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Russia Moves to Block the Trans-Caspain Export Route

Just one day after we posted an article about Russia’s energy agenda for Central Asia, a major pipeline deal is announced that further consolidates Moscow’s control over energy exports from the region, outflanking Western attempts to open up a trans-Caspian export route independent of Russian participation to diversify suppliers. In the various articles cited below, the representatives did their best to downplay the political significance of the new deal, but the skepticism remains reasonably high. Although the trans-Caspain option is “not off the table”, apparently as both Russia and Iran have veto rights on such a project, it seems highly improbable.

Russian Export

From the AP:

Mr. Putin said the new pipeline may carry “at least” 20 billion cubic meters of gas annually by 2012.

Russia bought about 42 billion cubic meters of Turkmen gas last year at a price of $100 per 1,000 cubic meters, well below its $250 price for customers in Europe. Building the pipeline and modernizing old ones would allow Russia to buy as much as 80 billion cubic meters of gas from Turkmenistan, said Alexei Miller, the head of Russia’s state OAO Gazprom gas monopoly.

Turkmen President Gurbanguli Berdymukhamedov and Kazakh President Nursultan Nazarbayev signaled Saturday that the trans-Caspian pipeline may also be considered in the future. The latest deal means Russia would control the bulk of Central Asian energy exports, boosting its role as a major supplier of oil and gas to Europe and strengthening Western fears that Moscow could use its energy clout for political purposes. Mr. Putin sought to assuage such fears, saying, “we very responsibly take our role in the global energy sector.” But when asked whether others could join the new pipeline project, he answered “No.”

From Kommersant:

In the final drafts of documents from the meeting, the three leaders agreed to prepare a multilateral agreement and commercial contract for the creation of a consortium to manage the Caspian shoreline pipeline before the next summit in Turkmenistan in September 2007. According to Russian Industry and Energy Minister Viktor Khristenko, the three sides will draw up documents for a larger-scale project than was earlier planned: the Caspian shoreline project (currently named the Central Asia–Center 4 gas pipeline) is slated to be expanded from its current carrying capacity of 1-2 billion cubic meters a year to 10 billion cubic meters within the next five to seven years. In addition, the existing Central Asia–Center 3 (SATs-3) pipeline, which delivers gas from Turkmenistan to Russia via Uzbekistan and Kazakhstan, will have its yearly capacity boosted by 20 billion cubic meters. By 2014, Russia can count on an increase in the flow of gas from Central Asia to Russia to the tune of 60-90 billion cubic meters per year. However, none of the sides have commented yet on how and who will be selling an additional 30 billion cubic meters of gas produced by Turkmenistan, Kazakhstan, and Uzbekistan (Uzbek President Islom Karimov signed the declaration from the Turkmenistan summit ahead of time, during his May 9 meeting with Mr. Khristenko). Gazprom has not guaranteed that volume. During the first meeting of the summit, which took place between Vladimir Putin and Nursultan Nazarbayev in Kazakhstan, it was agreed that the 15 billion cubic meters of gas that will be refined by Kazakhstan’s Orenburg gas refinery annually from gas condensate extracted from the Karachagansky gas reserves in Kazakhstan will be sold in Europe by Kazrosgas, a joint partnership between Gazprom and Kazmunaigaz.

From ISN:

All three leaders sought to play down the diplomatic implications of the pipeline. But the deal comes amid rising Western concerns over Russia’s use of its energy riches for political purposes — a charge Moscow denies. Turkmen President Gurbanguly Berdymukhammedov praised the agreement: “This project has obvious benefits for all parties. We guarantee the delivery of the required volume of Turkmen natural gas and for the period that will be determined by the results of the reached agreement.” Prior to the signing, Kazakh President Nursultan Nazarbaev, who this week pledged to keep most of his country’s oil flowing through Russian pipelines, had called the agreement “a purely pragmatic commercial project,” adding: “There is no politics there.” Still, Berdymukhammedov said plans for a rival US-backed trans-Caspian pipeline that bypasses Russia had “not been completely dropped.” However, Russian Energy Minister Viktor Khristenko said he believed there was now little chance of it going ahead. He said that the “technological, legal, and ecological risks are so big that it will be impossible to find an investor unless it is a political investor who does not care how much gas there is to pump through.” Julian Lee, a senior analyst at London’s Center for Global Energy Studies, says that one key issue with the West’s desired trans-Caspian pipeline is that neither Russia nor Iran, which have veto rights as countries that border the Caspian, are likely to agree on the project. “It seems at the moment, at least, very clear that both Russia and Iran are likely to veto any plans to build either gas or oil pipelines underneath the Caspian Sea. So I think it will be perhaps very difficult to see either gas or oil moving from Central Asia by pipeline toward Europe without bypassing Russia,” Lee says.