Turnabout is fair play

At the beginning of the year, Russia shut off the gas to Ukraine, sparking a major uproar. Today, Turkmenistan threatened to do much the same thing to Russia.

Turkmenistan's Foreign Ministry warned in a statement today after a suspension of talks on gas deliveries to Russia that supplies will be cut off in September if Moscow and Ashgabat fail to reach a new import deal.

Russian gas giant Gazprom said today that it has been unable to reach agreement on price in a new import deal with Turkmenistan and that negotiations have been suspended.

The announcement of the negotiations' collapse came after a meeting between Turkmen President Saparmurat Niyazov and Gazprom chief Aleksei Miller.

Turkmenistan wants to raise the price of its gas sales to Russia to $100 per 1,000 cubic meters for supplies in the second half of 2006 and in 2007.

The Turkmen Foreign Ministry today confirmed that Ashgabat would honor a previous, 30 billion-cubic-meter contract to sell gas to Russia for $65 per 1,000 cubic meters.

Turkmenistan has recently looked to other prospective markets to sell its gas, including signing a deal in early April that foresees a gas pipeline to deliver Turkmen gas directly to China.

Turkmenistan is also looking to Iran. The $190 million Korpezhe-Kurt Kui pipeline from Turkmenistan to Iran, launched in 1997, is the first natural-gas export pipeline in Central Asia to bypass Russia.

With other potential markets for its gas, Turkmenistan is in a strong position, at least strong enough that it doesn't need to cave in to Russia pressure.

And there is Russian pressure. Russia would like Turkmenistan to join the SCO, in part so it could better control Turkmenistan's oil and gas. Russia went so far as to help foment an attempted coup in Turkmenistan in 2002. If Turkmenistan joined the SCO, and if and when Iran and Pakistan become full members, Afghanistan will be completely surrounded by SCO nations. The major presence for the US in Central Asia would certainly feel the pressure of an organization led by rival nations.

Another reason Turkmenistan is enjoying a stronger position is Gazprom is increasingly in need of additional gas supplies.

Russia's rising appetite for Central Asian gas is a direct result of the shifting fortunes of Gazprom, the state-run Russian company that controls lucrative exports. The company's total gas production has flatlined at around 550 billion cubic meters (bcm) a year. With major fields yielding less as they age, Gazprom has chosen to maintain its all-important gas balance by purchasing gas on the side -- from independent producers in Russia and from Russia's Central Asian neighbors -- instead of investing in the lengthy and costly development of untapped Arctic fields, former Deputy Energy Minister Vladimir Milov explained in a 26 December article in "Novaya gazeta."

Maintaining the gas balance is crucial because Gazprom needs to keep up both domestic shipments, which serve to preserve social stability and subsidize the Russian economy, and exports, which produce profits. Domestic shipments at regulated, reduced prices totaled 258 bcm in 2004 and 325 bcm in 2005, when they generated losses of nearly $1 billion, Prime-TASS reported on 29 November. Exports to the West, which account for the bulk of Gazprom's profits, are planned at 151 bcm in 2006 and set to rise to 163 bcm by 2008, Prime-TASS reported on 23 November.

Faced with declining yields at home and rising demand across the board, Gazprom is looking south to make up the difference. In an October 2005 book titled "The Future Of Russian Gas And Gazprom," Professor Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, argues that Gazprom will undergo a signal shift in coming years, with dependence on Russian production giving way to "imports of around 100 bcm [a year] from Central Asian countries -- Turkmenistan, Kazakhstan, and Uzbekistan."

The US has human rights concerns with Turkmenistan and its president Saparmurat Niyazov. Still, we have to deal with Turkmenistan as it is, and we should be encouraging good relations with Turkmenistan.