’s economic presence in Turkey has grown as Turkey’s relations with the EU and the United States have frayed.
In 2015, a consortium of Chinese state-owned enterprises acquired a major container terminal in Istanbul for nearly $ 1 billion.
Bloomberg announced in March that China Merchants Group and other partners are in the process of closing an agreement to acquire an initially agreed majority stake in the Third Bosphorus Bridge and its connecting routes for $ 688 million. However, the deal was reportedly interrupted by the pandemic in late 2019. According to the report, the deal was relaunched this time, including the refinancing of $ 1.6 billion of the original loan to the bridge operator by banks. , especially industrial and commercial. Bank of China, Bank of China and China Merchants Bank.
The high-profile deals show that Chinese investors are not indifferent to infrastructure developments in Istanbul, Turkey’s largest city, which is home to more than 15 million people and geographically connects the continents of Asia and Europe.
Yet Turkey has officially decided neither on the tender nor on the economic model of the project, not even announcing a timeline for the tender for the channel itself.
Turkish media have so far speculated on the possible implication of Chinese and Qatari investment and funding for the project. For example, a member of the Qatari royal family has already acquired land along the route of the canal.
According to Ali Merthan Dundar, director of the Asia-Pacific Research Center at Ankara University, “In line with the Belt and Road initiative, the Istanbul Canal project may arouse the interest of China in terms of both financing and construction and operation, provided they receive attractive incentives to get involved. “
Reuters reported in April that some local banks were reluctant to fund the canal project, citing investment risks as well as their status as signatories to the UN-backed Principles for Responsible Banking framework that calls for avoiding harm to people and the planet. Since the canal project has been criticized by environmentalists and academics for causing potentially irreversible damage to the environment, many bankers are pessimistic that the project could secure Western funding.
A day before the inauguration ceremony, Istanbul Mayor Ekrem Imamoglu, who belongs to Turkey’s main opposition party and actively campaigned against the canal before being elected in 2019, held a press conference on the site of a dam which is to be replaced by three other dams in the project.
“Erecting a bridge leg here that was actually planned long ago as part of a highway project and calling it a revolutionary canal is an effort to save the situation politically,” Imamoglu said. He called the ceremony an “illusion” and promised to continue fighting the project.
“We face the risk of damaging the environment, people and Istanbul as well as the risk of destroying the entire Sea of Marmara,” Imamoglu continued. The sea is currently struggling with a slimy substance called sea snot caused by pollution and rising water temperatures.
For nearly two decades, successive Erdogan administrations have undertaken multibillion-dollar mega-infrastructure projects like airports, bridges, tunnels and hospitals, forging public-private partnership programs and winning votes. Consequently. Their efforts have persisted despite criticism of the high long-term costs.
This time, however, the Istanbul Canal is widely seen as Erdogan’s biggest infrastructure challenge, coming as it does amid a struggling economy beset by the coronavirus, a plunging Turkish lira and support. public approaching record lows, according to several polls.
It remains to be seen if Erdogan is serious about moving the project forward or if China will eventually get involved after providing Turkey with more than 34 million doses of coronavirus vaccine so far along with an infusion. of foreign currency essential for the depleted reserves of the country’s central bank. Erdogan announced on June 13 a new agreement between the central banks of the two countries just before his departure for the recent NATO summit and his meeting with US President Joe Biden. Under the deal, the existing currency swap agreement increases the limit from $ 2.4 billion to $ 6 billion.
According to Selcuk Colakoglu, director of the Turkish Center for Asia-Pacific Studies, a project of this magnitude could only be funded by a handful of countries, whether they are members of the G-7 or China, and even they have become much more selective lately. “Whichever country is ready to finance this project, it will not be a purely financial decision,” said Colakoglu. “This will also come with political and diplomatic conditions attached, where the financier will seek a maximum degree of coordination of foreign policy strategy.”