Turkmenistan: Gazprom Plays Hardball with Ashgabat on Pricing

Gazprom has ratcheted up the pressure on Turkmenistan with an announcement that Ashgabat will have to lower the purchase price for its natural gas, or find that Gazprom has no interest in buying it.

Either option spells trouble for Turkmenistan's energy-dependent state budget. "Either review the price or the volume," a defiant Valery Golubev, the deputy chairman of Gazprom, is widely quoted as saying on June 2.

Golubev adds that if a deal isn't made, Gazprom will reduce imports by 80 percent. He cites falling demand on the European gas market and sliding prices as the reason for Gazprom's hard-line stance. "We've proposed to limit the volume because Turkmen gas is purchased at European prices. [But] Europe is not buying gas at European prices today. We have nowhere to sell your gas," Golubev stressed.

Analysts estimate that Ashgabat stands to lose up to $1 billion per month if Gazprom follows through on its threat. Gazprom has cut production by more than 20 percent this year across its contracts with Central Asian suppliers.

Meanwhile, Turkmenistan appears to be desperately seeking new customers with a high level delegation entrenched in Beijing this week to secure credits to develop the giant South Yoloten gas deposit. If Gazprom does end up cutting its Turkmen purchases, Ashgabat's interest in joining a US-backed project to build a trans-Caspian pipeline would rise markedly, regional experts say.