Intriguing figures on China’s natural gas purchases reported by Russian state news agency TASS and relayed by website Eurasia Daily has shed some light on Turkmenistan’s current economic woes.
In the first nine months of 2016, China reportedly increased its overall imports of gas by 26.5 percent on the previous year, up to 71.6 billion cubic meters. The average price it paid for the fuel was $228 per 1,000 cubic meters, according to data reportedly collated by China’s General Administration of Customs. That was apparently $100 less than Beijing was paying last year.
The cheapest gas of all, however, is coming from Turkmenistan, which reportedly sells its exports to China at a giveaway rate of $185 per 1,000 cubic meters. Turkmenistan sold China 23 billion cubic meters of gas over the reported period, accounting for 13 percent of what Beijing imported.
Australia was a far second to Turkmenistan as a gas supplier — 11.6 billion cubic meters shipped to China in liquified form at $220 per 1,000 cubic meters.
The takeaway here is that Turkmenistan is being badly pinched on its only serious export commodity.
And as the Chronicles of Turkmenistan points out, Ashgabat’s sale of gas to China is serving primarily to service multibillion loans issued by Beijing.
This might explain Turkmenistan routine but lackluster attempts to restore diversity among its buyers.
In the long-term there is the trans-Afghan TAPI pipeline — the prospects of which are subject of much skeptical analysis.
A high-level meeting reportedly set to take place later this year in Turkmenistan could put talk of building a natural gas pipeline across the Caspian Sea back on the agenda.
The Associated Press on July 23 cited Turkey’s ambassador to Turkmenistan, Mustafa Kapucu, as saying that the presidents of his country, Turkmenistan and Azerbaijan will meet to discuss the issue. The talks pick up from the EU-brokered Ashgabat Declaration of May 2015, which was signed by the energy ministries of the three countries and set down objectives like creating a legal framework for gas sales by Turkmenistan to Europe and “[developing] constructive dialogue” on the required infrastructure.
The fact that heads of state are set to sit around the table presumably suggests all the governments involved envision a transition from preliminary paper-shuffling to some concrete breakthrough, although experience teaches that this may not be the case.
The resurgence of interest in trans-Caspian would come at a timely juncture for Turkmenistan, which is now reduced to selling almost all of its gas to China. A small if growing amount if being sent to neighboring Iran.
Diversification of export routes has long been an article of dogma for Turkmenistan, and yet it has exasperatingly seen only a reduction of its international markets in recent years. Its erstwhile main customer Russia bought 45 billion cubic meters of gas in 2008, but that has through a series of commercial and diplomatic vicissitudes dwindled to nothing.
Since gas is so important to Turkmenistan, many have surmised that the country’s economy is performing far worse than the government officially allows for.
When Russian gas giant Gazprom bought up Kyrgyzstan’s natural gas distribution system in 2014, some grumbled about loss of sovereignty, while others were relieved the purchase meant gas cut-offs could become a thing of the past.
So there will be some dismay if Gazprom-Kyrgyzstan, as the local affiliate is called, follows through on threats to suspend gas supplies in the country.
News website Zanoza.kg on February 18 reported that Olga Lavrova, Gazprom-Kyrgyzstan’s deputy general director for finances, said the danger of a cut-off has been precipitated by a dispute over debt with German-owned plate glass manufacturer Interglass.
“Because of the debts owed by Interglass, the whole of Kyrgyzstan could end up without gas,” Lavrova was quoted as saying.
Gazprom-Kyrgyzstan has since its incorporation been engaged in an uphill battle to force its customers to pay for the fuel that they use. Interglass is by far the largest delinquent debtor with 698 million som in unpaid bills and another 419 million som in interest outstanding on those debts, according to the gas supplier. As of February 1, that puts Interglass’ total debt to Gazprom at a whopping $15 million at the current rate.
Lavrova said Interglass continues to use 1.2 million som worth of gas daily, while only usually paying 2-3 million som per month.
Failure by the glass producer to pay its bills has caused Gazprom-Kyrgyzstan in turn to accumulate debts to its suppliers of $12.5 million, Lavrova was quoted as saying.
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.
Leaders from Turkmenistan, Afghanistan, Pakistan and India gathered in Ashgabat on December 13 to jointly inaugurate the start to work building a natural gas pipeline linking the four countries.
The $10 billion project, if it is ever completed, could some way to quenching energy thirst in South Asia.
The presidents of Turkmenistan and Afghanistan, the vice president of India and the prime minister of Pakistan traveled out to a spot in the Karakum desert near the city of Mary to attend the ceremonial welding of the first section of pipeline, which they all signed.
“What we see today is not just TAPI, but a super-highway between Central Asia and South Asia,” Afghan president Ashraf Ghani said.
Turkmenistan’s President Gurbanguly Berdymukhamedov was no less fulsome.
“TAPI is intended to become a new effective step towards the formation of a modern architecture of global energy security — a powerful factor for economic and social stability in the Asian region,” he said at the ceremony.
Berdymukhamedov signed a government decree in November mandating that the pipeline be completed in three years, despite all of the security concerns that have surrounded the project, which has also been marred by uncertainties over funding.
The main investor in construction is Turkmenistan state-owned Turkmengaz, which was picked in August to head up the TAPI Limited consortium.
The pipeline is designed to carry 33 billion cubic meters annually and will stretch more than 1,800 kilometers through the Afghan cities of Herat and Kandahar and end up in Fazilka, on the border of India and Pakistan.
The pipeline intended to forge a new export route through Afghanistan for Turkmenistan’s natural gas riches has made a fresh stride with the naming a consortium leader for construction.
Turkmenistan’s state news agency reported on August 6 that state-owned Turkmengaz will be in charge of bringing TAPI — named for the initials of the four countries it crosses — into existence.
The decision was taken during a TAPI management committee meeting in Ashgabat, the Turkmen state news agency reported. Senior officials from the Asian Development Bank, which is acting a transaction adviser on the project, were also in attendance.
“In its capacity as leader of the consortium of the TAPI Limited pipeline company, Turkmengaz will head coordination on construction, financing, management and use of the TAPI pipeline,” said an official statement cited by the state news agency.
Backers of the project, which include the United States and the European Union, appear to be unfazed by occasional and loosely sourced reports of unrest along the Turkmen-Afghan border that would stand to disrupt any major construction work. Security issues do not typically feature in official statements on TAPI, which suggests either that anxieties are overblown or that the parties to the project are simply hoping for the best.
The statement notes that Turkmengaz has more than 50 years experience in the development and transportation of gas resources, as well as in the construction of pipelines. But it also notes hopefully that other large companies will join the consortium as the project moves forward.
Turkmenistan’s leader Gurbanguly Berdymukhamedov has flown to Kyrgyzstan with promises of enduring friendship and, on a more practical note, supplies of cheap electricity.
As ever though, natural gas was being discussed as Turkmenistan presses forward in its program to create as many export routes for its fuel as possible.
Speaking after talks in Bishkek on August 5, Kyrgyz President Almazbek Atambayev was fulsome in his gratitude for commitments that are still only notional.
“I want to thank you for your brotherly word about Turkmenistan’s readiness to deliver electricity at very low prices. I think that all the issues to do with its transportation will be settled,” he told his guest.
Easier said than done given the not inconsiderable issue of Uzbekistan, which lies between the two countries. Tashkent has historically proven an unreliable transit nation for power deliveries. In 2009, Uzbekistan interrupted electricity supplies from Turkmenistan to Tajikistan when it pulled out of the Soviet-engineered power grid that links Central Asian nations.
Ashgabat committed in 2013 to investing $5 billion over a seven year period into increasing its export capacity fivefold, so it should on paper have enough to go around. It is unclear, other than sheer brotherliness, why Turkmenistan would commit to subsidizing Kyrgyzstan’s notoriously inefficient electricity system.
Any Kyrgyz government unwilling to countenance political unrest will consider raising electricity tariffs at their own peril.
Iranian President Hassan Rouhani tried to end uncertainty about Iran’s desire for Turkmenistan's gas during his first official visit to the gas-rich Central Asian country on March 11, promising an unspecified increase in imports.
Over the last few years, at least in terms of gas, Turkmenistan’s relationship with Iran has been second only to its relationship with Russia in volatility. Tehran makes occasional noises about boosting domestic production and doing away with a tiresome trade pickled with disputes.
But during his visit Rouhani confirmed that the Islamic Republic would up imports from Turkmenistan.
That must be music to Turkmen President Gurbanguly Berdymukhamedov’s ears. The Turkmen economy has been struggling on the back of the sharp downturn in Russia and the slumping ruble; moreover, Moscow suddenly slashed imports of Turkmen gas last month.
Referring to increased transport links with Turkmenistan, such as the new Kazakhstan-Turkmenistan-Iran railway, Rouhani set an ambitious target for bilateral trade to grow by more than 15 times from its current $3.7 billion to $60 billion by 2020, his official president.ir website cited him as saying.
For his part, Berdymukhamedov was also effusive: “In recent years, given the growing cooperation in different fields, bilateral ties between Tehran and Ashgabat have taken on a new meaning,” said the Turkmen president, who also called Rouhani a “brother” in comments picked up by AFP.
Four months after announcing it would slash the amount of gas it buys from Turkmenistan and Uzbekistan, Russian energy behemoth Gazprom has revealed the extent which its imports from Central Asia will fall this year.
On February 3, Vice Chairman Alexander Medvedev told an investment summit in Hong Kong that this year Gazprom will import two-fifths of the 10 billion cubic meters (bcm) it imported from Turkmenistan in 2014; it will buy less than a quarter of the roughly 4.5 bcm it bought from Uzbekistan last year.
Medvedev said the decisions had the blessings of both Central Asian states, while boasting that his company came to the agreements from a position of strength.
“For Gazprom, thanks to investment in extraction and transport infrastructure, there is no technological necessity for the purchase of foreign gas,” Medvedev said in comments picked up by state-run RIA Novosti. “Gazprom is in the situation to guarantee both the domestic demand in any region of the Russian Federation, and the delivery of gas to our customers in Europe, and in the future, Asia, with our own resources.”
The announcement came just hours before Moscow said Foreign Minister Sergei Lavrov would make a rare stopover in Ashgabat.
Kyrgyzstan’s problems probably featured pretty low on Vladimir Putin’s to-do list when he traveled to Tashkent this week.
Some in Kyrgyzstan believe the Russian president, and only he, can end their country’s intractable disputes with its neighbor. There was hope, for example, that Putin could get Karimov to resume gas supplies to southern Kyrgyzstan.
Though Putin had a nice package of goodies for his Uzbek counterpart on December 10 – he wrote off most of Tashkent’s debt and showed support only a few months before Karimov is expected to stand for reelection – it is unclear what he got for Russia.
Per usual, Karimov ducked a press conference. And he did not publically opine on the elephant in the room: Tashkent’s future role, if any, in relation to Putin's Eurasian Economic Union.
One of the items supposedly on the agenda, however, was gas.
The standoff in the Fergana Valley directly involves Russia. Russia’s Gazprom had just taken control of Kyrgyzgaz in April when UzTransGaz said it had no obligation to supply Gazprom. Kyrgyzstan’s second-largest city has been without gas ever since.
The meeting failed to produce a breakthrough, Kyrgyz media reported.
Many analysts assume Uzbekistan is using gas to gain leverage over its poverty-stricken upstream neighbor as well as that neighbor's benefactor—Russia.