Turkey and Deutsche Bank AG are in the final stages of talks for a pioneering 1 billion-euro ($1.1 billion) loan to finance liquefied natural gas purchases that will reduce the country’s reliance on Russian imports.

Boru Hatlari ile Petrol Tasima AS, the state-owned pipeline operator known as Botas, will use the money to buy LNG from U.S. producers and from traders in Europe, according to people with direct knowledge of the matter. The transaction marks the company’s first loan for LNG imports and paves the way for similar deals that will allow Botas to diversify supplies currently dominated by Russia and Iran.

The expected signing of the deal within weeks comes at a crucial time for the Turkish company, which has been hit by rising gas prices. The government pumped more cash into Botas during the first quarter than it did in the whole of 2021 to keep it running. The company was also the biggest recipient of the central bank’s $18 billion of currency sales for state companies over the past five months, adding to pressure on Turkey’s foreign reserves.

The loan guaranteed by Turkey’s Treasury and Finance Ministry is expected to have a maturity of as long as five years and can be doubled in size, said the people, who asked not to be identified because the talks are confidential. At current LNG prices, the funding could fetch about 1 billion cubic meters of gas, a fraction of Turkey’s consumption of more than 61 billion cubic meters last year.

Deutsche Bank, Botas and the Treasury declined to comment.

Balancing Act

Finance deals backed by Western financial institutions would help Turkey fund costlier LNG purchases while reducing reliance on imports from Russia, which meets more than half of Turkey’s gas needs. The government in Ankara has walked a fine line since Russia’s invasion of Ukraine, continuing to supply military drones to Ukraine while refraining from joining sanctions targeting Moscow.

Botas has been hard hit by the rally in global gas prices as suppliers struggled to meet a post-pandemic surge in consumption, and Turkey’s energy import bill rose further after the invasion of Ukraine.

But Botas is finding it difficult to pass the rising costs on to consumers as authorities are desperate to curb inflation at a 20-year high before a crucial election year. Botas said it’s selling gas to domestic consumers at 30% of the cost.