Turkmenistan has proven a fickle energy-export partner for all foreign companies trying to do business there. Yet, a Kremlin spokesperson's recent statement that Russia would resume natural gas imports as soon as the end of October, confirms that hope springs eternal when it comes to the question of Ashgabat and energy.
On October 7, Natalia Timakova, Russian President Dmitry Medvedev's press secretary, announced a political agreement had been reached on the resumption of gas supplies. A Turkmen gas expert subsequently confirmed Ashgabat's desire to resume exports by the end of October.
There was only one thing missing from these expressions of optimism: the Kremlin-controlled conglomerate Gazprom and the Turkmen government still haven't agreed on a price. As Timakova admitted, Gazprom is still working to hammer out the "technical details."
The absence of a pricing agreement is causing many regional observers to adopt a 'we'll-believe-it-when-we-see-it" attitude.
"I think that Natalia Timakova is too optimistic. Her statement came because she wants to present her boss as an effective politician. Problems between Gazprom and Turkmenistan have not yet been resolved, and they will still be much to argue about the price of Turkmen gas," said Igor Ivakhnenko, Caspian Editor of the RusEnergy newsletter.
Although it would seem much work remains to be done to bridge the pricing gap, both sides need the exports to resume, experts believe. Perhaps the biggest obstacle to a pricing agreement remains the mindset of Turkmen leaders. With energy exports playing such a central role for government revenue, Ashgabat seems reluctant to adapt its earnings expectations to the post-global financial crisis environment. Gas prices on world markets have plummeted over the past year. Turkmen officials, however, continue to hold out for top-dollar. Meanwhile, Gazprom had been taking a financial beating on a fixed-price agreement with Ashgabat, which obligated the Russian firm to pay "European" prices for Turkmen energy. These days, the Russian firm is in no mood to keep paying a premium price.
Gazprom's preference now appears to be basing the purchase price on a floating rate as determined by a fixed pricing formula. Ashgabat appears to be holding out for a fixed price, however.
"For the Turkmen, it is not an easy task to base their income on a formula for calculating the price. It requires specialists, highly qualified, who follow every day very carefully the up and down of the market. It's very precise work, and I'm not sure that my country has people with the skills," explained Annadurdy Khajiyev, a Turkmen economist living in exile in Bulgaria.
In addition to the purchase price, recent statements made no mention of export volume. Some experts believe that Russia is now willing to import only up to 30 billion cubic meters (bcm) of gas per year, whereas under the old agreement Gazprom was purchasing 90 bcm annually. If the two sides agree to search for a fixed purchase price, Ivakhnenko believes Russia would want to pay between $180-$200 per thousand cubic meters (tcm), while Turkmenistan would seek $250-$270/tcm. That's a big difference to reconcile.
For now, officials in Moscow appear content to wait, if necessary. Turkmen leader Gurbanguly Berdymukhamedov has hinted that he is willing to export substantial amounts of gas via US- and EU-controlled export routes. But some experts believe that Berdymukhamedov is bluffing. [For background see the Eurasia Insight archive].
"Moscow knows that in absence of any status for the Caspian Sea, the Turkmen will not be able to sell their gas to the West via the Caucasus [i.e. via the planned Nabucco pipeline network]," Khajiyev said. "This question of the Caspian status is far from being solved."
Regis Gente is a freelance journalist, covering Caucasus and Central Asia.