Turkmenistan: Ashgabat Sends Shot across Gazprom's Bow

In a development that may spell big trouble for Russia, Turkmenistan has expressed determination to diversify energy exports.

Ashgabat is indicating that it may use the so-called East-West gas spur -- which was originally envisioned as linking Turkmenistan into the Russian-controlled Prikaspiiski pipeline network - as a means to carry out its diversification plans.

A statement outlining Turkmenistan's intentions, posted April 3 on the website of the state news agency, makes for uncomfortable reading for Gazprom, which currently enjoys a stranglehold on Turkmen natural gas exports. [For background see the Eurasia Insight archive]. Gazprom had originally said it would finance the East-West spur, but it backed out of the deal during Turkmen leader Gurbanguly Berdymukhamedov's late March visit to Moscow. [For background see the Eurasia Insight archive].

Now Turkmenistan appears intent on carrying out an international tender for the East-West contract.

"The era of monopolies in this segment of the world economy is a thing of the past," the official Turkmen statement said. "Rapidly growing demand for energy [...] stimulates the search for new configurations, schemes and project models of alternative energy supply routes. Which [new configuration] is chosen is the sovereign right of the parties to a particular project."

The statement provided no specifics on Turkmenistan's development plans. Ashgabat has expressed interest in participating in the US-supported trans-Caspian pipeline (TCP) project, which would become part of an export route to Europe that evades Russian control. But so far, Turkmen officials have made no firm commitments to the TCP route.

The East-West spur is estimated to cost about $1.5 billion to build. The April 3 statement took repeated swipes at Russia, but gave no indication that Turkmen leaders were ready to embrace the US-backed TCP route. In not so subtle terms, the statement accused Russia of trying to bully Turkmenistan on energy-related issues.

"The issue of sovereign rights of countries to choose the manufacturer of the supply routes of their energy is inextricably linked to the right to formulate prices for them," the statement said. "In this context, the only correct pattern for the formation for natural gas prices is direct agreements between the seller and buyer. In doing so, logically, that it is the country of production determines the price based on cost of gas production."

If Russia wishes to remain an influential player in the development of Turkmenistan's energy resources, Ashgabat's statement seemed to demand that the Kremlin undergo an attitude adjustment. The statement hinted that Russia's approach to energy issues was "anachronistic" because it attempted to "politicize the problem of energy supply, to use them as a tool to achieve political goals or to satisfy corporate interests."

"The modern approach - an approach based on the interests of all participants in the energy market [is to] to protect energy supply from political and other risks," the statement added.

Turkmen officials indicated that they would explore diversification options an upcoming energy conference in Ashgabat on April 23-24.