In public appearances, Turkmenistan's leader Gurbanguly Berdymukhamedov tends to maintain a stern visage, a look befitting a man who heads one of the most repressive states on earth. But in the great Caspian Basin energy game, Berdymukhamedov is playing the role of joker, a wild card that can at any moment tip the balance of forces. And Russian leaders, who currently hold the most chips in the Caspian contest, are more than a little nervous about Berdymukhamedov's skill at playing opponents off each other.
Turkmenistan is a crucial supplier of natural gas to Russia. Although the Turkmen leader has professed loyalty to Moscow, and has pledged to use Russia as the main conduit through which Turkmen energy exports will flow, the Kremlin is not convinced of his sincerity. Indeed, Berdymukhamedov has made much lately of a pipeline to China. [For background see the Eurasia Insight archive]. And he has witnessed a parade of American and European Union officials pass through Ashgabat in recent weeks, raising the possibility that he might make a formal commitment to a Trans-Caspian Pipeline (TCP). [For background see the Eurasia Insight archive].
At the very least, Berdymukhamedov's independence is a sign of Moscow's weakness, an indicator that Vladimir Putin's leverage is slipping. No longer can the diminutive Russian leader try to throw one of his patented glares at a Central Asian leader like Berdymukhamedov, and induce a blink. The man of the year in 2007 could well experience some setbacks in 2008.
We may be witnessing a turning point at which Russia is starting to need Turkmenistan more than Ashgabat needs Moscow. If indeed this is the case, Russia's energy house of cards could well come crashing down.
To a great extent, it all depends on how much natural gas Turkmenistan actually has. No one, outside of Berdymukhamedov and perhaps a few others in Ashgabat, really knows. Turkmenistan has never publicly released audit figures, and no one trusts the data that does circulate. Berdymukhamedov recently indicated that he would invite independent auditors to calculate the country's reserves. If he follows through on this pledge, it may well turn out that Turkmenistan has enough gas to fill three export routes. After all, why would he go public unless he knew Turkmenistan could back up all his promises?
If indeed Turkmenistan is drowning in gas, it'll be Russia that feels the pangs of discomfort. Russia currently enjoys a stranglehold on Turkmen exports. If Ashgabat were to have the ability to fill a Chinese export pipeline, along with perhaps a TCP route, it would dash Russia's monopolistic ambitions.
Because Russia cannot meet its domestic demand or its export obligations to CIS and European Union states with its own gas production, it must have Turkmen imports to keep its economic model viable. The Kremlin has hitherto been able to buy Turkmen exports at bargain-basement prices, and then provide it to its own subsidized market, and to similarly subsidized CIS markets. Russia uses much of its own domestically produced gas for export to the EU, which pays top euro for it.
If Moscow can no longer have cheap Turkmen gas, it will face a variety of unsavory choices: it will either have to raise heavily subsidized domestic prices to global market levels, an option that the Kremlin is loathe to embrace; the Russian government could also reform its economy, which, self evidently, is a no less distasteful option than raising gas prices; or worse yet, Moscow could reduce foreign sales to meet domestic demand.
At present, Russia has three sets of consumers: the domestic market, Europe, and East Asia. By its own forced and belated admission, under conditions where energy demand is rising in all three sectors, it cannot generate enough energy to meet that demand, especially as its own highly inefficient domestic market guzzles energy like there's no tomorrow. Russia may have admitted the dilemma, but attempts to correct current imbalances via price hikes have yet to occur. Even so, the Kremlin quietly realizes that the country is still not a mature economic power, as the Russian public could never bear the shock of paying true energy costs. Russian leaders, thus, have no choice but to keep on subsidizing a dysfunctional domestic system, the severity of which has been masked in recent years by skyrocketing energy prices.
Russia is very good at playing the bluffing game, so few people realize that the Russian government is sweating buckets. But the reality is that Moscow, increasingly desperate to preserve its status quo, is throwing money at Turkmenistan in the hope of buying Ashgabat's continuing loyalty.
The problem for Moscow, however, is that Berdymukhamedov is a much savvier player than was his predecessor, Saparmurat Niyazov. Berdymukhamedov, it would seem, knows how to spot weakness and exploit it to his maximum advantage.
A sign that the tables are turning on Moscow was evident last November, when Russian Prime Minister Viktor Zubkov traveled to Turkmenistan, presumably to pressure Berdymukhamedov into finalizing agreements governing the expansion of the so-called Prikaspiisky pipeline, which would, if completed, possibly cement Russia's dominant export position in Turkmenistan. [For background see the Eurasia Insight archive].
Instead of Russia making Berdymukhamedov bend, however, it was the Turkmen leader who turned the screws on the Kremlin. When the negotiations ended, Russia found itself agreeing to a massive price hike for the gas that it takes from Turkmenistan.
A major reason that Russia will agree to pay more is that the Kremlin calculates it can pass along the higher costs to its customers, namely Ukraine and the EU. But this will work only as long as Moscow's consumers lack viable alternatives. If such alternatives materialize, especially a TCP-to-Nabucco connection that allows Turkmen gas to completely circumvent Russian control, Moscow could find itself in serious economic trouble.
To guard against the possibility of Russian treachery, Berdymukhamedov reportedly carried out vigorous purges of anyone in possession of sensitive information about him, or who was seen as having too cozy a relationship with Russia. As a result, the Kremlin finds itself with no trusted friends in Ashgabat, and thus, in Turkmenistan's case, the old KGB tactic of mobilizing a Fifth Column is not an option available to the current crew at Lubyanka Square.
Although Russia still gets the majority of Turkmenistan's gas and can still simulate the role of an imperial overlord in reference to that gas, the costs of this posture are mounting -- as is the rivalry with China, the EU and the United States. And if Russia's rivals achieve any real successes in Turkmenistan, Moscow's costs will just keep on rising.
It is apparent that Turkmenistan under Berdymukhamedov is eagerly exploiting its opportunities to explore export deals. If the present trend continues, the United State and European Union could find themselves with a prime opportunity to throw a monkey wrench into Russia's energy export machine. At the same time, an opportunity is presenting itself to the US/EU on the one hand, and Turkmenistan on the other to enter into an energy relationship in which all sides can emerge winners.
Stephen Blank is a professor at the US Army War College. The views expressed this article do not in any way represent the views of the US Army, Defense Department or the US Government.