In an economy overwhelmingly reliant on hydrocarbons and other raw materials, apart from the arms industry, nuclear energy is one technology-intensive sector where Russia is among world leaders.

Turkey likewise has its eyes set on nuclear energy. Since 1970, it has been pursuing plans to build a nuclear power plant. But Turkey has lagged behind neighbours, including Armenia, whose Metsamor station is kilometres away from the Turkish border, Bulgaria, which has been the top exporter of electricity to Turkey in 2017, Romania and Iran.

Turkey’s economic growth and expanding population is expected to drive up demand for electricity in the next decade. Nuclear also promises to facilitate to the transition to a low-carbon economy. Not only does it displace coal, but it also makes renewables (hydropower, solar, wind, geothermal) more appealing. When the sun does not shine or the wind is low, there is a need for back-up. Government officials in Ankara have been making plans for two or even three nuclear power plants on both the Mediterranean and the Black Sea coasts.

So Russia and Turkey look like a perfect match. One has the goods, the other – the market. And on top of that, the two former rivals have been getting diplomatically and politically closer.

Putin and Turkish President Recep Tayyip Erdoğan met once again in Ankara this week, joined later by Iran’s President Hassan Rouhani. The Russian and Turkish leaders oversaw  – via video conference – the groundbreaking ceremony of the Akkuyu nuclear power plant, near the Mediterranean city of Mersin.

Started in 2010 and implemented by Russia’s state-owned conglomerate Rosatom, the project’s first unit should be completed by 2023, the centennial of the Turkish Republic. Once all four units become operational, they will generate about 10 percent of Turkey’s electricity – enough to keep a huge city like Istanbul running.

The start of construction carries huge political symbolism. The Akkuyu project was frozen when Russia and Turkey fell out in late November 2015. Its restart in October 2016, when Putin was guest of honour the World Energy Congress in Istanbul, signalled a turnaround in relations between the two countries.

Yet behind the grand political façade, it is not all roses and sunshine. For starters, Russia managed to twist the Turkish government’s arm and obtain tax breaks to the tune of $3 billion before the relaunch. Moscow has good reason to drive a tough bargain. Akkuyu follows the Build-Operate-Own (BOO) model where Rosatom shoulders the financial risk from the $20 billion venture. The Turkish Electricity Trading and Contracting Company (TETAS) has committed to buy electricity from the power plant at fixed prices, but without a quota.

Rosatom, for its part, is in no position to find the cash to fund the project. That is why it transferred 49% of the venture to a Turkish consortium set up by Cengiz, Kolin and Kalyon (CKK) in June 2017. But last February, the three firms pulled out. Sources inside Rosatom said the decision was driven by disagreements. The Russians were unhappy about CKK’ choice of a Chinese consultant. More importantly, the Turks wanted to have a say in managing the projects before securing the financing for their shares.

As experts familiar with the Turkish energy sector point out, these are companies that have no experience and technical expertise with long-horizon projects. They are accustomed to state-funded construction and infrastructure development where there are quick bucks to be made. Akkuyu is a very different kettle of fish. Yet, there is a consolation prize: Cengiz is getting a $465-million hydrotechnical engineering contract with Akkuyu.

Whether Akkuyu moves according to schedule therefore depends on how quickly the Turkish side finds a strategic investor. Ultimately, it might turn out that direct or indirect budget transfers would be required. Like anywhere in the world, nuclear energy is not feasible without some form of state support or even direct payments. In other words, Turkey would end up propping up Rosatom, BOO model notwithstanding. The Russian company has already signed contracts to the tune of $4.2 billion. That is well beyond the $3 billion Rosatom has chipped in so far.

Raising money on global capital markets is a tough proposition, beating in mind the sanctions against Russia. It would not be surprising at all, in that sense, if the Kremlin is pressuring the Turkish government to pay up or bring in another minority shareholder to replace CKK. The question whether this is the most effective way to spend public resources may become pertinent, especially if more clouds start gathering over the Turkish economy.

What we saw this week was not the first launch of Akkuyu. There was already one such ceremony held in December last year. Who knows, there might be more such ceremonies in the future.