The head of Turkmenistan’s state gas company Turkmengaz has been fired as the government remains mired in an debt dispute with Iran over historic gas deliveries.
At a government meeting on January 13, President Gurbanguly Berdymukhamedov announced that Ashirguly Begliyev was being moved to another unspecified post to be replaced by his deputy, Maksat Babayev.
Addressing deputy prime minister Yashigeldy Kakayev, who oversees the country’s energy sector, Berdymukhamedov complained that his “managers do not meet current requirement, and that is why I have taken this decision.”
In an organisational rearrangement whose significance it is still too early to fully divine, Berdymukhamedov said the head of Turkmengaz will have a ministerial rank. Accordingly, Babayev will now be designated a state minister and chairman of Turkmengaz state concern.
Begliyev had occupied his post since January 2015 — a relatively short tenure, but not one whose brevity is out of the norm for Turkmenistan.
As so many other Turkmen officials, the new Turkmengaz chief, Babayev, has almost nothing by way of a public profile. He was named deputy head of the company in April 2012. Within a year he had already earned a reprimand from Berdymukhamedov, officially for “allowing shortcomings during construction of a gas compressor station at the Malai field.” But after that, he seems to have managed to evade complete attention, other than from his intermittent appearances at the regular energy conferences in Turkmenistan.
As Turkmenistan and Iran continue to trade accusations in their unfolding dispute over natural gas debts, Turkmenistan has suffered a dismal defeat in the information war.
In the middle of December, some media outlets began reporting that Turkmenistan was officially demanding $2 billion for unpaid gas bills accruing since Iran was slapped with sanctions in 2012. Outlets predominantly cited Radio Free Europe’s Turkmen service, which in turn, in a report on December 20, quoted what appeared to be official sources. That same $2 billion figure also cropped up in an English-language analytical piece on Baku-based Trend news agency on December 19 prophetically titled “Odd gas debt dispute between Iran, Turkmenistan.”
The problem with all this is that the Turkmen government never has made any public statement about the size of the alleged debt and has, until recently, avoided mentioning the disagreement at all.
Indeed, all public pronouncements in Turkmenistan about the state of ties with Iran has been cast in highly effusive and optimistic terms. When Iranian President Hassan Rouhani visited Ashgabat in March 2015, Turkmen state media declared an imminent surge of economic activity among the two nations.
“If last year , trade turnover between our countries was $3.7 billion, then today we have declared our goal of taking this figure to $60 billion within the next 10 years,” the government website stated at the time.
Considering Iran had by this stage failed to make payments to Turkmenistan for best part of three years, this was a generous prediction to say the least.
Turkmenistan has managed to avert the loss of one of its only two buyers of natural gas with some desperate, last-gasp negotiations.
Iran’s Mehr news agency reported on December 30 that Turkmenistan has signed a new gas deal despite demands from Ashgabat for Tehran to pay $1.8 billion in alleged unpaid arrears for historic gas deliveries.
Negotiations went right down to the wire, as Mehr news agency revealed.
“Due to Turkmens’ persistence on [threatening] to cut gas exports to Iran over claims of a $2 billion debt, the Iranian delegation left the negotiating table to return home. At the airport, Turkmenistan’s officials persuaded the Iranian delegation to come back to the negotiating table in hopes for reaching an agreement on gas delivery to Iran,” the news agency reported.
In the run-up to the agreement, a senior official with the National Iranian Gas Company (NIGC) signaled that Tehran was willing to adopt an intransigent position over the matter, leaving Turkmenistan with few options ahead of a Saturday deadline.
ILNA news agency cited senior NIGC representative Saeed Momeni as saying that Turkmenistan only provides three percent of Iran’s gas needs and that the shortfall could be addressed by drawing in internal resources if necessary. Iran has substantial gas reserves of its own, but has relied on Turkmenistan to supply areas in the north not connected to the national pipeline grid.
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.