Turkmenistan's budding economic partnership with China has the potential to dramatically reshuffle Central Asia's energy equation. Russia, which has been able to dictate prices due to its stranglehold on regional gas exports, stands to be the big loser if the Turkmen-Chinese partnership develops as envisioned. However, many experts are skeptical that Turkmenistan's mercurial leader, Saparmurat Niyazov, can deliver on all his export promises.
Turkmen and Chinese officials signed a series of economic and technical cooperation agreements on August 21. In comments broadcast by state television, Niyazov hailed the event as a "turning point of [bilateral] large-scale political, economic and cultural cooperation." Niyazov also revealed that both countries are continuing work on a pipeline scheduled for completion in 2009, enabling Ashgabat to supply 30 billion cubic meters (bcm) of gas annually to China. Plans to build the pipeline were first discussed during Niyazov's visit to Beijing in April. [For background see the Eurasia Insight archive].
On paper, the Turkmen-Chinese gas export plans would appear to threaten an earlier agreement involving Turkmenistan and the Russian conglomerate Gazprom on the delivery of up to 80 bcm of gas under a 25-year supply deal. [For background see the Eurasia Insight archive]. "Gazprom can find itself in a difficult situation;" said a recent commentary posted by the Profile.ru website. "If Ashgabat starts supplying gas to China according to schedule, no one can guarantee that Turkmenbashi [Niyazov] will have enough left over to supply Gazprom."
The business daily Kommersant took a decidedly more pessimistic tone. The inability of Gazprom to count on reliable supplies from Turkmenistan would cause to the Russian conglomerate to "face problems both in terms of fulfilling its European export contracts and with [declining] profits."
Not only might Russia take a hit on the import side, its exports could also suffer. During a visit to Beijing in March, Russian President Vladimir Putin committed Russia to building a gas pipeline connecting Russia and China, facilitating Chinese imports of up to 80 bcm per year. That route is projected to be completed by 2011. According to Russian energy analysts, the costs of the Russian and Turkmen pipeline projects are similarly priced at roughly $10 billion. But the Chinese might find the Turkmen project more attractive as it is scheduled to come on line two years ahead of the Russian one.
"If the Turkmen project has a solid feasibility study and there are no problems with funding, it may well be realized as planned," Andrei Gromadin, an analyst for MDM-Bank told Gazeta.ru. If Beijing indeed opts for the Turkmen gas supplies, Russia can forget about its ambitious plans to sell fuel to China, some analysts say.
The Chinese route is not the only one that Turkmenistan is currently toying with. A week before his tête-à-tête with Chinese officials, Niyazov and US Deputy Assistant Secretary of State for South and Central Asian Affairs, Steven Mann, discussed the possibility of pipelines across the Caspian Sea, as well as through Afghanistan to Pakistan and India. [For background see the Eurasia Insight archive].
After his talks with Mann, Niyazov reiterated that his country is pursuing a "policy of creating a diverse pipeline system." Washington appears to be particularly interested in a new gas pipeline from Turkmenistan to Pakistan. This so-called TAP route is seen as a competitor of a Gazprom-backed project to construct a pipeline connecting Iran to Pakistan. The Asian Development Bank recently completed a feasibility study for the TAP pipeline project, but political instability in Afghanistan remains a formidable obstacle to construction.
Some experts suggest Turkmenistan's "energy exports diversification" plan" is seriously flawed, citing a belief that the country does not have sufficient reserves to match its commitments. Turkmenistan at present produces annually around 60 bcm of gas, 75 per cent of which is exported. Under the terms of the already signed contracts, Turkmenistan is to supply its major customers, Russia, Ukraine and Iran, with up to 100 bcm of gas by 2009. Add the Chinese deal and Turkmenistan has committed itself to exporting 130 bcm. The consensus on this figure is that it is an impossible target.
What is more likely, analysts argue, is that Niyazov is trying to use energy ties with Beijing as leverage in negotiations with Russia and Ukraine over the price of Turkmen gas supplies. Ashgabat's policy is clear, suggests Alexei Gromov, the analyst at the Institute for Natural Monopolies Studies, it seeks to stimulate competition between the principal gas consumers in order to secure the most profitable bargaining position for itself on export prices. [For additional information see the Eurasia Insight archive].
"Due to the stiff competition for Turkmen gas, Niyazov has a good excuse to raise prices," said a commentary posted by the Politcom.ru website. "The Chinese project may
Editor's note:
Igor Torbakov is a freelance journalist who specializes in CIS political affairs. He holds an MA in History from Moscow State University and a PhD from the Ukrainian Academy of Sciences. He was a Regional Exchange Scholar at the Kennan Institute, Woodrow Wilson International Center for Scholars, Washington DC, 1995; Research Scholar at the Institute of Russian History, Russian Academy of Sciences, Moscow, 1988-1997; and Kiev correspondent for the Paris-based weekly Russkaya mysl, 1998-2000.
