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Kanal Istanbul Construction To Start This Summer – First Financing Banks Mentioned

Kanal Istanbul construction to start this summer – first financing banks mentioned

Istanbul, Turkey (PortSEurope) April 12, 2021 – The tenders for the Kanal Istanbul project will start in the coming months and construction is expected to begin this summer, Turkey’s President Recep Tayyip Erdogan was quoted as telling a gathering of his Justice and Development Party (AKP). “We’ve completed the preparations for Kanal Istanbul to a great extent,” Erdogan said. “The tender will be held soon, and we’ll
start groundwork in the summer”. The project depends on financial institutions “crazy enough” to fund its construction by Turkey which is in the middle of a deepening economic crisis. But local media already listed a few potential financial backers of the project – Industrial and Commercial Bank of China (ICBC), Hong Kong-based bank HSBC and the usual collection of Turkish banks who will be pushed hard by the government to finance Erdogan’s “crazy project” (in his own words). According to a Bloomberg article, Kanal Istanbul will cost between $12.7 billion and $25 billion. Most likely this amount will also include the related infrastructure – two railroad crossings, two metro crossings, seven highway bridges, buildings and tunnels. Local media keeps quoting a cost of 75 billion Turkish lira ($9.2 billion) for the project. In a telephone conversation on April 5, Qatari Emir Tamim reiterated to Erdogan his country’s support for the project, which is expected to include financing. China also has great ambitions for the Kanal Istanbul project which fits perfectly into its Belt and Road initiative. One Belt, One Road – a simplified version of the Silk Road and 21st Century New Maritime Silk Road – concerns the China-led infrastructural investment project which aims to symbolically revive the corridor that once united the East and the West. This initiative covers more than 60 countries and regions from Asia, through Eastern Europe and the Middle East to Africa. Following mismanagement of the economy and several expensive infrastructure projects exhibiting megalomania (the new Istanbul airport, bridge over and a tunnel under Bosphorus), the 83 million Turks face galloping inflation, devaluation of local currency and economic stagnation. Kanal (Canal, Channel) Istanbul is a project for an artificial sea-level waterway, which is planned to be built in Istanbul’s Kucukcekmece Lake-Sazlidere Dam-Durusu corridor. It is projected to have a capacity of 160 vessel transits a day – similar to the current volume of traffic through the parallel Bosphorus (Bosporus) Strait – where traffic congestion leaves ships queuing for hours and sometimes days to transit. Kanal Istanbul’s project works and development plans have been completed, and tender preparations are continuing, Turkey’s Transport and Infrastructure Minister Adil Karaismailoğlu said. Development plans for the man-made sea level channel Kanal Istanbul have been approved, Turkey’s Environment and Urbanization Minister Murat Kurum said alsorecently. On the background of these upbeat statements last week came the arrest of 10 Turkish retired admirals after they signed a statement supporting the importance of the Montreux Convention designed to prevent the militarisation of the Black Sea. The admirals are suspected of conspiring against state security and constitutional order. Their reaction follows the advancing of Turkey’s project to build a 45 km (nearly 28 miles) Kanal Istanbul that will run parallel to the Turkish straits and transit through it would be regulated by Turkey. The arrested admirals are part of a group of about 100 retired navy senior officers who signed the statement. Before them, 126 retired Turkish ambassadors and senior diplomats also expressed their support for the Montreux Convention and indirectly disagreed with the Kanal Istanbul project. In the secular Turkish republic created by Mustafa Kemal Ataturk the military were seen as guardians of the secular order. But Erdogan, heading the Islamist-rooted AKP, has curbed the military’s power and appealed to conservative traditionalists and the religious Turks. The Turkish straits, including the Dardanelles, the Bosphorus and the Marmara Sea, connect the Mediterranean and Aegean Seas to the Black Sea states of Russia, Ukraine, Bulgaria, Romania and Georgia. Located at the intersection of the Middle Corridor and the North and South Corridor, Istanbul will be the focus city of global trade, Karaismailoglu was quoted as saying by the local media. He confirmed that tender preparations for the construction works are continuing and said again that the project will be completed in a short time. “Montreux provided Turkey the possibility to maintain its neutrality during World War Two. We are of the opinion that there is a need to avoid any statements and actions that could cause the Montreux convention, an important treaty in terms of Turkey’s survival, to be brought up for discussion,” the statement, signed by the retired admirals and 94 former high-ranking navy personnel said. The Montreux Convention from 1936, limits the access of warships to Black Sea, considered by Russia as its strategic backyard. The Turkish strait is a natural passage, where ships have freedom of navigation. Currently, non-Black Sea state warships in the strait must be lighter than 15,000 tonnes, and no more than nine non-Black Sea state warships may pass at any one time and they can stay in the Black Sea for a maximum of 21 days. The Kanal Istanbul project is opposed by the mayor of Istanbul, environmentalists and many citizens who fear that it will also create water shortages in the megapolis and environmental problems for both the Black and Mediterranean seas. Interestingly, Kanal Istanbul is not officially discussed by the governments of the Black Sea countries or by Greece. Local media in Bulgaria and Greece write about the project mostly focusing on its enormous scope and costs. The Halkali-Kapikule high-speed train, TCDD (Turkish Railways) projects as well as Yenikapi-Sefakoy-Beylikduzu and Mahmutbey-Esenyurt metro lines in Istanbul and the D-100 highway crossing, Tem highway, Sazlibosna highways are also to be integrated with the canal project. Between 41,000 and 48,000 vessels pass through the Bosphorus Strait every year, making it one of the busiest maritime passages on the planet. The Bosphorus has over two times the traffic of Egypt’s Suez Canal. According to Turkish media, in the past 10 years, six out of 10 of the world’s largest projects were undertaken in Turkey. Kanal Istanbul would be the largest construction project of the decade globally. Here is a comparison of the new project with the two most famous man-made waterways in the world: Kanal Istanbul (width 250 m; length 45 km, ship beam max 77.5 m); Panama Canal (width 62.5 m; length 80 km; beam 51.2 m); Suez Canal (width 205 m; length 193 km; beam 51.2 m). The justification behind this hugely expensive Canal, which will permanently alter the geography and urban spread of one of the largest cities on Earth (more than 15 million people live in Istanbul), is based firstly on trade. Supporters hope that Kanal Istanbul will relieve shipping traffic from the already congested Bosphorus, increasing capacity for shipping to and from the Black Sea. The idea of digging such a canal is not new – it has arisen periodically since the 16th century and was most recently mentioned in the early 1990s. The subject of the transit toll for Kanal Istanbul will be a way of showing Turkish people that Erdogan is even more successful than the founder of the Turkish Republic, Ataturk, who restored the Bosphorus to Turkish sovereignty through the Montreux Convention, but on condition that ships could cross without paying a transit toll. Kanal Istanbul is controversial for many reasons, and the award of contracts to allies of President Erdogan and the presence of Qatari money can only add to the debate around the validity of the project. And last but not least, no one can suggest how this mega project will be financed by a country with double-digit inflation, depreciating local currency and a chronic shortage of hard currency. According to the draft development plan, the project will be realized with a build-operate-transfer (BOT) model. Companies that won the construction tender for the canal will be granted tax exemption for all technical equipment used in construction. Their income will also be exempt from corporate tax. Companies with close ties to Turkish President Recep Tayyip Erdogan and the governing Justice and Development Party (AKP), as well as Qatari senior officials and firms, could benefit the most from the Kanal Istanbul project, Sayari, a global corporate data provider and commercial intelligence platform, based in Washington, D.C. said in April. Originally Kanal Istanbul was scheduled for completion in 2023, for the 100th anniversary of the foundation of the Turkish Republic, but now Turkish officials claim that construction will take at least seven years (if started this year it is to be completed by 2028). Kanal’s revenue estimates from 2019 were for $8 billion (€7.3 billion) per year, thanks in part to a service fee for transits. Today, local officials confidentially quote a more realistic €2 billion per year. In 2011 Erdogan said “we are rolling up our sleeves for Kanal Istanbul, one of the greatest projects of the centuries, that will outshine the Panama and Suez canals”. Detailed reading in PortSEurope article Amidst arrests and protests Kanal Istanbul start of construction approaches Copyright (C) PortSEurope. All Rights Reserved. 2021.

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