New chance for Trans-Caspian
pipeline By Robert M Cutler
A significant indicator of Turkmenistan's
future diplomatic and economic course is whether
new President Gurbanguly Berdymuhammedov will
undertake a rapprochement with Azerbaijan.
Former president Saparmurat Niyazov,
self-styled "Turkmenbashi" (leader of Turkmens),
who died in December, was on notoriously poor
terms with the erstwhile Azerbaijani president
Heydar Aliev, father of the country's current
President Ilham Aliev. This antipathy, together
with Niyazov's failure to grasp the
intricacies of contemporary
negotiations on petrochemical-energy development,
which he nevertheless insisted on leading from
Turkmenistan's side, was responsible for the
ultimate failure of the Trans-Caspian Gas Pipeline
(TCGP) project in the late 1990s.
That
TCGP project would have piped Turkmenistani gas
under the Caspian Sea to Azerbaijan, then out to
world markets by a Georgian-Turkish gas route
parallel to the Baku-Tbilisi-Ceyhan oil pipeline
that recently entered service. In the event, the
surprise discovery of significant gas reserves
(instead of the expected oil with only associated
gas) in the Shah-Deniz field offshore from
Azerbaijan made Turkmenistan's gas superfluous to
the project. The gas-pipeline project from
Shah-Deniz to Turkey through Georgia, christened
the South Caucasus Pipeline, is now well under
construction.
A precondition for any
international financing of any new TCGP project is
resolution of the territorial dispute between
Turkmenistan and Azerbaijan over the mid-south
Caspian field that the latter calls Kyapaz and the
former calls Serdar. Although Azerbaijan's case
for sole sovereignty over Kyapaz/Serdar is well
founded under international law, Heydar Aliev
offered in 1997 the possibility of joint
development of the field to Niyazov, who
nevertheless rejected it.
Today, the
then-projected TCGP route through Georgia to
Ceyhan on Turkey's Mediterranean coast (or a
variant going through Georgia and under the Black
Sea, or also under the aegis of the Austrian-led
Nabucco project via the Turkey-Greece gas
connector that the Europeans have been trying to
make happen for a decade) could still bring
Turkmenistani gas into the European markets,
eliminating any need to transit Russian territory.
Azerbaijan, Kazakhstan and Russia have
implemented a "modified median line" principle,
well established in international law, to the
demarcation of sovereignty over resources under
the bed of the Caspian Sea. This offers a
precedent for the resolution of the territorial
conflict between Azerbaijan and Turkmenistan over
the Kyapaz/Serdar field, which lies in the middle
of the southern Caspian Sea, divided by a median
line between the Azerbaijani and Turkmenistani
coasts if such a line were to be drawn.
For this, it would not be necessary to
resolve boundary questions between Azerbaijan and
Iran, between Turkmenistan and Iran, or even
between Turkmenistan and Kazakhstan. It would only
require Turkmenistan to agree on such a "modified
median line" principle to demarcate its boundary
with Azerbaijan over use of undersea resources.
(This is not legally the same as claiming
ownership or sovereignty over the seabed itself.)
Azerbaijan has a historically
better-established claim to the entire
Kyapaz/Serdar block also because of the physical
geography of the region, which places the island
much closer to offshore Azerbaijani development
than to the mini-archipelago stretching from the
Turkmenistan shoreline into the southern Caspian
Sea. The application of the "modified median line"
would implement the 1997 proposal by the
Azerbaijani side to develop the block together
with Turkmenistan, a proposal rejected by Niyazov
at the time.
Given the engineering and
technology necessary for such development,
Turkmenistan would need outside help, and
Azerbaijan has the most significant infrastructure
and experience in the region, including
established access to foreign expertise, with
which to begin the development.
Exactly
that approach was taken in discussions between
Kazakhstan and Russia regarding deposits that
straddled their common demarcation line in the
northern Caspian Sea offshore; and after agreeing
on the modified median line principle, these two
countries subsequently reached binding written
understandings on the development of those
deposits, which are now in the process of being
jointly developed by companies from the two
countries.
So this is an established
method in international law with a precedent in
the Caspian Sea region. Even an oral endorsement
of its acceptance by Turkmenistan, if followed up
by concrete action, would signal a willingness to
undertake businesslike relations with a view
toward increasing outlets to world markets for
Turkmenistani gas.
One of the factors
conditioning prospects for construction of any gas
pipeline westward from Turkmenistan will be the
prices offered by Russia to Turkmenistan for gas
at its border. These prices have been the subject
of perennial haggling between Ashgabat and Moscow,
with several contracts being agreed and broken and
renegotiated over the past decade and a half. The
problem from the Turkmenistan side is that there
is at present nowhere else for the gas to go.
(Statistics on the small quantity of exports to
Iran, the one exception, are notoriously
unreliable; figures in the public domain are
almost certainly overestimates.)
Prices
paid to Turkmenistan for delivery of gas at the
Russian border have gradually increased over the
years, even before Russia began increasing its own
prices for export (or re-export of Turkmenistan's
gas) to third countries such as Ukraine and
Belarus. Berdymuhammedov has publicly assured
Russia that Turkmenistan will honor its
contractual obligations to Moscow out to the year
2028, the terminus date of a 25-year contract
signed in April 2003. This contract provided for
sales to Russia at a price of $44 per thousand
cubic meters (tcm).
By late 2005, Gazprom
had ceded to Niyazov's insistence for a rate
increase, agreeing to a price of $65/tcm for
deliveries during the first half of 2006. Almost
immediately into the new year, in the wake of the
Ukraine gas imbroglio (Ukraine is in fact
historically the principal recipient for gas from
Turkmenistan even in the Soviet period), Niyazov
began agitating for yet another price hike. Moscow
resisted until the end of the summer but finally
caved in and agreed a price of $100/tcm with
Turkmenistan.
At his death, Niyazov had
given no impression of relenting in his efforts to
drive up the price. The simple fact is that
Gazprom has managed its Russian resources so
poorly and failed so greatly to make any
significant improvements or important capital
investments that Russia not only is dependent on
gas from Turkmenistan for exports to Ukraine and,
through Ukraine, to Europe, but also simply needs
Ashgabat's gas for domestic Russian consumption
during the cold winter months.
There are
other non-Russian outlets theoretically available
to Turkmenistan: through Kazakhstan to China,
through Afghanistan to Pakistan, and through Iran
to Turkey, to name but three. Each of them has,
like a renovated TCGP project, its own particular
problems.
The Turkmenistan-Iran-Turkey
route may have the greatest practical obstacles,
despite a recent oral agreement in principle
between Turkish and Iranian representatives to
pursue the idea. However, Turkey has taken care
throughout the current decade to maintain very
good relations with Niyazov, who was in turn
favorably disposed to the Anatolian Turks, whom he
considered brethren; and Ankara naturally has
excellent relations with Baku, as well as
demonstrated positive cooperation in energy
transport.
In this connection, Turkey may
be a key to watch.
Dr Robert M
Cutler (RobertCutler.org) is research fellow,
Institute of European and Russian Studies, at
Carleton University, Canada. (Copyright
2007 Asia Times Online Ltd. All rights reserved.
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