Ashgabat, Kiev Talk Non-Russian Gas Routes
Ashgabat, Kiev Talk Non-Russian Gas Routes
When Turkmen president Gurbanguly Berdymuhammedov made a three-day trip to Ukraine in mid-March for top-level talks on natural gas, it was the first such formal visit for a decade.
Ukrainewants to reduce its reliance on Russian natural gas, and Berdymuhammedov’s talks with President Viktor Yanukovych focused on a possible purchase deal with Turkmenistan, which has rich reserves of the fuel.
In an interview for IWPR, Vyacheslav Zubenko, an analyst in Ukraine, described the advantages both countries could get from reengaging on energy issues, and the obstacles to moving from discussions to practicalities.
NBCentralAsia: What is Turkmenistan hoping to gain from these negotiations?
Vyacheslav Zubenko: This visit is vitally important to Turkmenistan for a number of reasons. First, it is keen to sell on the European market, which offers substantial profits, especially as the Europeans have lost faith in Russia’s Gazprom as their sole supplier.
It’s clear to everyone that European Union policy towards Gazprom has changed radically. In September 2011, the European Commission identified the [proposed undersea] Transcaspian Gas Pipeline [TCGP] as a key component in the proposed Southern Gas Corridor which would run through Turkey to Europe.
It was no accident that the Ukrainian president visited Turkmenistan the same month, or indeed that a Turkmen leader visited Kiev in March 2012 for the first time in a decade. It was only Berdymuhammedov’s second foreign trip since his re-election in February. The first was to Turkey, where he also discussed gas exports, specifically the proposed Trans-Anatolian Gas Pipeline.
Turkmenistanhas already restored a domestic pipeline allowing gas from southeastern reserves to be taken as far as the Caspian coast. The Turkmen leadership is likely to continue investing in ways of getting gas to Europe.
In March, it signed an agreement with Azerbaijan on TCGP. The EU is acting as mediator in these bilateral talks, which are mostly taking place in Brussels and Berlin. So it’s clear the EU is making it clear that it’s made its choice to diversify its gas imports away from Russia.
Turkmenistanis counting on selling significant volumes of gas without going through Russia. The Turkmen economy is entirely dependent on fuel exports, which account for some 70 per cent of gross domestic product and 90 per cent of hard currency revenues.
The Turkmen believe Moscow has never missed an opportunity to show them who’s boss. Gazprom has used its monopoly over westward gas exports and transit to dictate both the volume and the price of Turkmen gas it will take. It is currently buying ten billion cubic metres of Turkmen gas a year instead of the 50 billion it is contractually committed to taking.
Turkmenistan sees China as promising market [via a direct pipeline now operating], but current export volumes are not massive at ten billion cu m year – a projected increase to 30 and then 65 billion cu m will only happen some way down the line. Plus the Chinese are paying only 190 US dollars per 1,000 cu m, and the money is going to repay Turkmen state debts rather than arriving as net revenue.
Turkmenistan’s third market, Iran, is not a bulk buyer, either. It takes around eight billion cu m a year, via a pipeline that could carry 20 billion cu m.
Ashgabat thus has little option but to seek alternative markets and create new export routes. It has more than enough gas available if it can find buyers. It has already said it is prepared to supply 40 billion cu m annually to Europe, whether through the Trans-Anatolian Gas Pipeline, White Stream [proposed route from Georgia under the Black Sea to either Ukraine or Romania], Nabucco [alternative route through Turkey] or any other route that doesn’t involve Russia.
Turkmenistanis opposed to the South Stream project [under the Black Sea from Russia to Bulgaria], which will avoid Ukrainian territory and thus make gas cheaper by cutting out those transit fees. Since the price differential between Russian and Turkmen gas is now relatively small at 40 or 50 dollars per 1,000 cu m, there could come a point where Turkmenistan loses its principal advantage – cheaper gas prices.
Furthermore, many in Turkmenistan are convinced that South Stream will be used to export the gas their country sells to Gazprom, rather than Russia’s own gas. Gazprom has no reason to invest in developing new Russian deposits when it has rights to buy an extra 40 billion cu m a year from Turkmenistan. So Moscow would retain continuing leverage over Turkmenistan and make massive profits from reselling its gas.
It wasn’t Turkmenistan Moscow had in mind when it conceived South Stream, but rather Ukraine – to avoid depending on it for transit. At that time, Russia didn’t seem to be any problems with Turkmenistan. It didn’t take western plans like Nabucco, White Stream, or the Transcaspian Gas Pipeline seriously. But now that the Russian-Turkmen energy relationship is in trouble, South Stream presents a major threat for Ashgabat.
Berdymuhammedov undoubtedly wants to engage Ukrainian support in his dealings with the EU by checking out how much Kiev would charge in transit fees, although this is not on the cards yet since there’s presently no way of getting Turkmen gas direct to Ukraine.
Ukraineis hope for an agreement to buy Turkmen gas for 200 dollars per 1,000 cu m, half what it’s paying Russia. It also offered its pipeline gas network as a transit route for Turkmen gas exports.
However, Berdymuhammedov obviously didn’t come to Kiev to give away gas for free or indeed to seek transit rights. What he’s interested in is engaging Ukrainian diplomatic support to oppose construction of the South Stream pipeline.
This article was produced as part of News Briefing Central Asia output, funded by the National Endowment for Democracy.
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