Business & Economics:
RUSSIA: TRYING TO REMAIN STANDING ON CENTRAL ASIA'S SLIPPERY ENERGY SLOPE
4/21/09

With its energy strategy for Central Asia in grave danger of unraveling, Russia is striving to create an appearance of normalcy as the first step in reasserting its energy role in the region.

For the past week, Prime Minister Vladimir Putin has been in damage-control mode. On April 20, he dispatched a Russian delegation to Ashgabat to hold emergency consultations with Turkmen leader Gurbanguly Berdymukhamedov. The primary objective of the mission was to repair a rift in bilateral relations created by an April 9 pipeline explosion. [For background see the Eurasia Insight archive].

The semi-official Turkmen news website Turkmenistan.ru indicated on April 21 that the meeting between Berdymukhamedov and the Russian delegation, headed by Deputy Prime Minister Igor Sechin, failed to ease tension. According to the report, Sechin voiced Russia's desire to "do whatever it takes to strengthen and develop" bilateral energy relations. Tellingly, the report did not say how Berdymukhamedov reacted to Sechin's overture. Instead, it said that "the Russian side was clearly informed of Turkmenistan's position" on the current energy dispute.

Prior to the Ashgabat mission, Putin on April 16 sent Sechin and Gazprom CEO Alexei Milller on a Central Asia swing to hold talks with Kazakhstani, Turkmen and Uzbek officials concerning natural gas supplies.

Just a year ago, Russia seemed poised to cement its control over Central Asian natural gas exports by offering to pay European prices for Central Asian gas. [For background see the Eurasia Insight archive]. But following the global economic meltdown, Gazprom now is struggling to maintain its economic health, and Moscow appears to be looking for a way to get out of what have become onerous gas purchase contracts, while still retaining its dominant role in Central Asian energy developments.

Central Asian leaders, however, appear to be rapidly losing faith in Russia. Turkmenistan has taken fast action to reorient its energy strategy. On April 15, Turkmenistan's state-owned Turkmengaz dispatched a mission to Tehran to negotiate with Iranian officials on a new export arrangement. And on April 16, Turkmenistan signed an agreement with Germany's RWE AG to develop offshore gas deposits, including natural gas exports eventually.

The RWE deal could potentially be a harbinger of a firm Turkmen commitment to export via a long-planned trans-Caspian pipeline, a route that would circumvent Russian territory.

Kazakhstan, meanwhile, has demonstrated in recent days that it sees China as reliable energy partner. [For background see the Eurasia Insight archive]. Uzbekistan, at the same time, snubbed Russia by declining to send representatives to an April 15 gathering of foreign ministers of Collective Security Treaty Organization member states. The Uzbek absence has stoked speculation that Tashkent is intent on withdrawing from the security alliance.

With Russia's energy position in Central Asia seeming to be precarious, some officials are urging the government to take bold action. One such official is Valery Yazev, a vice speaker of the Russian State Duma. During an April 21 press conference, hosted by the official Russian news agency RIA Novosti, Yazev called on the Russian government to not only reach purchase agreements for all gas produced in Central Asia, but also engross Iran's gas exports. Doing so would be the only way to guarantee that Central Asian states did not drift out of Russia's energy sphere, Yazev maintained.

Independent experts say such a scheme would be impossible to implement. Dmitry Alexandrov, an analyst with Financial Bridge, said that while monopolizing Central Asian gas supplies over a 10-year period was "theoretically possible," in practice the idea could not be realized due to China's booming energy interest in region. In addition, Iran would never go along with such a plan, Alexandrov maintained.

"[Controlling all of Central Asia's gas] would require very special activities and efforts, but in the case of Iran, this is absolutely impossible," Alexandrov told EurasiaNet. "The regime in Iran is very specific about its gas cooperation with Russia, and could be fickle if Europe was to show that it was open to compromise on political and economic questions."