Business & Economics:
US DIPLOMATS SET THEIR SIGHTS ON TURKMENISTAN'S BERDYMUKHAMEDOV
Joshua Kucera: 1/29/08

US policymakers believe that they can convince the new president of Turkmenistan, Gurbanguly Berdymukhamedov, to open up his country’s vast reserves of natural gas to American companies.

Washington is aiming to revive a strategy that led to the greatest US diplomatic triumph in the Caspian Basin to date -- the construction of the Baku-Tbilisi-Ceyhan (BTC) pipeline in the late 1990s and early part of this decade. Skeptics, however, say the US push may be too little, too late. [For background see the Eurasia Insight archive].

Russia presently enjoys an overwhelming advantage in the Caspian Basin, underscored by the December deal -- signed by Russian, Turkmen and Kazakhstani leaders -- to greatly expand a pipeline network that runs along the Caspian Sea’s shoreline. At this late stage, especially given Washington’s preoccupation with the Iraq war, the United States may lack the resources and the influence to surmount numerous obstacles in the Caspian Basin. [For additional information see the Eurasia Insight archive].

For one, the so-called Prikaspiiski agreement dealt a heavy blow to American-supported plans of building a Trans-Caspian Pipeline (TCP), which would take gas from Turkmenistan to Azerbaijan and then onward via existing pipelines through Georgia to Turkey. [For background see the Eurasia Insight archive]. That plan may not be commercially viable if the Prikaspiiski pipeline gets built. Similarly, European Union-backed plans for the Nabucco pipeline from Turkey to Austria took a hit with a deal between Russia and Bulgaria signed earlier this month for a pipeline across the Black Sea. [For background see the Eurasia Insight archive].

But the United States will not yet concede defeat to Russia. The centerpiece of the State Department’s effort to repulse the Russian advance in the Caspian Basin is the creation of a new office, the Coordinator of Eurasian Energy Diplomacy. Steven Mann, formerly US Principal Deputy Assistant Secretary of State for South and Central Asian Affairs and US ambassador to Turkmenistan, has been appointed to the post.

Washington is also seeking a high-level envoy to bring more diplomatic heft to the US bargaining position, but the Bush administration is having trouble finding a suitably high-profile diplomat to fill the post. The State Department reportedly had selected Thomas Pickering, a former ambassador to Russia and top department official, but he withdrew his name from consideration.

The primary task for Mann and the would-be new envoy will be convincing Berdymukhamedov to grant American firms the opportunity to explore and develop Turkmenistan’s gas fields. Mann is wasting no time in trying to woo Berdymukhamedov. On January 28, he arrived in the Turkmen capital Ashgabat for a series of top-level meetings with Turkmen leaders, including the president, according to the official newspaper Neytral’nii Turkmenistan.

Buoying US hopes for a comeback is the belief that the Prikaspiiski pipeline’s expansion blueprint will never get off the drawing board. “Pipeline declarations are a dime a dozen,” said one American official, speaking on condition of anonymity. “If declarations counted, we would have seven pipelines criss-crossing Afghanistan into India. You only know that a pipeline is real when you get to financial close.”

Similarly, while the Bulgaria-Russia deal “is not positive,” the official said “there is still room for Nabucco.”

The new diplomatic office is similar to one that existed at the State Department from 1998-2004 -- a period when, against seemingly daunting odds, the United States promoted the construction of the BTC pipeline. [For background see the Eurasia Insight archive]. The BTC route, which circumvents Russia, prevents Moscow from achieving a monopoly of Caspian Basin export routes to the West. “Two successive administrations got it seriously right,” the official said.

The key to success back then, the official stressed, was focusing first on getting access to the energy reserves and only then concentrating on the pipeline to get it out, rather than on getting the pipeline built first. Only when there is guaranteed access to the gas will Western companies be interested in building a pipeline, the official noted.

But skeptics wonder if the US effort has enough weight to resist Russian opposition. They note that Russian leader Vladimir Putin is personally involved in arranging oil and gas deals with other former Soviet republics. The to-be-named US special envoy will not be able to wield anywhere near the same kind of influence as does the Russian leader.

US officials believe they can best make their case by stressing that American companies have better ecological records and better practices of training local workers than does the Russian state-controlled gas company Gazprom.

There are signs that Turkmenistan may be receptive to some American diplomatic sweet-talking. The most significant recent signal sent by Berdymukhamedov was an announcement that Ashgabat would allow an independent audit of the country’s gas reserves. [For background see the Eurasia Insight archive].

Even so, too many uncertainties may remain to make a convincing argument that Western companies are a better option for Turkmenistan, said Martha Brill Olcott, a Central Asia expert at the Carnegie Endowment for International Peace. It is not clear how much a pipeline will cost, how much natural gas is in the country, and how much of it would be left after Turkmenistan fulfills its obligations to China and Russia. [For background see the Eurasia Insight archive]. Without knowing all that, it will be impossible to determine whether shipping the gas across the Caspian would be a better option, she said.

“There’s no reason to assume that the purchase price [for an American-backed option] will be higher,” Olcott said. “There’s no evidence that the Russians are not paying a decent price for this gas. There has to be an economic basis for the claim that you’re cheating these people, rather than an emotional basis.”

An additional obstacle is that Western firms may have lost some of their competitive edge over the last decade. In the early 1990s, the United States could convincingly claim that Western companies offered superior technology and expertise in comparison to their Russian and Chinese counterparts. In recent years, though, Russian and Chinese firms have gained valuable experience in operating in the Caspian Basin, suggested Sean Roberts, the Central Asian Affairs Fellow at Georgetown University.

The United States does have one significant advantage, Roberts added. Washington can argue that American companies are less likely to be influenced by political factors than would be companies in China or Russia. “It is much more likely that you’ll see a US oil company do something that’s in their own financial interest, but not in line with US foreign policy than a Russian company,” Roberts said.

It is also not clear that Western companies are interested in making a big bet on Turkmenistan, a country with a poor infrastructure. “The bigger question is, is Turkmenistan ready for Western investment? And I don’t think they are,” Olcott said. “They don’t have a legal structure in place that provides the same level of protection as Azerbaijan or Kazakhstan – and that’s not such a high threshold.”

Editor’s Note: Joshua Kucera is a Washington, DC,-based freelance writer who specializes in security issues in Central Asia, the Caucasus and the Middle East.