Turkmenistan vs. the Gas Cartel
What happens when the largest exporter of natural gas in Central Asia (and the fourth largest reserves on the planet) declares its open disagreement with the Russia-led natural gas OPEC? At the very least, it makes for an energy conference of heated diplomacy when heads of state meet in Ashgabat this week, as the Europeans fight for the Nabucco supply route direct to Europe (the word “bypass” is misleading), while the Russians fight for Gazprom’s continued total monopoly over the country’s exports.
We’re always impressed with the sophisticated negotiating techniques of the Turkmen leadership, but we’ve seen them play this game a couple too many times to get very excited about the possibilities for Europe to compete in a normal market in Central Asia alongside the Russians. Turkmenistan’s decision making will likely depend three things – who they can get to pay the most, which foreign partners are the least likely to raise any human rights complaints further down the line, and what kind of tolerance they will have for shoddy treatment and hardball tactics from Gazprom (such as blowing up pipelines in response to open tenders).
Gazprom has repeatedly promised Turkmenistan seemingly impossibleprices – literally paying more for the gas than they can sell it for -which leads some to believe that Moscow has no intention of fulfullingtheir contract obligations (and the Turkmen counterparts realizethis). Is it possible that Central Asia is getting tired of theRussian energy dominance? Kazakhstan, for example, is getting romanced by China,and its hard not to read into the Turkmen attack on Gazprom as a clearrebuke and warning that the door will be opened to Europe. As VladimirSocor reports in Asia Times Online, an April memo believed to be penned by President GurbangulyBerdimuhamedov stated: “A producercountry’s sovereign right to choose its energy supply routes is inseparablylinked with its right to set its price for its energy resources. Combininggas-producing countries into supranational regulating bodies, including priceregulation, is an idea without merit. Direct contracts between seller andconsumer are the only correct model for price formation.“
Ouch … looks like Gazprom might have overplayed its hand there. Let’s prepare ourselves for some multibillion dollar rapproachementfrom the Russians, because they seem to be the only party who realizethe enormous strategic importance of Turkmenistan.
