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Russia and Central Asia: Playing the Turkmenistan Card

Russian President Vladimir Putin just spent the weekend of May 19-21 in Ashgabat where he reached an agreement in principle to increase Russian gas purchases from Turkmenistan. It is yet another indicator of Russia's renewed interest in Central Asia since Putin assumed control. Russia and Turkmenistan have reached an agreement in principle to renew and expand their December 1999 agreement to export 20 billion cubic meters (bcm) for calendar year 2000 and increase this figure by 10 bcm per year for three to four years until import levels reach 50-60 bcm per year. But Russia's real target in Central Asia is neither Turkmenistan nor Uzbekistan but Kazakhstan.


Turkmenistan has some of the largest natural gas reserves in the world, but since independence it has had trouble establishing regular outlets for its energy. The main problem is that all Turkmenistan's major export pipelines run through Russia. In contrast to 1991, when Turkmenistan produced nearly 85 bcm of gas, it produced only 13.2 bcm in 1998 and 23 bcm in 1999. In 1997, Turkmenistan suspended deliveries to Russia in a price dispute, insisting that $32 per thousand cubic meters (tcm) was too low. In December 1999, Russia's Gazprom maintained its offer with 70% of the payment in barter and 30% in cash. Turkmenistan insisted on $40-42 per tcm with 50% payment in cash and a compromise was reached at $36 per tcm with 40% in cash.

The new agreement in principle between Turkmenistan and Russia comes as talks have reached a standstill on the Trans-Caspian Gas Pipeline (TCGP), planned to run from Turkmenistan under the Caspian Sea to Azerbaijan, through Georgia and into Turkey. The TCGP, with a projected capacity of 30 bcm per year, hit a snag when Azerbaijan decided it wanted to place its own newly discovered gas, found late last year in its off-shore Shah-Deniz field, into this pipeline. Azerbaijan wanted to start its own gas production for the TCGP at 5 bcm per year and then treble this as greater production came on-line.

Turkmenistan balked in response to Azerbaijan's proposal, offering 5 bcm as a constant quota. In response, Azerbaijan and Kazakhstan have floated the proposal of delivering Kazakhstani natural gas to Turkey via the Soviet-era pipeline system that runs around the Caspian through Russia. Azerbaijan's Shah-Deniz off-shore deposit is commercial in its own right and it is being developed rapidly. The BP-Amoco led consortium operating Shah-Deniz is refurbishing an older gas pipeline from Azerbaijan to Georgia.


Turkmenistan's gas is important to Putin because Russia needs gas to make up for the shortages created by its export commitments to Europe and lack of domestic investment. It is estimated that Gazprom's 2001 shortfall in supplying the Russian domestic market will be 40 bcm. This is why Gazprom will try to accept more than 30bcm next year, the limit this pipeline network can presently handle. In this connection, Gazprom is considering the Dauletabad gas field on the Iranian border, the same field involved in Unocal’s failed project to construct a pipeline via Afghanistan to carry 20 bcm per year for Pakistani markets. Dauletabad is still hooked up to the old Soviet pipeline network, so Gazprom could conceivably take gas from there into Russia.

Turkmenistan's Korpedzhe gas field lost crucial exports to Iran, according to one report, when Iran cut its gas imports earlier this month in a sign of dissatisfaction over the prospect of Russian involvement in the Dauletabad field. Iran has invested nearly US$ 200 million to construct the pipeline connecting Turkmenistan and Iran, funds that have still not been repaid either in cash or in kind. Turkmenistan and Iran have had price disagreements and Turkmenistan's gas supplies to Iran of only 1 bcm per year have fallen short of the agreed 5 bcm. Turkmenistan is under increasing pressure to reach a deal ith Russia. And Niyazov is in a bind now that the Russian company that would transport the gas from Turkmenistan has rejected Niyazov's asking price of $46 per tcm announcing that even $36 per tcm would be too high.

Putin's meeting in Turkmenistan raised the competitive stakes in the Caspian region. However, the U.S. government has not totally given up on the Trans-Caspian Gas Pipeline though it is frustrated with the delays. There are those who assert that the U.S. has few vital interests in Central Asia and the Caucasus but a division of the Caspian region between opposing Turco-Iranian and Russian blocs is not inherently more stable than a pipeline scenario involving the United States. In fact, beyond the U.S. involvement in the high-profile Baku-Ceyhan pipeline, the European Union has been much more involved than the U.S. in developing the Caspian energy infrastructure and Europe has been unable to prevent the evolution of these opposing blocs.


Since Putin's rise to power, Moscow has increased its attention to Central Asia. Beyond natural gas talks, Russia and Turkmenistan established an intergovernmental commission for general economic cooperation and agreed to enhance bilateral relations. The meeting between the two presidents followed Putin's visit to Tashkent, where he met with Uzbekistan's President Islam Karimov and promised assistance against armed insurgents in the south of the country. However, Russia's real target in the region is neither Turkmenistan nor Uzbekistan but Kazakhstan.

Of the Central Asian countries, Kazakhstan's economy was the most intertwined with Russia's during the Soviet period. Thus, Russia's Gazprom just agreed to take over Kazakhstani energy operations from the Belgian company Tractebel. This does not necessarily mean that Moscow is seeking to re-establish a Soviet-style sphere of influence. Many experts view Central Asia and the Caucasus in terms of rivalry between emerging U.S. and Russian alliance blocs but this is a gross oversimplification of a very complex region. But is it a mere coincidence that Putin's focus on Central Asia comes not long after U.S. Secretary of State Madeleine Albright's visit to the region?

Copyright © Robert M. Cutler unless otherwise noted.
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URL:  http://www.robertcutler.org/blog/2000/05/russia_and_central_asia_playin.html
First published in Central Asia – Caucasus Analyst 2, no. 11 (24 May 2000): 3–4.

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This page contains a single entry from the blog posted on May 24, 2000 2:32 PM.

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