Streetwise Professor

November 2, 2007

And Now For Some Good News

Filed under: Economics,Energy,Russia — The Professor @ 9:02 am

Two articles from Eurasia Daily Monitor on Turkmenistan provide some good news. The first is on China’s efforts to secure Turkmen gas. The second reports that Russia’s efforts to lock up Turkmenistan’s gas supplies and box out potential competitors–China, the West, and recently, the Indians–are running into difficulties:

In recent months Turkmenistan and Kazakhstan have been targeted by coordinated and escalated pressures from the United States, European Union, and Great Britain in favor of the sub-sea Trans-Caspian gas pipeline, the state-run RIA-Novosti news agency commented on October 19, adding that, since earlier this year, nearly 20 U.S. delegations have traveled to Turkmenistan. Maneuverings by potential gas consumers allow Russian neighbors to use the issue of alternative pipelines to prop-up their bargaining position in discussions on gas prices, the agency commented.

In the meantime, Ashgabat has other arguments to boost its bargaining position. On October 25, Berdimukhamedov announced that construction of a Turkmenistan-China gas pipeline would be an important factor in regional stability and development. He said bilateral cooperation, including energy, would top the agenda during Chinese Prime Minister Wen Jiabao’s upcoming visit to Turkmenistan (Xinhua, October 26).

It seems that the US and Europe are finally getting their acts together. The report of 20 US delegations to Turkmenistan is of particular interest.

As I’ve written often, it is in Turkmenistan’s interest to play the field and free itself from Russia’s–that is to say, Gazprom’s–grip on its gas supplies. And as I’ve also written many times, such a prospect is a dagger aimed at Gazprom’s–that is to say, Russia’s–heart. Given its declining production volumes, Gazprom desperately needs gas from Turkmenistan to meet its contractual commitments. And it needs the wide spread between the price at which it sells this gas to Europeans and the price at which it buys this gas from Turkmenistan in order to feed the many hogs at the Gazprom trough. To mix metaphors perhaps, Turkmenistan is the keystone of the Gazprom strategy, and if it crumbles (due to the construction of a Trans-Caspian pipeline, or a pipeline to China, or a pipeline to India via Afghanistan, or all three), the company will be in serious trouble.

There is a lot riding on this. And all directly involved know it–Putin et al most of all. I therefore expect the intensity of this set of the Great Game to ratchet up considerably in the coming months.

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