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Moscow gets the upper hand in the fight for Central Asian gas
26.04.07
MOSCOW. (Igor Tomberg for RIA Novosti) –

During his first visit to Moscow, the new president of Turkmenistan, Gurbanguly Berdymukhammedov, guaranteed President Vladimir Putin that his country’s 2003-2028 contract with Gazprom would remain unchanged. Russia has thus scored points in the contest to control Caspian gas. In any event, this is what one would assume from the Kremlin’s optimistic press release about the talks. But Russia does not yet have an answer to the main question: by what routes will Turkmen gas be supplied?
This year, Turkmenistan is planning to increase its gas exports by a quarter – up to 58 billion cubic meters – and wants to diversify supplies. But right now, the only existing export routes for its gas are Gazprom’s pipelines and a low-capacity pipeline to Iran. It is vital for Moscow to keep control over Turkmen gas supplies. To do so, it could provide its partner with more transit capacity.
At the same time, the death of Saparmurat Niyazov, the previous Turkmen president, has encouraged the United States to step up its efforts to diversify energy supplies to Europe. It is trying to involve Central Asian countries, primarily Turkmenistan, in the building of oil and gas pipelines bypassing Russia through the southern Caspian Sea. The U.S. has come up with a plan for a Trans-Caspian pipeline on the bottom of the Caspian Sea with a capacity of 30 billion cubic meters a year. It could transport natural gas to the Baku-Tbilisi-Erzurum pipeline (put into operation in 2006) and then on to Europe through the Nabucco pipeline (to be built by 2010). If the Trans-Caspian pipe is built, Turkmen gas will travel to Europe without going through Russia and will compete with Gazprom’s gas.
The results of the presidential meeting show that for the time being Russia seems to have outdone the West in the battle for Central Asian gas. At any rate, the Turkmen president reacted positively to a proposal by his Russian counterpart to expand the existing Central Asia-Centre pipeline and to build a Caspian pipeline with a capacity of 30 billion cubic meters a year on the Caspian Sea’s eastern shore.
It is very important that there are now grounds for counting on Turkmenistan’s adhering to its contracts with Gazprom and agreements on bigger gas supplies. Berdymukhammedov confirmed the readiness of his country to honour agreements that make Russia the main importer of Turkmen gas until 2028. He also promised to abide by the September 2006 agreements giving Russia all Turkmen gas exports in 2006-2010 – 50 billion cubic meters a year. In early 2006 this deal also raised the purchasing price of Turkmen gas from $44 per thousand cubic meters to $100.
However, even if the two presidents had discussed prices, they could not have resolved the problem. Quite rightly, Turkmenistan is displeased that Gazprom is selling Turkmen gas to Ukraine for $100 per thousand cubic meters while exporting Russian gas to Europe for almost $300. It is clear that sooner or later Turkmenistan will demand a fair price for its gas. When the Turkmen president was in Moscow, the Russian business newspaper RBK Daily quoted a reliable source as saying: “Turkmenistan believes that its dependence on Russia for gas transit is depriving it of profits. In effect, they are giving us an ultimatum: either we buy their gas at near-European prices or help them sell it to Europe. Otherwise, they will build alternative routes.”
It is worth paying attention to the idea that sooner or later there will be a joint venture like RosUkrEnergo (a Russian-Ukrainian consortium set up to facilitate the delivery of Turkmen gas to Ukraine and Europe). It will supply Turkmen gas to Europe but at a much higher price than now.
It is understandable why the Turkmen president was evasive on the proposed Trans-Caspian route. He expressed interest in Putin’s suggestion for a pipeline around the Caspian Sea (on Kazakh and Russian territory) but remarked that Turkmen experts would have to conduct a feasibility study on it. So, without questioning the previous agreements, Berdymukhammedov conspicuously avoided giving a definite answer to a question of vital importance to Russia: what routes will Turkmenistan use for its future gas exports?
The media hope that during Putin’s reciprocal visit to Ashgabat, the Turkmen capital, in May, the Trans-Caspian saga will come to an end. But the situation is not that simple. On the day before the Turkmen president’s visit to Moscow, Turkmen Foreign Minister Rashid Meredov said during a trip to the United States that his country would not mind sending gas to Azerbaijan. From there, the gas could be sent on to the proposed Nabucco pipeline, which will supply it to Europe bypassing Russia. This is why the Turkmen authorities are listening to proposals without making any commitments.
Turkmenistan has two bargaining chips in its price negotiations with Russia: future alternative gas routes to Europe and access to the Chinese market. But these alternatives are hypothetical, which gives Moscow the time to adopt a clear-cut and streamlined policy towards Turkmenistan and other Central Asian countries. Turkmenistan was not the first to discuss a price increase; another Gazprom supplier, Kazakhstan, is demanding $160 per thousand cubic meters of gas.
Moscow has picked a good time to make its new pipeline proposals. They will make the U.S.-lobbied Trans-Caspian project look like even more of a pipe dream.
Dr. Igor Tomberg is a senior research fellow with the Centre for Energy Studies, at the Institute of World Economy and International Relations, the Russian Academy of Sciences.
The opinions expressed in this article are the author’s and do not necessarily represent those of RIA Novosti. -0-