Russia labors as neighbors do deals
By Sergei Blagov
Russian officials insist that the Turkmenistan-China gas pipeline project,
which this week passed an important milestone in its development, is not a
matter of Moscow's concern. Moscow, however, has been struggling to sustain its
earlier gas agreements with Ashgabat.
The Turkmenistan-China gas pipeline project would not adversely affect Russia's
energy cooperation with China, including plans to build gas pipelines from
Russia to China, Russian Prime Minister Vladimir Putin announced on December 3.
"We know China's gas demand ... and do not think the
Turkmenistan-China gas pipeline could undermine [our plans]," he said.
However, also on December 3, Uzbekistan's state-run energy company
Uzbekneftegaz announced that it aimed to test the first stage of the
Turkmenistan-China gas pipeline on December 15. (The pipeline was inaugurated
this week at a ceremony attended by Turkmen President Gurbanguly
Berdymukhamedov, Chinese President Hu Jintao, Kazakhstan's President Nursultan
Nazarbayev and Uzbekistan's President Islam Karimov, Radio Free Europe
reported. See China
ends Russia's grip on Turkmen gas, Asia Times Online, December 16,
2009.)
The construction of Uzbekistan's 530-kilometer section of the
Turkmenistan-China gas pipeline started in July 2008. The project's first stage
is due on stream in January 2010. The second stage is expected to be completed
by the end of 2011, thus raising the pipeline capacity up to 40 billion cubic
meters (bcm) per year. The pipeline is estimated to cost US$2.975 billion.
Therefore, the project's first stage will have taken less than four years to
build. In April 2006, late Turkmen president Saparmurat Niyazov and Chinese
President Hu signed a framework agreement on oil and gas cooperation in
Beijing. China pledged to purchase 30 billion cubic meters (bcm) of natural gas
annually at the Turkmenistan border over 30 years to be supplied via the
Turkmenistan-China gas pipeline.
The pipeline project moved ahead as Turkmenistan and Uzbekistan resolved their
disagreements on how to share gas deposits near the border. Uzbekistan is an
important transit nation for Turkmenistan because parts of the existing Central
Asia-Center gas pipeline network, as well as the gas pipeline to China, pass
through Uzbek territory. In October 2007, during Uzbek President Karimov's
visit to the Turkmen capital of Ashgabat, a bilateral treaty was signed and the
two countries pledged to jointly explore and develop gas deposits on the right
bank of Amu Darya River to fill the Turkmenistan-China gas pipeline.
By contrast, Russian plans to build gas pipelines to China have been discussed
for more than five years. In October 2004, Russian gas giant Gazprom and
China's state-run CNPC clinched a partnership deal, including plans to supply
natural gas. In March 2006, Gazprom and CNPC signed a memorandum on the
delivery of Russian natural gas to China from 2011.
Also in March 2006, in his previous capacity as Russian president, Putin
promised to export up to 40 bcm of Russian gas to China via a planned
6,700-kilometer $10 billion Altai pipeline. Subsequently, in the past three
years, both sides struggled to turn a Memorandum of Understanding into any kind
of a viable and binding contract. Gazprom reportedly offered to supply gas at
European prices, while CNPC insisted on significantly lower gas prices.
On October 13, 2009, Gazprom and CNPC signed yet another framework agreement on
gas supplies, including construction of a gas pipeline. Nonetheless, Russian
plans to build gas pipelines to China still firmly remain at a stage of
preliminary discussions.
Meanwhile, Moscow has been struggling to salvage its earlier gas agreements
with Turkmenistan. After the April 9 explosion on Turkmenistan's
Davletbat-Daryalik pipeline, also known as the Central Asia-Center (CAC)-4,
near the border with Uzbekistan, Gazprom cut imports of Turkmenistan's gas.
Initially, Ashgabat insisted that the blast was caused by Gazprom's violation
of its gas supply agreement and indicated that it planned to seek financial
compensation. Subsequently, Turkmenistan toned down its accusations and no
longer mentioned any compensation from Gazprom.
Less than two years ago, in March 2008, Russia agreed to raise the gas price
for Turkmenistan, Kazakhstan and Uzbekistan up to European levels from 2009. As
a result, Gazprom had to buy Turkmenistan's gas well above the domestic cost.
Moscow apparently made an expensive miscalculation by agreeing to raise gas
price for Turkmenistan up to European levels. But the gas dispute between
Russia and Turkmenistan benefited alternative gas export routes as it pushed
Ashgabat to seek alternative energy alliances.
On June 1, Gazprom deputy CEO Valery Golubev urged Turkmenistan to either cut
its export volumes to Russia or scale down gas prices. He argued that Gazprom
no longer needed Turkmenistan's gas at European prices as European and
Ukrainian gas consumption had plunged. Golubev also claimed that Ashgabat had
no alternatives but to sell its gas to Gazprom. However, the Turkmenistan-China
gas pipeline project came as an indication that Ashgabat managed to develop
alternative gas export routes.
The rift between Moscow and Ashgabat came as a departure from Russian and
Turkmenistan's pledges to develop their "strategic" relationship. Since April
this year, Russia and Turkmenistan have apparently refrained from mentioning
the planned Pricaspiysky gas pipeline, designed to supply more Central Asian
gas to Russia. Both sides also failed to sign an agreement on the "East-West"
600km link that is supposed to connect Eastern Turkmenistan with the
Pricaspiysky pipeline at an estimated cost of $1.5 billion.
Moscow has repeatedly dispatched top level missions to Ashgabat. Russian
President Dmitry Medvedev last traveled to Turkmenistan in September 2009. On
November 26, Russia's first deputy Prime Minister Viktor Zubkov traveled to
Ashgabat for bilateral economic talks with Turkmen President Berdymukhamedov
and other Turkmen officials. In the wake of Medvedev's and Zubkov's trips to
Ashgabat, no agreements were announced. As both sides remained silent, the last
round of bilateral talks was understood to produce very limited, if any,
results.
On November 29, Medvedev and Berdymukhamedov met at Medvedev's Zavidovo
residence outside Moscow. Officially, both leaders only discussed economic
cooperation and "bilateral partnership." Berdymukhamedov noted that bilateral
trade reached $5.5 billion in January to October 2009, while the annual trade
turnover amounted to $7 billion in 2008. Berdymukhamedov's trip to Russia came
as an unexpected development. The Turkmenistan leader was believed to be
seeking to discuss Gazprom's plans to cut gas imports from Turkmenistan.
However, after the talks no announcement was made on the bilateral gas pricing
dispute.
The meeting came as the latest in a series of Russian efforts to repair ties
with Turkmenistan. After the meeting, it was only announced that Medvedev is
due to visit Turkmenistan in late December to attend the opening of a Russian
school in Ashgabat. But it remains far from certain whether the two sides will
manage to resolve their differences before the end of 2009.
Prior to working as Moscow-based independent researcher and journalist, Dr Sergei
Blagov was a newswire reporter. He spent nearly seven years reporting
from Hanoi, Vietnam, between 1983 and 1997.
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