On Monday 6th February, a magnitude 7.8 earthquake occurred in southern Turkey near the northern border of Syria, followed 11 minutes later by a magnitude 6.7 aftershock. This follows reports in the Insurance Insider on 31st January of damage from a prior earthquake damage to the Sakarya gas construction project which could cost the market up to $350m-$400m.
The earthquake at the current time of reporting has resulted in a high casualty rate with 5,100 individuals losing their lives in the disaster.
The impact of this disaster has been devastating, with only three events of a magnitude 6 - or larger - occurring within the 250km range of the February 6 earthquake, since 1970.
Analysts believe the preliminary location of the earthquake to be within the vicinity of a meeting point between the Anatolian, Arabia and Africa plates, with the mechanism and location of the faultoccurring either on the East Anatolian fault zone or the Dead Sea transform fault zone.
The East Anatolia fault accommodates the westward extrusion of Turkey into the Aegean Sea, while the Dead Sea Transform accommodates the northward motion of the Arabia peninsula relative to the Africa and Eurasia plates.
The East Anatolian strike-slip fault occurs when solid rock plates push up vertically against each other, building up stress until one finally slips in a horizontal motion, generating a large amount of strain that triggers an earthquake.
Analysts also point out that the earthquake was in the region of 50 to 80 times the strength of a similar earthquake that took place in 2020 at Elazığ, Turkey. The damage from that 2020 earthquake was $600 million in damages, meaning that provisional estimates would put the losses of the 2023 earthquake at in excess of $1bn.
The lira, the Turkish currency, fell initially to 18.85 against the US Dollar in the aftermath of the earthquake, before recovering these initial losses, Reuters reported.
Borsa Istanbul, the Turkish Stock Exchange, announced a temporary halt to transactions in shares of several companies that were operating in the earthquake zone, with trading having since resumed.
These stock market tumbles occurred amid a time of economic turmoil for Turkey, with the Turkish economy suffering from years of currency crashes and soaring inflation, driving international investors out from Turkey.
Troubles that have been compounded by unorthodox economic decisions by the Turkish Government, such as cutting interest rates to combat inflation, resulting in an eye-watering inflation rate of 85% in October 2022.
Recent inflation data, according to Tatha Ghose, FX Analyst at Commerzbank, as reported in Reuters, suggests an annual inflation rate in Turkey, of 58% as at January 2023.
The earthquake forced the closure of the oil terminal at the port of Ceyhan until 6th February, as officials assessed the damage from the port.
BP Azerbaijan, reported that a “small leak” had been found at Ceyhan, which led to operations being halted, with the decision to close the terminal, being taken by the operator of the Turkish portion of the BTC route, Botas International Anonim Sirketi,, a BP spokesperson said.
“There’s no damage as of now to the pipeline and its facilities, therefore export operations continue,” the BP spokesperson told S&P Global Commodity Insights. “BTC crude oil is being stored at the oil tanks in the Ceyhan terminal.”
“There was a small leakage reported at Ceyhan and therefore tanker loading operations were suspended. But the leakage was stopped,” the spokesperson said, adding that an assessment of the damage was ongoing.
The terminal is the end point on the Baku-Tbilisi- Ceyhan (BTC) Pipeline, which runs from Baku, Azerbaijan to Ceyhan, Turkey and is responsible for key crude exports from Iraq and Azerbaijan.
Azerbaijan uses the port as its main crude export hub, with a flow of 650,000 barrels per day (bpd), according to Reuters. Annual Crude Oil flows in 2022 through the BTC pipeline averaged $617,658 bpd according to S&P Community Insights.
The earthquakes occurs against a background of political volatility for Turkey, with an upcoming Presidential election taking place in May this year.
"The tragic events with southern part of Turkey being hit by a powerful earthquake is source of additional uncertainty ahead of crucial elections that most likely are going to be held in May," said Piotr Matys, senior FX analyst at In Touch Capital Markets, quoted in The Daily Telegraph.
Prior to the earthquake, there were already tensions between Washington and Ankara, over what Washington believes is an unwillingness on Turkey’s behalf in preventing exports to Russia of chemicals, microchips and other products that are used in the ongoing conflict in Ukraine.
Furthermore, there have been various reports of a potential Turkish-Syrian-Russian coordinated response from this earthquake.
During the first 24 hours (best chance of recovery) rescuers at the northern site dealt with snow whilst cold rain/sleet made efforts tricky at the southern site in less cold air. Cold weather has already swept in from the NW across central turkey over mountainous regions and now infiltrating further south towards Gaziantep with overnight temperatures approaching minus –5. This is adding to the urgency of recovery and the potential urgency of future quakes/aftershocks recovery NE along the fault line, both moving deeper into Turkey's interior and more mountainous regions - both exacerbating the cold and increasingly unsurvivable conditions, if outdoors.
The Turkish earthquake highlights for (re)insurers and corporates a major connected risk impacting multiple lines of business from political violence, energy, financial lines and marine.