In a move to be expected, Russian gas behemoth Gazprom has formally suspended purchases of natural gas from Turkmenistan, according to a statement by state gas company Turkmengaz.
Turkmengaz has been philosophical about a development that now leaves it with only two international customers — China and Iran.
“The basis for this decision is the changing situation on the international gas market, and also certain economic and financial issues that has arisen for Gazprom Export,” Turkmengaz said in a stament
Turkmenistan said it remains open to further negotiations with Gazprom’s export branch on “wide array of issues.”
The language emerging from Ashgabat is substantially more measured than that heard last year, when Turkmenistan reacted to Gazprom’s announcement it was to slash the amount of gas it buys from the Central Asian nation by dubbing Russia an “unreliable partner.”
Russia has been a regular, if not always reliable, buyer of Turkmenistan gas since 1991. In April 2003, Russia signed a 25-year gas contract with Turkmenistan that envisioned exports increasing to 80 billion cubic meters per year.
Deliveries to Russia through the traditional routes hit a peak of 45 billion cubic meters in 2008.
As Europe began paying less for its Russian gas, Moscow in turn reduced the amount it bought in 2010 to 10 billion cubic meters.
Gazprom bought only 4 billion cubic meters of Turkmen gas in 2015. To make matters worse, Turkmenistan says Russia unilaterally decided to pay it only a break-even price relative to the cost of re-exporting to Europe.
Without an inside knowledge of the terms of the gas deal between Moscow and Ashgabat, it is impossible to know who has the legal or moral high ground, but the matter appears academic at this stage.
Turkmenistan’s overall gas exports are, of course, increasing by the year because of China’s significant appetites. Exports to China are predicted to reach 65 billion by 2020, although the price that Beijing is paying is a closely guarded secret.
With Turkmenistan in such a weak bargaining position, it is safe to assume China has driven a hard bargain. Moreover, some revenues are being used by Turkmenistan to pay Beijing back for constructing the gas pipeline linking their two countries in the first place.
Turkmenistan is trying to reverse the pattern of isolationism with the construction of the trans-Afghan pipeline known as TAPI. Once that route is finished — in 2019, according to the highly optimistic official projections — it will carry 33 billion cubic meters of gas through Afghanistan, Pakistan and India.