Analysis: Turkmen Government Steps Up Gas Diplomacy

Turkmen President Niyazov (file photo) (AFP) When Russia and Ukraine quarreled recently over the price of natural gas, the tiff garnered worldwide attention because European gas supplies suffered a brief interruption. But when the two countries brokered a tentative agreement on 4 January, Turkmenistan's role as the supplier of the cheap gas that made the agreement possible drew scant notice. That could be about to change, however, as Turkmen President Saparmurat Niyazov is sending increasingly clear signals that he is looking for ways to enlarge the benefits he reaps from his country's most coveted natural resource.

Turkmenistan currently ships the vast majority of its gas for export to Russia and Ukraine, both of which buy it at bargain prices. Russia's Gazprom is slated to buy 30 billion cubic meters of Turkmen gas at $65 per 1,000 cubic meters in 2006, according to International Oil Daily. The Turkmen gas that will go to Ukraine in 2006 could cost as little as $50 per 1,000 cubic meters, the "Financial Times" reported on 5 January. Meanwhile, prices in Western Europe exceed $200 per 1,000 cubic meters.

Export Routes

The most obvious way for Turkmenistan to get more for its gas would be to diversify its export routes and free itself from the need to send virtually all of its exports to Russia. Lately, President Niyazov has been exploring his options.

On 30 January, Niyazov met with Turkish Ambassador Hakki Akil and U.S. Ambassador Tracey Ann Jacobson in Ashgabat to discuss energy cooperation, turkmenistan.ru reported. According to Turkmen television, Niyazov stressed that his country is considering "all possible routes for bringing its energy resources to international markets bearing in mind increasing global demand." The report noted Turkmenistan's ongoing interest in the construction of a gas pipeline through Afghanistan, adding that the foreign ministers of Afghanistan, Pakistan, and Turkmenistan will soon meet in Ashgabat to discuss the project. The presence of the Turkish envoy at the meeting with Niyazov suggested that a trans-Caspian pipeline to Turkey might have been on the agenda as well, although it received no mention in official reports.

Accelerating Talks

The meeting came amid a quickening tempo of Turkmen energy talks. On 23 January, Niyazov met with Russian President Vladimir Putin. Although Turkmen gas is a crucial component in the rickety resolution of the Russia-Ukraine gas crisis, the meeting appeared to indicate that the Turkmen president was not yet ready to extend price guarantees either to Moscow or Kyiv, "Kommersant" reported on 24 January. While in Russia, Niyazov also met with LUKoil head Vagit Alekperov and Kremlin-friendly oligarch Oleg Deripaska to discuss Russian investments in Turkmenistan, turkmenistan.ru reported. Aleksei Miller, head of state-run Russian gas behemoth Gazprom, is slated to visit Ashgabat in the near future.

Before his Moscow meeting, Niyazov had hosted Zhang Guobao, deputy minister of China's National Development and Reform Commission, to draft a gas-export agreement in preparation for the Turkmen president's planned visit to China this spring. The agreement reportedly calls for Turkmenistan to export 30 billion cubic meters of gas to China a year through a pipeline to be built through Uzbekistan.

Bargaining Chip

The discussion of energy cooperation with the U.S. and Turkish envoys against the backdrop of ongoing talks with other current and potential partners suggests that Turkmenistan's efforts to explore alternative export routes, or at least use the possibility as a bargaining chip in ongoing price talks, are accelerating. Contributing to this impression was a long article that appeared the day after the 30 January meeting on News Central Asia (http://www.newscentralasia.com), an English-language website run by Ashgabat-based Pakistani journalist Tariq Saeedi. News Central Asia's offerings are idiosyncratic, but its stance on Turkmen affairs is pro-government with a particular focus on energy issues.

In a lengthy commentary, Saeedi suggested that the 30 January meeting between Niyazov and the U.S. and Turkish envoys "could possibly be the starting point of a new phase in energy diplomacy." He went on to note that the recent Russian-Ukraine dispute has shown "that you cannot trust Russians." Saeedi then enumerated possible export routes for Central Asian gas: through Russian and Ukraine; through the Caspian (Azerbaijan, Georgia, and Turkey); through Iran and Turkey; and through Afghanistan and Pakistan.

Saeedi commented that the first route -- currently the path most Turkmen gas takes for export -- is problematic because "Russians have proved that they are not reliable partners as far as energy security of Europe is concerned." Saeedi added that Iran "would be a logical route but the present circumstances and the American stance make it a politically indigestible fare." The trans-Caspian pipeline promises certain benefits, but would require the resolution of thorny political and environment problems. Saeedi presented the trans-Afghan pipeline as the most promising alternative export route.

An 'Honest Price'

The most intriguing section of Saeedi's article came at the close in a discussion of an "honest price" for Turkmen gas. Stressing that "Turkmen gas has been used to resolve" the recent crisis between Russia and Ukraine, the author took as a benchmark the $230 that Russia receives per 1,000 cubic meters of gas in Western Europe; he factored in transit charges, set aside 15-percent profit for Gazprom, and then concluded that a fair price for the Turkmen gas that Gazprom sells on to Europe would be $170 per 1,000 cubic meters. He added the caveat that there "may not be any immediate likelihood for Turkmenistan to get this price."

News Central Asia, as the website strains to make clear, is not officially affiliated with the Turkmen government. But its strikingly pro-government stance on major issues suggests at the very least an affinity for official thinking in Ashgabat. As the latest moves by Turkmenistan's mercurial leader indicate, his thoughts seem increasingly to be of ways to increase competition for his country's natural gas and ensure that it commands a higher price.