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   For Democracy and Human Rights in Turkmenistan
01.10.2014  
English

19.08.2014
Is Turkmenistans Gas Flowing Toward a One-Country Policy?

Chris Rickleton

Only China, it seems, has the economies of scale and wherewithal to bring the gas home at a price acceptable to Turkmenistans prickly dictator, Gurbanguly Berdymukhamedov.

Ninety percent of Turkmenistans exports are hydrocarbons. And 70 percent of all Turkmenistans exports went to China last year. So news that Iran, one of the countrys top three gas buyers, will soon stop importing Turkmen gas cannot be welcome in Ashgabat. It is almost like Turkmenistan threw off the Russian yoke only to shoulder Chinas.

On August 11, Iranian Oil Minister Bijan Namdar Zanganeh said Iran would no longer need Turkmen gas as of next year, news agency Trend.az quoted him as saying. Zanganeh explained that Iran is ramping up domestic production.

Writes RFE/RLs Bruce Pannier:

It is quite a turn of events for Turkmenistan. In early 2010 a new, second pipeline bringing Turkmen gas to Iran was launched. At that time leaders in the two countries spoke about gas imports to Iran reaching up to 20 billion cubic meters (bcm) annually. A new gas-compressor station started operation in western Turkmenistan in December 2013, built specifically to export more gas to Iran.

Unsurprisingly, Turkmen state-controlled media has not reported the bad news.

This would not be the first time the two countries have had a tiff over gas. Back in November 2012, following an unexpected halt in supplies from Turkmenistan to Iran, EurasiaNet.org outlined the sticking points in a tricky trade:

First, Iran has been struggling with balance of payments problems as international sanctions designed to end its nuclear program have crushed its banking system and stifled foreign trade. It is not unlikely that Tehran is struggling to make hard currency payments for the gas, asked for a discount, and Ashgabat started playing hardball.

Second, Iran relies on imports of Turkmen gas to supply its northern regions, particularly in winter, which helps free up excess capacity for its downstream sales to Armenia and Turkey. If Iran cant make these margins work, it is likely to want to halt purchases.

Third, Ashgabat may be trying to push up Irans purchase prices. Turkmen President Gurbanguly Berdymukhamedov seems to think each of his gas clients Russia, Iran, and China should pay as much as anyone else is willing to pay.

The first point could be the most pertinent in light of Zanganehs recent comments. In May, the oil minister talked up a goods-for-gas exchange during a meeting with Turkmen Vice President Kh. Mukhammedov. There has been no indication the Turkmens were happy with that plan and may have since told the Iranians that they dont want to be paid in pistachios, thus triggering the robust Iranian response.

Growing Chinese imports of Turkmen gas expected to amount to 65 billion cubic meters annually by 2020 will certainly have strengthened Turkmenistans hand in negotiations with Iran. But is Turkmenistan, whose gas ties with former overlord Russia cooled following a price spat in 2009, falling under a Beijing monopoly?

Potential customers looking to invest in Turkmenistans abundant gas fields have to weigh the isolated countrys shortage of pipeline infrastructure against the cost of the gas itself, which Ashgabat is always looking to force up after years of selling cheap to Russia.

Only China, it seems, has the economies of scale and wherewithal to build that infrastructure quickly and bring the gas home at a price acceptable to Turkmenistans prickly dictator, Gurbanguly Berdymukhamedov. If Iran isnt bluffing, it is likely Chinas share of the Turkmen gas market will go up again, twisting the infamously neutral country toward a risky dependence.

Things may have been different had the ill-fated Nabucco gas pipeline to Europe ever gotten off the ground. Ashgabat gave its strongest backing for Nabucco in 2010, but the project was derailed by political wrangling among European Union members, legal disputes between the states sharing the Caspian Sea, and financial problems among participating companies.

If only the Caspian littoral states could determine the legal status of the sea, Turkmen gas might one day flow west, perhaps through another trans-Caspian pipeline. Until then, its a Chinese buyers market.

:: EurasiaNet
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