EurasiaNet Business & Economics - Russia Registers Victory in Caspian Basin Energy Game

BUSINESS & ECONOMICS

RUSSIA REGISTERS VICTORY IN CASPIAN BASIN ENERGY GAME
5/14/07

In a significant geopolitical victory, Russia appears to have torpedoed Western hopes for a trans-Caspian natural gas pipeline.

At a May 12 summit, Russian President Vladimir Putin convinced his Turkmen and Kazakhstani counterparts to go along with a Kremlin-backed plan to expand a pipeline that hugs the Caspian shoreline. Such a route would help Russia maintain its stranglehold on gas exports from Central Asia to Western Europe. [For background see the Eurasia Insight archive].

Putin, along with Turkmen leader Gurbanguly Berdymukhammedov and Kazakhstani President Nursultan Nazarbayev, are expected to sign a formal agreement on the pipeline upgrade in September. Experts from the three states will hash out details between now and then.

The deal would expand a spur of a pipeline network linking Turkmenistan and Russia, known as Central Asia-Center. Nazarbayev is involved because the so-called Prikaspiisky spur travels across a section of Kazakhstani territory. At present the Prikaspiisky route is capable of handling a relatively small amount of natural gas, about 5 million cubic meters per day. The deal outlined by Putin envisions a large expansion of the spur’s capacity, up to an additional 20 billion cubic meters (bcm) by 2012.

The deal, provided it is completed, would appear to lock up the bulk of Turkmenistan’s gas production for export via Russia. Under an existing agreement, Turkmenistan is due to supply the Russian energy giant Gazprom with 60 bcm of gas in 2007 and up to 70 bcm in 2008. The deal between Ashgabat and Gazprom runs through 2028. In addition, Turkmenistan has pledged to begin exporting up to 30 bcm to China annually, starting in 2009. [For background see the Eurasia Insight archive].

Following the death of former Turkmen dictator Saparmurat Niyazov, the United States, European Union and Azerbaijan lobbied his successor, Berdymukhammedov, to commit to a trans-Caspian pipeline (TCP) that would have circumvented Russia. [For background see the Eurasia Insight archive]. Berdymukhammedov appeared non-committal during a visit to Moscow in April, but was enthusiastic about the project following the tripartite summit on May 12, held in the Turkmen coastal city of Turkmenbashi. [For background see the Eurasia Insight archive].

It would seem that if Turkmenistan fulfills the Prikaspiisky pipeline’s export projections, as well as its other commitment to Russia and China, there would be little gas left over to make a TCP route profitable. Nevertheless, Berdymukhammedov insisted on May 12 that the TCP project was "still on the table." Some observers believe that the Turkmen leader’s comments were motivated by a desire to maintain leverage against Russia over the pricing of Turkmen gas.

Nazarbayev, like Berdymukhammedov, seemed to still be thinking about TCP. At the news conference announcing the preliminary agreement on the Prikaspiisky upgrade, Nazarbayev made a gaffe, saying: "Here in the city of Turkmenbashi, we are signing a document on the establishment of the trans-Caspian Pipeline."

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

The views expressed in this publication do not necessarily represent the position of the Open Society Institute and are the sole responsibility of the author or authors.