Russia renews energy game in Central Asia

January 6, 2016 5:46 AM (UTC+8)

 

MOSCOW–Moscow has moved to resume its gas pipeline game in Central Asia by cutting energy ties with Turkmenistan, despite the latest maneuvers by Ashgabat to mend bilateral ties.

Russia's Gazprom Export company has notified Turkmenistan's Turkmengaz national gas company of a decision to terminate purchases of Turkmen natural gas
Russia’s Gazprom Export company has notified Turkmenistan’s Turkmengaz national gas company of a decision to terminate purchases of Turkmen natural gas

On January 4, Gazprom’s subsidiary Gazpromexport notified TurkmenGaz about its decision to discontinue imports of Turkmen gas. Gazprom was reported to explain the move by the changing situation on the international gas market, as well as financial issues. In response, TurkmenGaz suggested to resume negotiations with Gazpromexport.

Simultaneously, Gazprom indicated plans to increase imports of gas from another Central Asian supplier, Uzbekistan. These plans, as well as the decision to stop imports of Turkmen gas, were apparently aimed to put new pressures on Ashgabat, Moscow main competitor in terms of the gas pipeline game in Central Asia.

Interestingly, Moscow’s surprising move to halt imports of Turkmen gas came in the immediate aftermath of Ashgabat’s latest overtures towards Russia. On December 23, Turkmen President Gurbanguly Berdymukhamedov suggested to continue cooperation with Russia and Kazakhstan to build the Russia-oriented Pricaspiysky pipeline.

Berdymukhamedov made these remarks during the launch of the “East-West” 733-kilometer pipeline with a capacity of 30 billion cubic meters (bcm)/year that connected Eastern and Western Turkmenistan at an estimated cost of $1.5 billion.

In May 2007, the Russian, Kazakh, Turkmen and Uzbek leaders agreed to jointly develop gas pipeline networks in Central Asia. Their declaration paved the way for reviving Central Asia-Center pipeline network at its original capacity of about 100 bcm/year, aimed to funnel increased gas volumes from Turkmenistan, Kazakhstan and Uzbekistan. The May 2007 declaration said that the joint project should be launched in the first half of 2008, but it failed to materialize.

In December 2007, Russia, Kazakhstan and Turkmenistan signed an agreement to build the 1,700-kilometer Pricaspiysky pipeline system to funnel 40 bcm of Central Asian natural gas per annum, including 30 bcm from Turkmenistan and 10 bcm from Kazakhstan, along the Caspian shores to Russia. However, this project also was not implemented. Russian officials also promised to invest in the “East-West” pipeline in Turkmenistan.

But these ambitious plans were followed by an apparent rift between Moscow and Ashgabat that came as a departure from Russian and Turkmenistan’s pledges to develop their “strategic” relationship.

Before 2009, Turkmengaz was supplying 50 bcm/year of gas to Russia. But after April 9, 2009 explosion on Turkmenistan’s Davletbat-Daryalik pipeline near the border with Uzbekistan, Gazprom suspended imports of Turkmenistan’s gas. Initially, Ashgabat insisted the blast was caused by Gazprom’s violation of its gas supply agreement and indicated plans to seek financial compensation. Subsequently, Turkmenistan toned down its accusations and no longer mentioned any compensation, but Gazprom cut imports of Turkmenistan’s gas anyway.

Since 2009, Russia and Turkmenistan refrained from mentioning the planned Pricaspiysky gas pipeline. Both sides also failed to sign an agreement on the East-West pipeline.

Subsequently, Turkmenistan’s gas exports to Russia have been undergoing a steep decline. Gazprom’s purchases of gas from Turkmenistan went down to 4 bcm in 2015, from 40 bcm in 2008, and about 10 bcm/year in 2009-2014.

Energy disagreements between Moscow and Ashgabat resurfaced last year. In July 2015, TurkmenGaz accused Gazprom of failing to fully pay for gas. Gazprom responded by filing a case against TurkmenGaz at the international arbitration court in Stockholm over gas supply contract prices.

In mid-2015, Turkmen officials were also accusing Gazprom of failing to deliver on Russia’s earlier promises to invest in the “East-West” and the Pricaspiysky gas pipelines.

Yet despite Ashgabat’s efforts to mend bilateral energy ties, Moscow apparently remained reluctant to revive gas partnership between Russia and Turkmenistan. Moscow’s decision to discontinue imports of Turkmen gas was thought to be aimed at undermining Turkmenistan’s self-assumed position as Central Asia’s major gas pipeline player.

Sergei Blagov is a Moscow-based independent journalist and researcher. In the past three decades, he has been covering Asian affairs from Moscow, Russia, as well as Hanoi, Vietnam and Vientiane, Laos. He is the author of non-fiction books on Vietnam, and a contributor of a handbook for reporters.

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