Natural gas may be flowing again from Turkmenistan to Russia, but the two countries' pricing dispute is not over, analysts are predicting.
Turkmen gas exports to Russia resumed January 9 after a nearly nine-month hiatus, due to a pricing dispute. [For background see the Eurasia Insight archive]. Under the Turkmen-Russian settlement, the Kremlin-controlled energy giant Gazprom will only buy 30 billion cubic meters (bcm) of gas annually compared to 50 bcm in previous years, and will pay in the region of $250 per thousand cubic meters (tcm), Russian news sources reported.
The interruption in gas supplies caused serious damage to Turkmenistan's state finances. [For background see the Eurasia Insight archive]. In 2009, Turkmen gas production fell to 38 bcm from 70.5 bcm during the previous year, the Russian daily Kommersant reported on January 11. As a result, Turkmenistan lost "not less than a quarter of its annual Gross Domestic Product, between $7 billion and $10 billion," Michael Korchemkin, the director of the East European Gas Analysis, told Kommersant.
Since late 2009, Turkmenistan has opened new exports routes to China and Iran. But these pipelines, however, are not able to offset the losses from a stoppage of exports to Russia. [For background see the Eurasia Insight archive]. Given the significance of Russia-bound gas exports, Ashgabat had no choice but to submit to Russia's pricing demands, analysts say.
"Turkmenistan ha[d] been in survival mode since it stopped exporting gas to Gazprom," said Andrei Grozin, director of the Central Asia Department at the CIS Institute in Moscow. "It [Ashgabat]was living thanks to Chinese loans. China doesn't have the habit of writing off debts like Russia, China always wants the money back, it might be at a low interest rate, but they still want it," he said.
Geopolitics was a complicating factor in negotiating a Turkmen-Russian settlement, according to Dmitry Alexandrov, an analyst with Univer Investment Group in Moscow. "It took the sides so long to reach an agreement because we can't look at the gas problem in purely economic terms: political factors were also a component," he said.
Turkmenistan is unlikely to be satisfied with the current arrangement and may continue to haggle with Gazprom over the coming year. In turn, if Gazprom sees on opportunity to lower the gas purchase price, it will seize that opportunity, Grozin said. "Turkmenistan needs the money that Gazprom pays for its gas. And even if Gazprom pays only $200/tcm that's more than Beijing is ready to pay or even Tehran in the future," Grozin said. Referring to the settlement, he said that it didn't "cover all the issues the countries have."
"I think they will both periodically bargain over the price of Turkmen gas," he said.
Deirdre Tynan is a freelance journalist who specializes in Central Asian affairs.