Geopolitical Shifts in Energy Markets: Turkey's Energy Dependencies and the Decoupling of Russian Oil Flows

The Geopolitical Crossroads: Turkey's Energy Strategy in 2025

Turkey's energy landscape in 2025 is defined by a delicate balancing act between geopolitical pragmatism and economic survival. As a critical transit hub for Russian energy exports to Europe and a growing regional energy player, Turkey has navigated a complex web of sanctions, market dynamics, and strategic partnerships. The country's energy dependencies on Russia—particularly in oil and gas—remain a double-edged sword, offering both economic leverage and vulnerability in an increasingly fragmented global energy market.

According to a report by Oilprice.com, Turkey's crude oil imports from Russia plummeted to 19% of total imports in March 2025, down from over 50% in 2024, as the state-owned refiner Turkiye Petrol Rafinerileri (Tupras) limited purchases to G7 price-compliant barrels to avoid U.S. sanctionsTurkey Diversifies Crude Oil Imports Away From Russia^[1]. This marked a significant diversification effort, with Turkey sourcing crude from Brazil for the first time in decadesTurkey Diversifies Crude Oil Imports Away From Russia^[1]. However, by Q3 2025, Russian crude imports surged to 300,000 barrels per day (bpd), driven by the Urals blend's price advantage below the G7 capTurkey Ramps Up Russian Crude Imports^[2]. This fluctuation underscores the tension between geopolitical risks and economic incentives, as Turkey seeks to balance compliance with sanctions while maintaining affordable energy supplies.

Natural gas remains a cornerstone of Turkey's energy strategy. Data from Energyworld.ro indicates that Russian pipeline gas supplies to Turkey increased by 3.7% in January 2025, reaching 2.78 billion cubic meters (bcm), the third-highest volume in historyTurkey’s Russian gas imports have increased significantly amid rising consumption^[3]. With the TurkStream and Blue Stream pipelines collectively capable of delivering 47.5 bcm annually, Russia's dominance in Turkey's gas market is unlikely to wane soon. President Recep Tayyip Erdogan has even positioned Turkey as a potential transit hub for Russian gas to Europe, leveraging the TurkStream pipeline to facilitate exports to countries like SlovakiaTurkey’s Russian gas imports have increased significantly amid rising consumption^[3].

The Impact on Turkish Oil Equities: Tupras and STAR Refinery in the Crosshairs

The shifting dynamics of Turkey's energy imports have had profound implications for its oil equities. Tupras, the country's largest refiner, has faced operational and reputational challenges. In early 2025, the company temporarily halted Russian crude purchases to avoid U.S. sanctions but resumed them in April 2025 as Urals prices fell below the $60-per-barrel G7 capSanctions hypocrisy: G7+ imports EUR 1.8 bn of Turkish oil products made from Russian crude^[4]. This volatility has strained Tupras's financial performance, with its 2024 net profit declining to $505 million from $2.1 billion in 2023Sanctions hypocrisy: G7+ imports EUR 1.8 bn of Turkish oil products made from Russian crude^[4]. The company's reliance on Russian crude—accounting for 65% of Turkey's total imports in early 2024—has exposed it to regulatory and market risksSanctions hypocrisy: G7+ imports EUR 1.8 bn of Turkish oil products made from Russian crude^[4].

STAR Refinery, another key player, has also been entangled in the geopolitical web. As of 2024, STAR Refinery sourced 98% of its crude from Russia, with 73% supplied by U.S.-sanctioned LukoilEU tackles Russian oil refining ‘loophole’ in major sanctions crackdown^[5]. The refinery's role in processing Russian crude for export to G7+ countries generated EUR 750 million in tax revenue for the Russian government in the first half of 2024 aloneEU tackles Russian oil refining ‘loophole’ in major sanctions crackdown^[5]. With the EU's 2026 ban on Russian refined products looming, STAR Refinery and similar entities face existential threats. The ban, which targets the “refining loophole” allowing Russian crude to be processed in third countries, could force Turkey to pivot to alternative crude sources or risk losing access to European marketsEU tackles Russian oil refining ‘loophole’ in major sanctions crackdown^[5].

Domestic Production and the Path to Energy Independence

Amid these challenges, Turkey has accelerated domestic energy production to reduce reliance on imports. By March 2025, daily oil output reached 132,000 bpd, driven by expanded drilling in regions like Gabar and the Turkey-Syria borderTrillion Energy Targets Major 2025 Natural Gas Production Growth in Turkey^[6]. The government has allocated $7.1 billion for energy sector investments in 2025, with a focus on 270 drilling operations across land and maritime zonesTrillion Energy Targets Major 2025 Natural Gas Production Growth in Turkey^[6]. Natural gas production from the Sakarya Gas Field in the Black Sea has also surged to 7 million cubic meters per day, with plans to scale up to 20 mcm by mid-2026Trillion Energy Targets Major 2025 Natural Gas Production Growth in Turkey^[6].

Companies like Trillion Energy are playing a pivotal role in this transition. The Canadian firm, operating the SASB gas field in partnership with the Turkish Petroleum Corporation (TPAO), aims to boost output to 7 million cubic feet per day by Q2 2025 through artificial lift technologiesTrillion Energy Targets Major 2025 Natural Gas Production Growth in Turkey^[6]. Such initiatives highlight Turkey's ambition to become a net energy exporter by 2030, though significant hurdles remain, including geopolitical tensions and infrastructure bottlenecks.

The EU's 2026 Refined Product Ban: A Game Changer

The EU's 2026 ban on Russian-origin refined products will be a watershed moment for Turkey's energy sector. As a key transshipment hub, Turkey has facilitated the export of Russian crude and refined products to G7+ countries, indirectly funding Russia's war effortsEU tackles Russian oil refining ‘loophole’ in major sanctions crackdown^[5]. The ban, which prohibits EU imports of refined fuels derived from Russian crude, will force Turkey to either diversify its crude sources or lose access to lucrative European marketsEU tackles Russian oil refining ‘loophole’ in major sanctions crackdown^[5].

For Turkish oil companies, compliance with the new regulations will require costly operational overhauls. Automated validation systems to track crude origins and shipping routes will become mandatory, increasing administrative and logistical burdensEU tackles Russian oil refining ‘loophole’ in major sanctions crackdown^[5]. Tupras and STAR Refinery, already grappling with sanctions-related disruptions, may face further declines in profitability as they navigate these constraints.

Investment Implications and Strategic Outlook

For investors, Turkey's energy sector presents a mix of risks and opportunities. On one hand, the country's strategic location and growing domestic production capabilities position it as a potential regional energy hub. On the other, its continued reliance on Russian oil and gas exposes it to geopolitical volatility and regulatory scrutiny.

Equities in Turkish oil companies like Tupras and STAR Refinery will likely remain volatile in the short term, with earnings dependent on the pace of sanctions compliance and the success of diversification efforts. However, long-term investors may find value in firms involved in domestic energy production, such as Trillion Energy and TPAO, which are less susceptible to external shocks.

The EU's 2026 refined product ban also creates opportunities for alternative energy routes. Turkey's LNG infrastructure and potential as a gas transit hub could attract investment from Gulf producers seeking to bypass European marketsTurkey’s Russian gas imports have increased significantly amid rising consumption^[3]. This shift may accelerate Turkey's transition from a net importer to a strategic player in global energy trade.

Conclusion

Turkey's energy dependencies on Russia in 2025 reflect a nation caught between geopolitical realities and economic imperatives. While diversification efforts have reduced crude oil reliance, gas imports remain heavily concentrated in Russian supplies. The EU's 2026 refined product ban will test Turkey's ability to adapt, with significant implications for its oil equities and energy strategy. For investors, the key lies in balancing short-term risks with long-term opportunities, as Turkey navigates its role in a rapidly evolving global energy landscape.