Turkey’s energy inflation is expected to continue on an upward trend in the short term due to the outlook for natural gas and electricity prices, Turkey’s central bank said in its monthly statement on price developments on Monday, according to Reuters.
Inflation hit a 14-year-high in July, reaching nearly 16 percent on an annual basis as food prices surged, reflecting the impact of a falling currency that the central bank has been unable to support.
The Turkish lira’s valuation against the US dollar hit 5.19 on Monday.
Turkey’s Petroleum Pipeline Corporation (BOTAŞ) sent a memo last week to power plants that generate electricity through natural gas announcing that a 49.5 percent price hike would be applied to the natural gas they buy, due to consequent value losses in the lira.
In addition to the low value of the national currency, the Turkish energy sector is also under the pressure of US sanctions on Iran, which, in three months’ time, are due to enter into force, that could drive the Persian Gulf nation’s exports down toward zero and upend the global oil market, according to Bloomberg.
The US measures require buyers to cut purchases or run the risk of their banks being excluded from the American financial system. If they do scale back, then there’s a risk of spiraling crude prices.
Turkish Foreign Minister Mevlüt Çavuşoğlu said in late June that Turkey would not observe the US sanctions against Iran.
“Iran is a good neighbor, and we have economic ties. We are not going to cut off our trade ties with Iran because other countries told us to,” Çavuşoğlu said.
Natural gas imports from Iran accounted for 12.7 percent of the country’s total gas imports in the one-month period, according to a report released by Turkey’s Energy Market Regulatory Body in April.