The gas-blast row between Turkmenistan and Russia shows that the geopolitical balance in the Caspian Basin energy contest may be shifting. The Kremlin, along with its energy appendage, Gazprom, now appears to lack the power and the resources to call the shots.
Ashgabat and Moscow have been engaged in an acrimonious spat since April 9, when an explosion on the CAC-4/Davletbat-Daryalik pipeline cut Turkmen natural gas exports to Russia. [For background see the Eurasia Insight archive]. At first, Gazprom officials indicated that the pipeline would be repaired within a matter of days. But almost a week later, gas still is not flowing.
Over the past few days, the pipeline dispute has transformed into a test of political strength. This could hamper the swift resolution of the matter, as any step to compromise stands to be interpreted as a sign of weakness. "They [Turkmen leaders] turned this technological accident into a very politicized event," said Dmitry Alexandrov, an analyst at Financial Bridge in Moscow.
All indicators suggest Ashgabat currently has the upper hand. Turkmen leader Gurbanguly Berdymukhamedov has sought to keep Russia on the defensive by calling for an international investigation into the pipeline explosion, as well as demanding that Gazprom pay for the repairs. "We won't allow them to hurt our image as a reliable supplier of energy resources to global markets," Turkmen television reported Berdymukhamedov as saying.
The Turkmen accusations are closely connected with a looming battle over the gas export prices, according to Andrei Grozin, the director of the Central Asia Department at the CIS Institute in Moscow. "If Turkmenistan ends up having Gazprom pay for the repair, it will show that Gazprom recognized its fault and the Turkmen stood on their position until the end," he told EurasiaNet.
"Turkmenistan is afraid of losing prices set with Russia," Grozin continued. "In the summer or fall of 2009, prices will start going down and . . . Russia will not be ready to overpay for gas as it did before. Turkmenistan wants to get something as fast as it can."
The price that Gazprom pays for Turkmen gas is reportedly based on a formula derived from European market rates. With gas supplies now far outpacing consumption amid a global downturn, Ashgabat must brace for a substantial drop in its export revenue.
Gazprom, meanwhile, finds itself in deepening financial trouble. The conglomerate currently is burdened with a gas glut. The Interfax news agency reported that the company saw its reserves grow by 11 percent during 2008, and with demand continuing to lag, many experts foresee Gazprom's glut continuing to expand at an alarming rate this year. The interruption in Turkmen supplies thus benefits Gazprom on several levels. First, it allows the Russian company to draw down existing reserves, and it also affords some savings. According to a recent report in the Vremya Novostei newspaper, Gazprom lost more than $1 billion during the first quarter of 2009 on gas purchase deals, in particular its Turkmen obligation.
Grozin expressed a belief that the explosion was an accident caused by poor maintenance. "We know that the ex-president of Turkmenistan [Saparmurat Niyazov] spent all the [country's] money on building fountains and palaces instead of modernizing the gas transportation system," he said, adding that such explosions happen "approximately every six months in Turkmenistan," but are not reported.
A Turkmen political scientist with experience working on gas pipelines, speaking on condition of anonymity, concurred that such explosions were "common." The Turkmen government is notoriously lax in its upkeep and is probably responsible for the accident, he said.
He concurred Ashgabat is looking to bolster its image while locking in current prices. But the "defensive" response, he stressed, is an image game Ashgabat is playing for international and domestic consumption.
Turkmen officials are anxious to lock in a price now that maximizes their profit potential. But Gazprom no longer is in a hurry, given the expectation that prices will continue to fall. Hard pressed on all sides, Gazprom officials are also fearful of getting themselves locked into another draining deal. Underlying Moscow's position is the belief that Turkmenistan lacks immediate export alternatives.
"Turkmenistan is not in a very powerful position and must play "games" to get what it wants," Alexandrov said.
But other experts in Moscow are sounding an alarm. Political analyst Sergei Kulikov, writing in the influential daily Nezavisimaya Gazeta on April 15, cautioned that if Moscow mismanages the dispute, Berdymukhamedov might be prepared to cancel a 25-year gas export agreement that is a critical element to Russia's entire energy strategy.
If the Turkmen-Russian dispute drags on, Ashgabat may also feel inclined to make a firm commitment to exporting large quantities of gas via a US-backed trans-Caspian pipeline. Such a commitment could prove financially ruinous for Russia, as it would break Moscow's stranglehold over Central Asian gas exports to Europe.
The PR factor is important to keep in mind as the pipeline dispute unfolds, Grozin said. "The goal of Turkmenistan [is to burnish] the image of the country and its leader," he said. "The image of the leader is improving due to his demonstration of power."
David Trilling is the Central Asia Coordinator for EurasiaNet.