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    Central Asia
     Oct 17, 2008
Page 1 of 2
Energy superpower emerges in the Caspian
By M K Bhadrakumar

Turkmenistan knows better than any other country that predators will go to any extent to take away its valuable possessions. Five successive empires - Scythian, Parthian, Ywati, Hun and Turkmen - invaded the area to locate the "Akhal" oasis nestled in the foothills of the Kopet Dag mountains in southern Turkmenistan, and laid waste everything that came across their way until they could take away the treasured Akhal-Teke horses as spoils of war.

The ancient race of Akhal-Teke horses, dating to 2,400 BC, were much fancied for their elegance, strength, stamina and beauty. Alexander the Great apparently took away with him hundreds of

 

these horses as prized trophies during his campaign in Central Asia.

So Turkmenistan's collective memory will be stirred by the announcement on Monday that the country may have in the Yoloten-Osman deposits one of the world's four or five largest gas fields.

British consultancy firm Gaffney, Cline & Associates (GCA), making the announcement in Ashgabat regarding the first results of its audit of Turkmen gas reserves, said its low estimate under the established international and classification system is that the fields may have a minimum 4 trillion cubic meters of gas and as much as a staggering 14 trillion cubic meters.

This catapults Yoloten-Osman, in the southeast of the country, to the status of Turkmenistan's No 1 gas field, overtaking even the fabulous Dowalatabad, whose reserves it will exceed by at least five times. It should be kept in mind that many other of Turkmenistan's many gas fields have yet to be fully explored, and the GCA has just made its initial findings known.

Without doubt, Turkmenistan is closing its gap with Russia and Iran, hitherto listed as having the world's largest and second-largest gas reserves at 48 trillion cubic meters and 26 billion cubic meters, respectively. If the GCA results are confirmed, Turkmenistan will have reserves just 20% lower than that of Russia and outstrip Iran by far.

It seems the late Turkmenistan president Saparmurat Niyazov stands vindicated. Just before he died in December 2006, Niyazov remarked that Turkmenistan held reserves that were adequate to export 150 billion cubic meters (BCM) of gas for the next 250 years. The world, including the then visiting German foreign minister Frank-Walter Steinmeier, didn't take Niyazov's statement seriously.

In March, Niayov's successor, Gurbanguly Berdimukhamedov, ordered the GCA audit to clear doubts about Turkmenbashi's controversial claim. In a British understatement, GCA manager Jim Gillet said in Ashgabat, "Given the huge gas reserves, it is now clear that whatever the results of any final clarification, I can confirm that there is more than sufficient gas to fulfill Turkmenistan's existing contract commitments." Turkmenistan has contracts to supply Russia with around 50 bcm annually, China with 40 bcm and with Iran 8 bcm.

Without doubt, the maths of energy security is being reset. October 13 will stand out as a watershed in the race for Caspian energy. Like the shy Akhal-Teke, Turkmenistan comes from behind and surges ahead on the race tracks, captivating the world audience, especially the main wagerers - Russian, European, Chinese and the ubiquitous Americans. For these seasoned hands betting on the race track, this will also be pari-mutuel wagering, as the French would say, meaning "among ourselves", with betting against each other and not against the race track.

Turkmenistan is undoubtedly a vital partner for Russia in gas supplies. The two countries have an agreement regarding gas prices and the volume of gas supplies for 2007-2009. Ashgabat has been extracting higher and higher prices from Russia for its gas supplies. The price was raised to $100 per 1,000 cubic meters last year from the level of $65. Then it was further raised to $130 for January-June 2008 and to $150 in the second half of 2008.

Ashgabat has been playing on the nerves of Russian energy giant Gazprom and its desperate need for Turkmen gas to meet its export obligations in the European market, which accounts for 70% of the Russian company's total revenue at the moment. Gazprom sells close to two-thirds of Russia's 550 bcm annual gas production in the rapidly growing domestic market, which compels it to secure Turkmen supplies to meet the contracted European commitments.

Russian newspaper Kommersant made an innocuous-sounding reference on Wednesday, quoting a source in Gazprom to the effect that the Russian monopoly's famous July 25 agreement with Turkmengaz does not involve Yoloten-Osman. It seems, in other words, that Russia held in its hands a chimera when it fancied that the July 25 agreement put Gazprom in complete charge of all of Turkmenistan's exports. Surely, that is proving to be a misconception of Himalayan proportions.

For Russia, arguably, the game now starts all over again. First and foremost, it is no longer the superpower in the world of natural gas as was widely regarded until last weekend. Turkmenistan is, unquestionably, also a gas superpower of comparable muscle power to Russia.

Again, Russia will need to come terms with a "multipolar" world of gas-producing countries. It needs to revisit its entire strategy toward consolidating a world gas market. The prospect of a gas cartel - a gas OPEC - materializing any time soon now recedes into the far background. There will be disappointment in Tehran that the idea will have to be thrown out of the window, but a collective sigh of relief can be heard in European capitals.

More important, Russia will have to rework its bonding with its Central Asian partners. Turkmenistan was a vital link in the Moscow-led energy chain of Central Asia's leading gas-producing countries - the others being Uzbekistan and Kazakhstan. Last year, Russia worked out plans - involving Kazakhstan and Turkmenistan - for a gas pipeline along the Caspian Sea's eastern coast for handling Turkmenistan's anticipated exports. In September, during Russian Prime Minister Vladimir Putin's visit to Tashkent, Uzbekistan agreed to the Russian plan for an expansion of the Central Asian gas pipeline system for handling anticipated Turkmen gas exports.

These initiatives were predicated on the assumption that Russia must gear up to handle all of Turkmen gas exports. During last year, Russia gained rights over the gas exports of Turkmenistan, Kazakhstan and Uzbekistan on the basis of its offer to make purchases at "European prices". The entire economics and logistics behind these complicated webs of Russian gas diplomacy in Central Asia now require updating - and rapid updating since, unlike previously, Russia's competitors by now know its tactics and work ethics and there is consequently now no more surprise element.

The immediate Russian concern will be regarding the Nabucco gas pipeline proposal mooted by the European Union and backed by the United States as an energy project that would somewhat reduce Europe's dependence on Russian gas supplies. Nabucco envisages the dispatch of Caspian gas to the European market via an energy hub in Turkey bypassing Russian territory. Nabucco's viability depends on access to Turkmen (or Iranian) gas supplies.

With GCA's announcement on Monday, the doubts have been dispelled at least in one direction - Turkmenistan indeed does have the capacity to feed Nabucco with all the gas it needs. This comes at an awkward time for Moscow when its rival project, South Stream, which aims at further tying up the European market with Russian gas supplies, is struggling to take off.

Nabucco will give South Stream a run for its money. If it materializes, it could also be a setback for the broader thrust of Russian diplomacy, which in the past two years has aimed at cultivating the countries in the southern tier of the European market - Austria, Italy, Greece and the Balkan and Central European countries. There is already immense pressure from the US on the South Stream's transit countries to back off from far-reaching energy collaboration with Russia.

Geopolitics is just one step behind. Russia hoped to temper the eastward expansion of the North Atlantic Treaty Organization's expansion and the US designs to roll back the Russian presence in the Black Sea region by working out a system of energy dependence with the US's allies in the region. Moscow recently offered a $4 billion loan to Ukraine for establishing two nuclear power plants in its western region. This is despite the pro-US stance of Ukrainian President Viktor Yushchenko.

Moscow's strategy was working well. In a telling remark on Tuesday, at a joint press conference with Georgian President Mikheil Saakashvili, president of the European Commission Jose Manuel Barroso virtually acknowledged the effectiveness of the Russian diplomacy in Europe. He said that if the EU is moving toward resuming negotiations with Russia on a new partnership deal even in the aftermath of the Caucasus conflict, that was not a "gift" for Russia but because it was in the interests of Europe. He said EU had economic, financial and investment interests to safeguard and needed to work out cooperation with Moscow in maintaining energy security.

"I think it is in the interest of the EU to keep the dialogue with Russia to promote stability in Europe," Barroso underlined in a virtual snub to the US doctrine of isolating Russia over the Caucasus crisis.

It is not only with the European countries but also with its partners in the Commonwealth of Independent States (CIS) that

Continued 1 2  


Russia takes control of Turkmen (world?) gas
(Jul 30, '08)

Relax and float south stream
(Mar 14, '08)


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(24 hours to 11:59pm ET,Oct 15, 2008)

 
 



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