Turkmenistan: The new Great Game
[GlobalPost Moscow correspondent Miriam Elder recently traveled to Turkmenistan where she reported on the battle for the country’s national gas resources, below, as well as its new leader and its threatened stability.]
TURKMENBASHI, Turkmenistan — On the outskirts of this impoverished town on Turkmenistan’s Caspian Sea coast an endless mess of lights sparkle, towered over by three flames that burn around the clock — a colorful image of the natural gas that is this country’s lifeblood.
In the world’s endless hunt for energy, Turkmenistan is vital. Sitting on massive gas reserves both on land and in its Caspian waters, the country ranks among the world’s largest gas holders in terms of reserves, according to international experts, alongside the likes of Russia, Iran and Qatar.
For now, Europe and Russia remain locked in a struggle to win access to Turkmenistan’s resources. This is the heart of the new Great Game.
“One can argue that there’s a window for others to come in,” said Tim Gould, Caspian expert at the Paris-based International Energy Agency. “Given the time to put new projects together the timing would be about right to meet anticipated gas demand growth towards 2015 and after."
Europe is keen to diversify energy sources and routes to reduce its dependence on Russia following three consecutive years of pricing spats with Ukraine that prompted Moscow to shut the taps, leaving Europe shivering at the height of winter. Europe imports about 25 percent of its gas supply from Russia, and 80 percent of it arrives in pipelines that run across Ukraine.
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| A photo of Turkmenistan President Gurbanguly Berdymukhamedov hangs on a hotel, seen through rusting ship hulls, in the Caspian port city of Turkmenbashi. (Miriam Elder/GlobalPost) |
Russia, meanwhile, is eager to maintain its near monopoly on central Asian supplies. Despite its standing as the world’s largest gas producer, the country needs to import gas from central Asia to boost its own reserves as demand at home and abroad grows, and investment in new and difficult Arctic and East Siberian fields lags.
But will there be enough gas for everyone?
International organizations, independent auditors and the Turkmen government disagree on how much gas the country actually holds.
According to the BP Statistical Review, the country holds the world’s fourth largest gas reserves, at 7.94 trillion cubic meters, or over 4 percent of the world’s reserves. Cedigaz, an international gas organization, puts the amount at 2.7 tcm.
Last year, an independent U.K. auditing firm, Gaffney, Cline & Associates, carried out an audit of the country’s major South Yolotan-Osman field in western Turkmenistan, one year after it was discovered.
Last month, reports emerged that the audit had overstated the contents of the field by two to three times, because of reliance on statistics provided by Turkmen officials. In the wake of the ensuing scandal, President Gurbanguly Berdymukhamedov fired the country’s energy team, from its energy minister to the head of all state-run energy companies.
Yet all agree that the stakes are huge, judging at least by the gas-rich neighborhood in which Turkmenistan finds itself.
Turkmenistan releases few statistics, with figures on everything from foreign reserves to GDP make-up left to guesswork. International experts estimate that energy revenues comprise 80 percent of its GDP, and the government says it hopes to whittle that down to 30 percent by 2020. The government has failed to present any sort of strategy for diversification.
The country currently produces about 70 billion cubic meters per year, sending most of it north to Russia and some south to Iran.
The first in on the Turkmen game were the Russians, thanks to their close ties to the ex-Soviet republic after the fall of the Soviet Union.
In May 2007, just five months after the death of eccentric dictator Saparmurat Niyazov, better known as Turkmenbashi, then-President Vladimir Putin flew to this port city and won an agreement to build a pipeline that would skirt the Caspian and traverse Kazakhstan before making its way to Russia, eventually carrying an extra 30 billion cubic meters of gas annually.
At the time, the deal was seen as striking a blow to Europe’s U.S.-backed plans for a pipeline that would snake along the Caspian’s floor and on to Europe, cutting Russia completely out of the picture.
Yet since then, nothing has happened — no start to construction, no final deal even.
On the contrary, relations between Russia and Turkmenistan have reached a new low.
As gas prices, which are tagged to the price of oil, reached ever higher in 2006, Russia and Turkmenistan renegotiated the price at which the Russian state-run gas monopoly Gazprom bought Turkmen gas, raising the price from $50 per thousand cubic meters to around $300 per thousand cubic meters — close to the price paid by Gazprom’s European customers.
Then the financial crisis hit, and both domestic and European demand for Gazprom’s gas dropped dramatically. The existing Turkmen-Russia pipeline was hit by a mysterious explosion in April, and gas supplies have been cut since, with difficult negotiations on a new price currently ongoing and showing no signs of coming to a conclusion.
Wouldn’t now be the perfect time for the Europeans to jump in?
“Berdymukhamedov never used to mention Nabucco before in public, now he’s mentioned it twice recently in public remarks,” said a western diplomat in Ashgabat, the capital.
That proposition, which would be part of the Nabucco pipeline project from central Asia to central and eastern Europe, carries its own problems. European countries have yet to agree on a unified approach to the project, from routes to quantity, and the plan is further complicated by demarcation disputes in the Caspian Sea dating to the fall of the Soviet Union.
As Russia and Europe continue to squabble amongst themselves and with the host country, a true winner is emerging: China.
“Russia was the favored partner, but now it’s China,” said one western diplomat in Ashgabat, the capital. “They also don’t like to be talked to about human rights,” the diplomat noted. “They like a quiet partner.”
Next month, China’s first ever gas pipeline will open, with its start in Turkmenistan. Though coal remains China’s main fuel source, its use of gas is increasing. The pipeline is due to supply 70 to 80 billion cubic meters a year.
“China arrived with an export ready solution,” said Gould, the Caspian expert, noting that Beijing undertook all construction costs.
China’s influence is growing across the central Asian region, and experts believe projects like this one will only strengthen its position there.
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