Turkmenistan: New Clout, Old Uncertainties

Turkmen President Niyazov (file photo) (AFP) Turkmenistan's importance as a source of gas was underlined in the New Year when Russia and Ukraine ended their highly controversial dispute with a deal that depends on supplies of Turkmen gas. In recent weeks, Turkmenistan has reinforced its new prominence by trying to promote a range of new pipelines that would make it central to a new web of energy-based relationships. Turkmenistan's bid to increase its clout on the global energy market is again on show now, with Afghan, Pakistani, and Indian diplomats currently meeting in the Turkmen capital, Ashgabat, to discuss a new pipeline.

And, with oil and gas prices stable in the stratosphere, energy clout is rapidly becoming the watchword of the 21st century. Russia's status as a crucial supplier of natural gas to Europe, for example, is a major source of the onetime military superpower's current geopolitical significance. Two Central Asian countries -- Kazakhstan and Turkmenistan -- are also potential major energy players, but so far the region's isolation from international markets and dependence on Russian export routes have kept it on the periphery of global energy politics. Now, though, the unpredictable ruler of Central Asia's most isolated nation, Turkmen President Saparmurat Niyazov, appears committed to a serious campaign to move Turkmenistan from the wings to center-stage.

That aim was demonstrated again on 10 February, when Niyazov announced on national television that Turkmenistan intends this autumn to raise the export price of its natural gas from $65 to $100 per 1,000 cubic meters. This gambit comes at a time when Turkmen gas is increasingly tied into a complex international equation, as a deal recently brokered between Ukraine and Russia depends on cheap Turkmen gas. Under the deal, Ukraine would pay an average price of $95 per 1,000 cubic meters in 2006.

The Impact Of Turkmenistan's Clout

Such a price hike would pinch Ukraine's economy painfully. Ukraine is slated to import 17 billion cubic meters of Russian gas and 39 billion cubic meters of Turkmen gas in 2006, according to the news website gazeta.ru. A 53 percent increase in the price of Turkmen gas would raise the average price Ukraine pays for its total imports from Russia and Turkmenistan by 20-25 percent, from $95 to $114-119 per 1,000 cubic meters. Other estimates run higher. An unidentified source in Gazprom, the state-run Russian company that handles gas exports, told the Russian business newspaper "Vedomosti" that if Turkmenistan charges $100, Ukraine would have to pay $130 for imports.

The problem for Ukraine is that crucial sectors of Ukrainian industry are no longer profitable once the price of imported natural gas rises above $100. Arif Zeinalov, an analyst with the Russian financial group Interfin Trade, told gazeta.ru that such a price increase could undo the Russian-Ukrainian deal that emerged from politically fraught talks after Gazprom briefly cut off supplies to Ukraine in the New Year. Zeinalov believes that "if prices rise to this level, there will be a new round of very complicated talks. There will be a chain-reaction review of all the other conditions of the contract. Kyiv's first condition will be to raise the transit rate."

Mikhail Bakulev, an analyst with Moscow-based AVK Group, also feels a Turkmen price hike would impact Russian-Ukrainian relations. "Niyazov's decision is beneficial to Russia, since Moscow gets an additional mechanism to pressure Ukraine," he told gazeta.ru.

Niyazov (right) with Pakistani President Musharraf (center) and Afghan President Karzai meeting in 2002 (AFP)

Not everyone agrees. Ukrainian Prime Minister Yuriy Yekhanurov, for one, reportedly reacted calmly. Interfax-Ukraine said that Yekhanurov called the Turkmen price hike "unofficial" and said "this has no bearing whatsoever on our relations regarding supplies of natural gas." Ukrainian lawmaker Oleksandr Hudyma, a member of the Ukrainian parliament's energy committee, told "Vedomosti" that Niyazov's price hike statement represented an attempt to pressure Russia. Hudyma said Russia, which is currently an irreplaceable export route for Turkmen gas, could and should resist Turkmenistan's pressure, especially since an increase in the price of Turkmen gas could trigger price rises across the board, affecting Russian relations with the European Union. The New Year clash between Ukraine and Russia had already left Europeans feeling jittery about the security of oil and gas supplies from former Soviet states.

While Niyazov's desire to boost the price of Turkmen gas from double- to triple-digit levels hardly requires an explanation, his latest public statement may be intended to influence more private negotiations, "Vremya Novostei" suggested on 13 February. The newspaper wrote that when Niyazov traveled to Russia in January and met with President Vladimir Putin, he asked for a share in the export profits from the resale of Turkmen gas. Gazprom's head, Aleksei Miller, is due in Ashgabat for a new round of negotiations on 18 February, and Niyazov's public threat of a price hike could be seen as a curtain-raiser to their talks.

Ambitions Abroad, Uncertainties At Home

Moreover, recent reports from Turkmenistan indicate that Niyazov may be experiencing a cash crunch. Niyazov's latest domestic initiative involved unprecedented pension reductions, with 200,000 retirees now receiving smaller monthly payments, 100,000 getting nothing at all, and some unlucky souls even facing the prospect of reimbursing the state for pensions suddenly deemed to have been overly generous.

And Niyazov continues to explore alternate export routes for Turkmenistan's natural gas. Recent talks have touched on the possibility of a trans-Caspian pipeline and a pipeline to China. On 14-15 February, the steering committee of the Turkmenistan-Afghanistan-Pakistan (TAP) pipeline is set to meet in Ashgabat, with an Indian delegation for the first time joining ministerial-level delegations from Afghanistan, Pakistan, and, of course, Turkmenistan.

TAP has a checkered past and unclear prospects, with critics pointing to questions about Turkmenistan's reserves and security concerns in Afghanistan. The latest round of talks is unlikely to resolve those issues. However, in bringing together Indian and Pakistani ministers for a project with peaceable ramifications for the two countries and for a project of undeniable significance for Afghanistan's economic future, Turkmenistan is underlining its growing importance as an energy supplier. Russia's deal with Ukraine, brokered with the help of Turkmen gas, made much the same point.

But the point comes with a catch. Even as Turkmenistan beings to flex its muscles as an energy supplier, it remains the region's quintessential black box -- ruled by a president-for-life who is his own political system, shut off from the outside world behind a dense thicket of state-controlled media that extol a new golden age, and described in independent reports as a land of harsh repression, decaying health care, dysfunctional education, rising drug abuse, and careering corruption. In short, at the very moment when Turkmenistan's energy reserves have thrust it onto the international stage, no one has any idea where the country is really headed.