Laying a gas transit route across the Caspian bed from the Azeri coast to the shores of Turkmenistan, with all its hydrocarbon wealth, remains an exciting prospect for energy-hungry Europe and one that grows tantalisingly near with the passing of time.
Arguably, this vague sense of looming achievement is the artefact of Turkmenistan’s President Gurbanguly Berdymukhammedov, whose openness to dialogue and negotiation has dangled the possibility of a breakthrough on gas deliveries that could see the West rid of Russian energy hegemony.
Consider his promise to EU External Relations Commissioner Benita Ferrero-Waldner that Ashgabat would supply the European Union with 10 billion cubic metres of gas from 2010. Not to speak of numerous other more low-key visits to Turkmenistan by U.S. and EU officials, including last week’s brief stop-off from President George W. Bush’s Special Envoy for Eurasian Energy Ambassador C. Boyden Gray and U.S. Coordinator for Eurasian Energy Diplomacy Ambassador Steven Mann.
When OSCE Chairman-in-Office Alexander Stubb dropped by last week, he could not resist congratulating his Central Asian interlocutors for pursuing diversification of hydrocarbon exports.
It is now virtually gospel-truth that Turkmen gas will eventually reach three immediate destinations _ Russia, China and Iran _ and the West continues to hope that list can be extended yet further.
For all the fervour that this thought inspires, however, some fundamental core issues stand in the way. In brief, these could be outlined as international politics, availability, and technical feasibility.
As has been widely documented elsewhere, Moscow is desperate to secure majority control over Central Asian gas reserves and has moved quickly and decisively to ensure it is successful. The preliminary tripartite agreement sealed in May 2007 between Russia, Kazakhstan and Turkmenistan to build a gas pipeline skirting the Caspian shore and expanding the capacity of an existing Soviet-era route traversing Uzbekistan was rightly hailed as a victory and a decisive blow for Moscow. Thrashing out the deal has proved more problematic, though it is still early days to determine the exact nature and seriousness of the sticking points between the stakeholders.
Yet, for all the importance of last year’s groundbreaking concord, it is likely that Russia’s evolution towards market realism will have a more telling effect in the long run.
In March, Russian gas monopoly Gazprom announced that it would begin paying European-level prices for gas from Kazakhstan, Turkmenistan and Uzbekistan. It is clear to anybody that has watched regional gas politics play out over the last few years that Gazprom is not motivated by any sense of fairness toward Central Asian countries or, as it claimed farcically, that it is “guided by their national economic interests.”
Likewise, Gazprom CEO Alexei Miller’s reported commitment to paying Azerbaijan real market prices for its gas testifies to a strategic recalculation on Moscow’s part. Where arm-twisting was once the name of the game, Russia is now deploying its vast financial resources to squeeze out Western rivals.
Ultimately, this card may have been played too late in the day and Russia’s target suppliers have reason to be suspicious of this sudden Damascene conversion to market principles.
To begin with the Azeri part of the puzzle, as a former president of state-owned energy firm SOCAR told Eurasianet recently, “Azerbaijan is already exporting its gas to Europe at market prices. So, I do not see reasons why Baku should sell its gas to Russia instead of the Europe.”
Azerbaijan’s potential to become a spoiler also extends to the role it could play in enabling the elusive trans-Caspian pipeline. Improving ties between Baku and Ashgabat look likely to culminate in the most disruptive sticking point in bilateral ties over the past decade_ the contested offshore Serdar/Kipyaz oilfield _ being settled. Should that come about, the trans-Caspian will become inevitably become a tantalising possibility, barring one-sided disruptive territorial diplomacy from Moscow.
For potential to be realised, however, a number of technical issues will have to surmounted. Again, it was Azerbaijan, with U.S. support, who took the initiative on this front in April when it commissioned KBR subsidiary Granherne to conduct a feasibility study on the pipeline. It is hoped the study will clear up long-standing questions about the pipeline _ including the environmental hazards, the risks of seismic activity in the area, and expected construction and maintenance costs.
It is not yet clear when that research will be concluded or publicised, but the day will be awaited with bated breath by many a policymaker from Washington to Brussels. A caveat in all this is that one of the routes reputedly under examination includes oil and gas links between Azerbaijan and Kazakhstan, which would not immediately benefit Turkmenistan. Indeed, Astana’s growing heft as a regional broker would indubitably see it favour an option that left it holding all the cards, but it is still too early to speculate on the range of hypothetical outcomes.
Ever keen to put the cat among the pigeons, SOCAR First Vice President Khoshbakht Yusifzadeh said this week that existing gas pipelines on Azeri subsea soil mean only an additional 100 kilometres need to be added to complete the trans-Caspian. Yusifzadeh gives no specific details, lending a frustratingly illusory air to the claim, but is compelling nonetheless.
At 100 kilometres, the trans-Caspian proposition would be eminently realistic even compared with Russia’s planned 900-kilometer Nord Stream, which faces opposition from neighbouring countries, environmentalist groups and certain European Union states.
Even providing Turkmenistan wants to run the gauntlet of geopolitical manoeuvring and the lengthy exercise of waiting for an expensive and possibly risk-laden pipeline to built, however, will it really be able to provide.
Once more, a much-awaited international study will be responsible for settling that mystery. British-based Gaffney, Cline & Associates’ findings will conclude once and for all just how much Turkmen gas there really is and, more importantly, whether the reserves are large enough to meet the demands of all-comers.
But cynicism about Turkmenistan’s extravagant hydrocarbon reserves claims abounds, with the widely shared consensus being that Berdymukhammedov is drawing suitors into a bidding war. This line of reasoning presumes Russia and China will be ultimate victors of this competition for Turkmen gas. Indeed, it is hard to believe Ashgabat would risk the diplomatic oblivion to which it would be doomed if it double-crossed these two giants.
Meanwhile, onlookers remain in the dark and the West continues to waltz in ever-diminishing circles round Central Asia’s most reclusive nation. What will appear once the dust has settled, only time will tell.