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Ukraine and Russia in spat over
Turkmen gas
By Roman Kupchinsky
A number of unpublished agreements
purportedly signed between the governments of
Ukraine and Turkmenistan for the purchase of
natural gas have inflamed a conflict between Kiev
and Moscow over natural-gas deliveries from
Turkmenistan.
The Russian newspaper
Kommersant-Daily on April 14 reported that during
Ukrainian President Viktor Yushchenko's visit to
Ashgabat on March 22-23 he signed a long-term
agreement set to begin in 2006 by which Ukraine
would purchase 50-60 billion cubic meters (bcm) of
Turkmen gas annually through 2026. Ukraine would
buy 38 bcm for its own use, while the remaining
12-22 bcm would be sold to Western Europe.
The contract is potentially problematic
because a similar volume of gas had already been
earmarked for sale to Russia's Gazprom.
Turkmenistan, which presently produces 58 bcm per
year, does not currently have the capacity to sell
such a large amount of gas to both Ukraine and to
Russia. Moreover, Turkmen President Saparmurat
Niyazov has promised to supply 15 bcm of gas
annually for 30 years via Afghanistan to Pakistan.
Turkmenistan has proven reserves of 2.86
trillion cubic meters (tcm) of natural gas,
according to the US International Energy Agency,
while Russian industry sources place those
reserves at 2.1 tcm.
A blow to Moscow's
plans?
The loss of Turkmen gas supplies
would be a serious blow to the Russian
leadership's geopolitical plans.
"Turkmenistan's gas reserves were critical
to Russia's domination of the European gas
market," Martha Brill Olcott, a specialist on the
problems of transitions in Central Asia and the
Caucasus, wrote in a 2004 study of Central Asia's
gas trade, and added: "Moscow wanted to retain
control over the gas spigots of several
Commonwealth of Independent States states,
including fractious Georgia and independent-minded
Ukraine. Buying and then reselling Turkmen gas
allowed Moscow to supply these states while
keeping the lucrative markets of Europe largely to
itself."
Russia and Turkmenistan signed a
25-year agreement in April 2003 that was to take
effect in 2006 whereby Russia, over time, would
effectively buy all Turkmen gas production. This
agreement now appears to have been abandoned - or
at least is in danger of collapsing.
The
new Ukrainian-Turkmen agreement, if implemented,
would effectively shut Gazprom out of purchases of
Turkmen gas for 20 years. The Ukrainian government
neither confirmed nor denied the Kommersant-Daily
report.
Such an agreement could lead to
gas shortages in Russia and see Turkmenistan
entering the European gas market, where it would
compete with Gazprom. Such a deal with Ukraine
would also help diversify European gas supplies,
something that the European Union and the United
States have been encouraging for some time.
The men from RUE
In addition to
buying most of Turkmenistan's gas production,
Kommersant-Daily reported that Ukraine is also
insisting that its own gas monopoly, Naftohaz
Ukrayiny, become the operator for Turkmen gas
deliveries to Ukraine. That could force the
present operator, RosUkrEnergo (RUE), out of
business - thus ending a murky scheme that appears
to benefit only Gazprom and the Kremlin.
Meanwhile, the role of the Austrian partner in
RUE, RaiffeisenInvest, is unclear. The prospect of
losing a lucrative contract worth some 15 bcm, or
an annual profit of approximately US$300 million,
is upsetting Gazprom management and the Kremlin.
It might also have repercussions for
Ukrainian-Russian relations.
It is
altogether possible that Russia is pressuring
Ukraine to allow RUE to remain as the operator.
The cancellation of Ukrainian Prime Minister
Yuliya Tymoshenko's recent visit to Moscow could
well be connected to the gas dispute - as few
people believe that Russian authorities would
arrest her as soon as she stepped onto Russian
soil or that she was truly needed in Kiev to make
arrangements for spring planting.
In early
January, Turkmenistan halted deliveries of gas to
Gazprom over a price disagreement. Ukraine agreed
in January to pay Ashgabat $58 per 1,000 cubic
meters of gas instead of the earlier price of $44,
but Russia has refused to cut a deal at the new
price. Taking advantage of this situation,
Yushchenko made a long-term proposal at the higher
price (which is bound to continue going up) and
ensured supplies for Ukraine for the next 20
years.
Soon after the announcement of the
Ukrainian deal, Gazprom chief executive officer
Aleksei Miller flew to Ashgabat and, according to
The Moscow Times of April 18, agreed with Turkmen
President Niyazov to continue to pay the old price
for gas - $44 per 1,000 cubic meters - but to pay
it all in cash and not 50% in the form of a
barter. The Turkmen side agreed to turn on the
spigot but did not say when this would take place.
This contract is to end in January 2006.
In 2005, Ukraine is under contract to
purchase 38 bcm of Turkmen gas, of which it gets
only 23 bcm after paying RosUkrEnergo its 15 bcm
commission.
However, Turkmenistan is
notorious for making promises that it cannot or
does not keep.
"The government of
Turkmenistan under President Niyazov is
unquestionably an unreliable partner, offering
little protection to ensure the sanctity of
contracts," Olcott wrote in 2004. "The political
future of the country is very uncertain, and the
successor regime to that of Niyazov may well try
to overturn the decisions of its predecessor."
One major obstacle to the
Ukrainian-Turkmen deal is the matter of
transporting the gas to Ukraine. The only pipeline
presently capable of transporting this gas is the
Gazprom-controlled Central Asia-Center trunk
pipeline, which has a capacity of 90 bcm per year.
Russia could well forbid the use of its
pipeline in order to sabotage the Ukrainian deal
by constraining Ukraine and Turkmenistan to
construct an expensive alternative route.
Copyright (c) 2005, RFE/RL Inc.
Reprinted with the permission of Radio Free Europe/Radio
Liberty,
1201 Connecticut Ave NW, Washington DC 20036 |
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