Istanbul Canal: Turkey's Stalled Project Amid Funding Challenges and Opposition Controversy

SadaNews - The Istanbul Canal project stands out as one of the most ambitious urban initiatives in Turkey's history, combining grand promises with heavy challenges. The government sees it as a gateway to transforming the geographic and economic landscape through a public-private partnership model to relieve the burden on the public treasury; however, the estimated enormous cost of billions of dollars raises questions about the feasibility of turning this project into reality.

What is the Istanbul Canal project?

According to the Turkish Ministry of Transport and Infrastructure's website, work began in 2021 on the "New Istanbul Canal" as an artificial waterway cutting through the city from north to south, stretching between 40 and 45 kilometers long, up to 400 meters wide, and with a depth of between 20 and 25 meters. The project also includes creating public parks on both sides of the new waterway, as well as 10 bridges across it, one of which will carry a rail line.

The project is currently stalled due to a lack of funding and the criticisms directed at it. According to statements made by Transport and Infrastructure Minister Adil Karaismailoğlu reported by Reuters last May, the project "is not on the agenda today, but when the right time comes and we find appropriate funding, we will definitely implement it".

Where is the funding for the project supposed to come from?

According to a previous Bloomberg report, the funding for the canal project relies on a public-private partnership model, specifically a "build-operate-transfer versus self-financing" model. Transport, Maritime, and Communications Minister Ahmet Arslan stated in 2017 that there was no request to the Turkish sovereign wealth fund to finance the project.

According to statements reported by the newspaper Azer News from Minister Karaismailoğlu in 2021, the government targeted various funding models for the $15 billion Istanbul Canal project to relieve the public budget from the financial burden, adding that "our top priority is that the construction costs do not burden the public budget at all." However, the project faces tremendous funding challenges amidst the private sector's hesitance to participate significantly.

Four senior Turkish bankers also told Reuters in 2021 that several major Turkish banks are reluctant to finance the "Istanbul Canal" due to environmental concerns and investment risks associated with a project of this magnitude.

What is the economic feasibility of the project?

According to the Turkish Ministry of Transport and Infrastructure at the time, Minister Karaismailoğlu stated that the canal would reduce the tremendous pressure on the Bosphorus Strait, which translates to shorter waiting times for ships and lower transportation and shipping costs, giving it a significant competitive edge, allowing it to capture a larger share of international logistics corridors.

Turkey also relies on generating substantial revenue from the canal's estimated daily capacity of about 160 ships, including giant tankers weighing up to 300,000 tons, as a direct factor in increasing expected crossing fees.

In the real estate sector, the economic impacts of the project began immediately upon its announcement; land prices on both sides of the canal's path saw a significant increase. The value of public land sales in 2024 was about 5 billion Turkish Lira, according to Turkey Today newspaper, while the state-owned Emlak Konut real estate company issued huge tenders for housing and infrastructure in the Dursunkoy area surrounding the canal, amounting to no less than 28 billion Turkish Lira.

What is the relationship between the Istanbul Canal project and the Montreux Convention?

Turkey is linked to the Montreux Convention signed in 1936, which regulates the passage of warships through the Bosphorus and Dardanelles straits and aims to ensure stability in the Black Sea region, allowing free passage for civilian vessels in peacetime and wartime.

The decision to create the Istanbul Canal raised concerns among the countries involved, signatories of the treaty. This led Turkish President Erdoğan to emphasize in May 2021 that his country would not exit the treaty, according to what Bloomberg reported at the time.

Additionally, Turkish Foreign Minister Mevlüt Çavuşoğlu stated at the end of talks with his Russian counterpart Sergei Lavrov that both sides agreed that the construction plans for the Istanbul Canal would not affect in any way the coordinates of the presence of foreign naval forces in the Black Sea.

According to the Armenian Weekly website, supporters of the canal project believe it fits within the "Blue Homeland" (Mavi Vatan) strategy aimed at strengthening Turkish naval power, controlling marine resources, and expanding its regional influence.

What are the main concerns about the project?

The Turkish opposition protests against the canal project and calls for its halt due to its environmental dangers; those opposing its idea believe that the uprooting of trees along the canal's path will cause a severe environmental imbalance.

Opponents of the project also argue that digging the canal will negatively affect the groundwater reserves of the major city, and concerns extend to warnings of the potential for causing devastating earthquakes.

The then mayor of Istanbul and currently imprisoned Ekrem İmamoğlu warned that the canal would destroy the water resources of the residents of Turkey's largest city, irreparably harm nature, and render the city uninhabitable.

The Turkish opposition also accused the government of a lack of transparency in the contracting processes, and investigations were launched against opponents and retired admirals due to their public opposition to the canal.

According to Turkey Today newspaper, lawsuits were launched by the Greater Istanbul Municipality against the division plans, arguing that the designated reserve construction areas include agricultural lands, forests, and water basins, posing serious risks to ecological balance.