28. Turkmenistan's New Pipeline and Russian Relations

Turkmenistan's New Pipeline and Russian Relations October 19, 2010 | 1221 GMT EMMANUEL DUNAND/AFP/Getty Images Turkmen President Gurbanguly Berdimuhamedov in September Summary Turkmenistan on Oct. 16 inaugurated a new natural gas pipeline that connects its main export line to Russia. The small pipeline will add little capacity to its natural gas exports to Russia, but the timing of the inauguration gives rise to questions about Ashgabat’s relationship with Russia that appears to be more political than technical in nature. Analysis Turkmenistan inaugurated a new natural gas pipeline Oct. 16 that will take natural gas supplies from deposits in the Karakum Desert and connect with the Central Asia-Center pipeline system for export to Russia. The Central Karakum-Yilanli natural gas pipeline, which was constructed by Russian energy firm Itera through a contract with Turkmen energy firm Turkmengaz, has a capacity of 3 billion cubic meters (bcm) per year with the potential to be upgraded to contribute up to 5 bcm of exports. While from a technical perspective this is a relatively small pipeline that represents a minor upgrade to the country’s energy infrastructure — Turkmenistan’s existing pipelines are from the Soviet era and in a state of decay — it raises some questions about Ashgabat’s relationship with Moscow that appears to be more political than technical in nature. The first question is why Turkmenistan would launch a new pipeline into a trunk line system that is not pumping much as it is. While Turkmenistan is one of the world’s leading natural gas producers and exporters, and Russia has traditionally dominated its export market (importing 48 bcm of Turkmenistan’s 54 bcm total exports in 2008), Turkmenistan’s exports to Russia have been down dramatically ever since its export pipeline to Russia ruptured in April 2009. This rupture was very likely intentionally caused by Russia since Moscow was facing a glut of its own supplies due to a decrease in European demand for natural gas, and Russia simply no longer needed Turkmenistan’s exports to fulfill its contracts with Europe. As a result, Turkmenistan has been desperate to find alternative markets for its natural gas since the rupture, with new pipelines being completed to China and Iran. But these new markets still pale in comparison to the supplies that Ashgabat used to send to Russia. This drop has severely affected the government’s budget, which relies heavily on energy exports, and Ashgabat’s relationship with Moscow has weakened as a result. Russia has since resumed its imports from this line, though only 10 bcm per year. Another question is why the construction of the pipeline was not stalled along with the other projects and exports that Russia and Turkmenistan have been engaged in since the rupture. The newly inaugurated pipeline began construction in February 2009 — before the April rupture — and only cost roughly $180 million to build, so it was certainly not a technologically difficult or costly pipeline to complete. But when there is plenty of spare capacity to increase supplies through the main export pipeline, it is a bit odd that Russia would complete the construction of a new pipeline just to get an additional 3 bcm of imports with almost 40 bcm of spare capacity to increase supplies through existing lines. So while it is possible this could just be a technical upgrade, it also could represent a more substantial plan for the future to link up new fields to the main trunk line system, as Turkmenistan holds widely untapped natural gas fields with reserves speculated to be nearly 8 trillion cubic meters. This indicates that there could be a wider political shift behind the inauguration. And while there was a falling out of sorts between Ashgabat and Moscow previously, the tone has recently turned more positive. Turkmen President Gurbanguly Berdimukhammedov said Sept. 30 that Turkmenistan would continue to build “strategic cooperation with Russia in the oil and gas sphere” and over the weekend claimed that this new pipeline “is a vivid example of mutually beneficial cooperation.” Also, the head of the union of Russian oil and natural gas producers, Yuri Shafranik, said Oct. 18 that there were “favorable conditions for our business in Turkmenistan.” So although natural gas exports to Russia currently are reduced by roughly 80 percent, it appears the two countries are in the process of trying to forge stronger energy bonds. This raises a third question concerning the timing behind the inauguration. On Oct. 15, just one day before the pipeline debuted, the Kremlin announced that Russian President Dmitri Medvedev will be visiting Turkmenistan from Oct. 20-21 to meet with Berdimukhammedov. It is interesting that the presidential trip was announced less than a week before it was scheduled to occur. Such last-minute visits are rarely a matter of coincidence. The reason for the trip remains unclear at this point, but Turkmenistan may have some sort of leverage — whether in the energy, political or security realms — with the Russians. The new pipeline could represent more than meets the eye, and Medvedev’s upcoming visit to Turkmenistan will serve as a key opportunity to gauge relations between the two countries. Give us your thoughts  on this report For Publication Not For Publication Read comments on  other reports Reader Comments