Gazprom might have to pay more for Turkmen gas

Energy Trade

Turkmen President Gurbanguly Berdymuhammed began his first visit to the US by acknowledging there is tension in the gas talks with Russia. According to unofficial data, the tension is caused by Turkmenistan’s wish to raise the price of natural gas for Gazprom up to $150 per 1,000 cubic meters. It can be done only with violation of the current agreements.

However, if Russia eventually agrees to the price growth, so as to preserve its energy alliance with Turkmenistan, Ukraine will be the first to pay for it. Turkmen President Gurbanguly Berdymuhammed arrived to New York to speak at the UN General Assembly on Wednesday night. In response to a very warm welcome he received in the US, Berdymuhammed unequivocally hinted that Turkmenistan might change its strategic partner in the gas sector. Turkmen leader told US businessmen that difficulties have appeared in the Russia-Turkmenistan energy relations. “The Caspian Shore Gas Pipeline, our new joint project with Kazakhstan, will allow supplying additional amounts of Turkmen natural gas [30-40 billion cubic meters.--Kommersant] to Russia and other countries. The process of negotiating the gas prices both for the new project and for the current agreements is tense,” said Berdymuhammed, but did not specify what the tension lies in.

Sources close to the Turkmen authorities said that the president wants to raise gas prices for Russia. Energogaz company’s owner Roman Matsuev said, with reference to Turkmenistan’s Deputy PM and Oil and Gas Minister Tachberdy Tagiev, that Turkmenistan intends to raise the price of gas sold to Gazprom from $100 to $150 per 1,000 cubic meters since January 1, 2008. Matsuev said that Dushanbe justifies the initiative by mentioning Gazprom’s plans to increase gas prices for Lithuania, Latvia, Estonia, Hungary, and Belarus. The expert believes it is the gas price that is the stumbling block in negotiations over the Caspian Shore Gas Pipeline’s construction. Presidents of Russia, Turkmenistan, and Kazakhstan initiated the project in May, by signing a memorandum of intent. By September, they planned to sign a four-sided binding agreement (Uzbekistan was to join it). However, it did not happen.

Turkmenistan’s Oil and Gas Ministry and the country’s embassy in Russia refrained from giving comments to Berdymuhammed’s statement in New York. Gazprom said “the documents concerning the pipeline are being coordinated”. Yet, the monopoly does not know the new deadline for signing it. Gazprom refused to discuss the issue of Central Asian gas prices in 2008. Meanwhile, the monopoly has grounds to insist on keeping oil prices. In 2006, Gazprom head Alexei Miller signed with late Turkmenbashi Saparmurat Niyazov an agreement on buying up to 162 billion cubic meters of natural gas in 2006-2009 for $100 per 1,000 cubic meters.

Yet, Turkmenistan’s new president finds more and more new strategic allies against Russia. At his meeting with Great Britain’s Energy Minister Malcolm Wicks last week, Berdymuhammed invited British companies to join the extraction of energy resources from the Turkmen shelf of the Caspian Sea, and to create refineries in the country. “We discussed the possibility of creating a southern corridor [Nabucco pipeline.—Kommersant] for transporting gas from Turkmenistan across the Caspian Sea to Azerbaijan, and then to Turkey and the EU. I was greatly impressed by the president’s positive stand on the issue,” said Wicks. Berdymuhammed also confirmed his predecessor’s agreements on supplying gas to China and granting it access to Turkmen resources.

Thus, Russia will either have to resort to methods of political pressure on Turkmenistan, or to agree to higher prices, as it already happened in August 2006 (from $65 to $100 per 1,000 cubic meters). However, Ukraine, and not Gazprom, will suffer the economic consequences of the price raise. Ukraine buys all Turkmen gas from the Russian monopoly through Rosukrenergo. Ukraine’s Deputy PM Andrei Klyuev calmed the country’s population on Wednesday, saying that the talks on buying 34 billion cubic meters of Turkmen gas for $100 per 1,000 cubic meters are already over. Yet, Gazprom and Rosukrenergo do not confirm the information. “We are now in working consultations with our partners. Hopefully, the talks on the Central Asian gas price will be over in October-November, after which Ukraine will know its gas price for 2008,” explained Rosukrenergo’s spokesman Andrei Knutov. Another source close to the company believes that if Turkmenistan succeeds in raising the gas price, Kazakhstan and Uzbekistan, which also secure supplies to Ukraine, will do the same. (

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