U.S.-Turkey Energy Cooperation: A Strategic Nexus for Geopolitical Risk Mitigation and Emerging Market Opportunities

The evolving partnership between the United States and Turkey in the energy sector has emerged as a critical component of transatlantic security and economic strategy. As global energy markets grapple with the aftershocks of the Ukraine war and the imperative to decarbonize, Turkey's strategic position as a bridge between energy-rich regions and Europe has become increasingly valuable. For the United States, deepening ties with Turkey offers not only a pathway to diversify energy supply chains but also a means to counterbalance Russian and Iranian influence in a volatile region.

Geopolitical Context and Strategic Alignment

Turkey's ambition to become a regional energy hub is no longer aspirational but operational. By 2025, the United States has become Turkey's second-largest liquefied natural gas (LNG) supplier, surpassing traditional providers like Iran and AzerbaijanGeopolitics in Transit: U.S. Becomes Key Gas Player in Turkey^[1]. This shift reflects a deliberate strategy by Ankara to reduce dependence on politically sensitive suppliers, particularly Russia, which accounted for 42% of Turkey's natural gas imports in 2024Geopolitical Constraints of Turkey's Energy Hub Ambitions^[2]. The Trump administration's emphasis on expanding U.S. LNG exports to Turkey has been instrumental in this transition, with partnerships such as the ExxonMobil-BOTAS LNG agreement and the Continental Resources-TPAO joint venture for unconventional energy explorationTurkish-American Defense and Energy Partnerships^[3]. These collaborations align with broader U.S. goals of enhancing NATO energy resilience and securing alternative routes for Caspian and Middle Eastern resources to reach European marketsPart 4. Turkey’s Geopolitical Role in the Black Sea^[4].

Infrastructure Development and Investment Opportunities

Turkey's energy infrastructure is undergoing a transformative phase, driven by both domestic demand and geopolitical imperatives. The Turkish government has allocated USD 46.2 billion for public investments in 2025, with USD 2.8 billion earmarked for energy projects, including renewable energy developments, underground gas storage, and hydroelectric plant rehabilitationTürkiye Allocates USD 46.2 Billion to Public Investments in 2025^[5]. A key initiative is the Climate Investment Funds (CIF)'s USD 70 million plan to modernize Turkey's power transmission system, which aims to integrate an additional 60 GW of wind and solar capacity by 2035CIF Endorses $70 Million Plan to Accelerate Turkey's Renewable Energy^[6]. This aligns with Turkey's net-zero emissions target by 2053 and creates opportunities for U.S. firms specializing in smart-grid technology and energy storage solutionsTurkey - Electric Power – Renewables, Smart Grid^[7].

Nuclear energy also represents a significant frontier. The U.S. Export-Import Bank and the International Development Finance Corporation have signaled readiness to fund small modular reactor (SMR) projects in Turkey, with potential investments exceeding USD 17 billionU.S. Ready to Fund Nuclear Energy Projects in Türkiye^[8]. While Turkey's Akkuyu Nuclear Power Plant, developed with Russian partner Rosatom, is nearing completion, the country is now exploring U.S.-aligned alternatives to diversify its nuclear supply chainWhy Fusion Energy Should Be Central to U.S.-Turkey Relations^[9]. This shift not only addresses energy security concerns but also mitigates risks associated with overreliance on Russian technology.

Mitigating Geopolitical Risks Through Diversification

Turkey's energy diplomacy is a balancing act. While it has strengthened ties with the U.S. and European partners, it continues to maintain energy relationships with Russia, including nuclear collaborationUnderstanding the Energy Drivers of Turkey’s Foreign Policy^[10]. This duality is a deliberate strategy to hedge against geopolitical volatility. For instance, Turkey's natural gas export agreements with Moldova, Romania, Hungary, and Bulgaria underscore its role in enhancing European energy resiliencePart 4. Turkey’s Geopolitical Role in the Black Sea^[11]. By acting as a transit and trading hub, Turkey reduces the vulnerability of its neighbors to supply disruptions from adversarial suppliers.

However, challenges persist. Turkey's domestic gas production covers only 4% of its consumption, and its underground storage capacity remains insufficient to buffer against market shocksGeopolitical Constraints of Turkey's Energy Hub Ambitions^[12]. To address this, the country is expanding its LNG terminal infrastructure, including floating storage and regasification units at Aliaga, Dortyol, and Saros BayGeopolitics in Transit: U.S. Becomes Key Gas Player in Turkey^[13]. These facilities enable Turkey to respond swiftly to geopolitical crises, such as the 2022 European gas shortage, by redirecting supplies to regional partners.

The Role of Renewable Energy and Hydrogen

Renewables are central to Turkey's long-term energy strategy. Currently, renewables account for 56% of the country's installed power generation capacity, driven by hydroelectric, solar, and wind projectsTurkey Renewable Energy Projects^[14]. The government's goal to quadruple renewable capacity to 120 GW by 2035Turkey Requires $80 Billion Investment to Meet Growing Energy Needs^[15] presents opportunities for U.S. firms in solar panel manufacturing, wind turbine technology, and grid modernization. Additionally, Turkey's hydrogen ambitions—targeting 2 GW of electrolysis capacity by 2030 and 70 GW by 2053Turkey - Electric Power – Renewables, Smart Grid^[16]—position it as a potential leader in green hydrogen exports to Europe, further diversifying its energy portfolio.

Risks and the Path Forward

Despite these opportunities, risks remain. Turkey's domestic political instability and economic volatility could deter foreign investment. The U.S. 10% tariff on Turkish imports, while relatively low compared to other markets, introduces trade uncertaintiesTurkish-American Defense and Energy Partnerships^[17]. Moreover, regional conflicts and legal disputes, such as those involving Turkmenistan and Israel, complicate Turkey's efforts to diversify its energy supplyGeopolitical Constraints of Turkey's Energy Hub Ambitions^[18].

To mitigate these risks, U.S.-Turkey collaboration must prioritize long-term partnerships that go beyond short-term contracts. This includes joint ventures in renewable energy, shared research in fusion technologyWhy Fusion Energy Should Be Central to U.S.-Turkey Relations^[19], and infrastructure projects that enhance Turkey's role as a transit corridor. For investors, the key lies in aligning with Turkey's strategic priorities while leveraging U.S. technological and financial expertise to navigate the region's complexities.

Conclusion

The U.S.-Turkey energy partnership is a testament to the interplay between economic pragmatism and geopolitical strategy. By investing in Turkey's energy infrastructure and diversifying supply chains, both nations can mitigate risks associated with regional instability and energy dependence. For emerging market investors, Turkey offers a unique blend of strategic location, ambitious policy frameworks, and untapped potential in renewables and nuclear energy. However, success will depend on navigating the country's domestic challenges and ensuring that cooperation remains resilient in the face of evolving geopolitical dynamics.