Home > Economics, Politics > Turkmenistan a pivot in Eurasia’s high stakes energy contest

Turkmenistan a pivot in Eurasia’s high stakes energy contest

On Wednesday, January 6, Iran and Turkmenistan opened a new natural gas line. Currently, Turkmenistan delivers some 8 billion cubic meters of gas annually through the 200 km KorpejeKordkuy pipeline into Iran. The older deal, inaugurated in 1997, is in place for 25 years. The latest agreement greatly increases natural gas supply to Iran by adding a second pipeline, 30 km (19 miles) in length. Turkmenistan is recognized as one of the world’s premier sources of natural gas, and has been the focal point of much political wrangling between regional and global powers for a share of the its energy.

Previously, Turkmenistan’s energy exports had been under the sway of Russia, using Gazprom as dominant the distributor of choice. Turkmenistan was previously a Soviet state, giving Russia an edge in all subsequent deals due to existing infrastructure between the two countries along with that countries residual influence, as well as its proximity, to the Central Asian nation.

From January 2010 on, Russia will import 30 billion cubic meters (bcm) of gas annually from Turkmenistan, a long fall from its 50 bcm of imports prior a major April 2009 explosion at pipeline leading to Russia.

Futhermore, China has opened a long pipeline from Turkmenistan, carrying some 40 bcm of gas, eroding Russia’s regional energy dominance even more.

The true scale of Turkmenistan’s gas reserves are shrouded in controversy and mystery, with experts claiming that it lacks or has enough to meet its current needs in addition to new exports to Europe. Not surprisingly, Turkmenistan’s government claims that is has massive reserves.

What makes Turkmenistan so important in the dynamics over the race for energy in Central Asia is twofold. First, it does have significant natural gas resources. This makes it very important to energy hungry China, to energy exporting Russia, and to neighbouring Iran which also requires natural gas for its domestic needs specifically in the northeast of the country which is closer to bordering Turkmenistan than to its own southwestern gas reserves.  Europe is also a major gas importer and has had to be reliant on Russian domestic and regional distribution for its needs. Europe, supported by the US, would like to have a more direct tap into Turkmenistan, bypassing its dependence on Russian sources and distribution.

Russia’s economic health is greatly affected by European energy purchases. Russia’s growth in the recent past has been in great part due to energy exports. According to the World Bank and IMF, it’s estimated that Russia’s oil and gas sector made up about 64% of export revenues in 2007, and were tied to 30% of all foreign direct investment (FDI). Also, according to Alfa Bank, the energy sector accounts for some 20.5% of the country’s GDP.

Europe, on the other hand, imported 42% of its oil and 43% of its natural gas from Russia in 2004. In some European countries, their energy imports from Russia can top 80 or 90 per cent.

Nabucco gas pipeline, completed and proposed routes

Secondly, Turkmenistan’s geographic location is key to its importance. Europe is seeking greater energy independence from Russia, and the US has hatched a plan, that has so far seen little success, to accomplish this. It wishes to draw a long, multi-continental pipeline from Asia to Europe, running through Turkey in order to bypass Russia’s routes.  This 3,300 km pipeline, called Nabucco, is to run from the western coast of the Caspian sea, through Turkey, and into Europe. Interested parties have had great difficulty in making this line a reality due numerous and various political, security, and economic issues. Even if such a line was established, it would need a steady supply of energy. Central Asia is an obvious choice for this. Turkmenistan lies on the eastern shores of the Caspian sea and can act both as a source of energy and a route for pipelines across the sea. Of course, this route is made difficult by regional players such as Russia and Iran which border Caspian sea itself.

In April 2009, US president Barack Obama appointed Richard Morningstar to head up Eurasian energy policy. MK Bhadrakumar writes in Asia Times that Morningstar, under president Clinton, successfully championed the Baku-Tbilisi-Ceyhan oil pipeline.

In 1998, Morningstar was quoted as saying that, “the fundamental objective of the US policy in the Caspian is not simply to build oil and gas pipelines. Rather it is to use those pipelines, which must be commercially viable, as tools for establishing a political and economic framework that will strengthen regional cooperation and stability and encourage reform for the next several decades.”

Bhadrakumar states that Morningstar has been very busy and pragmatic in his first week in office under president Obama. He has been trying to win a supply deal from gas rich Turkmenistan in order to transit that energy across the Caspian sea and through to Europe. He has also stated that the US would consider striking a deal with Iran for natural gas. It has even been suggested that some Western technology may be made available to Iran’s energy sector if a natural gas deal was concluded.

Talk of purchasing natural gas from Iran can well be a carrot in negotiations between the US and Iran on the latter country’s nuclear program. Also, the US has been seeking some degree of increased cooperation from Iran in order to stabalize Afghanistan.

Having Iran join the proposed Nabucco pipeline would have that energy rich country enter into what would become an increasingly competitive market for European consumers, eroding Russia’s dominance.

The likelihood of Iran joining the Nabucco project is slim in the short-term. Tensions are high between the US and Iran, and this proposal is likely to serve both as an incentive to Iran and as a display of how serious the US is about making the proposed pipeline a reality, thus bolstering the confidence of currently lackluster potential investors.

Turkey’s interest in all of this or a Russian southern pipeline project lies in its potential to come out as a hub for energy pipelines leading from Asia to Europe. Meanwhile, Iran, though facing extreme difficulty in the affair, has interests in reviving plans for the IPI (Iran-Pakistan-India) pipeline to supply India’s growing energy needs.  This route would also have the potential to tap into Turkmenistan’s supply in addition to Iran’s southwestern resources.

  1. Annette
    January 6, 2010 at 8:21 pm

    Good points, I think I will definitely subscribe!:). I’ll go and read some more!

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