With Trans-Caspian on the Back-Burner, Turkmenistan Focuses on TAPI

Nabucco is dead or at least diminished, say Western analysts, killed by huge costs, logistical problems, policy shifts and consumption downturns, and the most important factor – lack of gas sources. Neither Azerbaijan or Turkmenistan, first pressured by Russia, then enlisted in smaller regional pipeline projects, could close the European deal. To be sure, the Nabucco consortium’s chief executive Jurgen Grossmann still characterizes exploration licenses in Azerbaijan and Turkmenistan as "increased in value,” the Wall Street Journal reported January 18. But Turkmenistan has never commented on its role as one of the main culprits for Nabucco’s derailing; it wasn’t until last November that President Gurbanguly Berdymukhamedov even pronounced the word “Nabucco” in public for the first time.

Turkmenistan has always been merely keeping its options open, moving the tokens along the board; Ashgabat has no immediate urgency to sell its gas, not when China has invested more than $8 billion in loans to take it out. Berdymukhamedov always seemed to be waiting for the Nabucco consortium to offer him the same kind of investment in his infrastructure as Beijing, but Nabucco, estimated at $10-11 billion to build, had costs enough of its own.

With a recent cold wave in Eurasia, Turkmenistan temporarily cut exports to Iran by 50%, raising some discussion again about its capacity. In fact, gas and oil exports overall increased 28.5% in January, regnum.ru reported, citing Turkmenistan’s Vice Premier Baymurad Hojamuhammedov, responsible for the oil and gas industry, who said polypropelyne and liquefied natural gas sales had increased 108% and 111.9% respectively. Iran said in September it wanted to buy more Turkmen gas.

Turkmenistan is also on track with cooperation with the European Union, announcing that a delegation of 15 officials head by Vice Premier Hodjamuhamedov is scheduled to travel to Germany to an oil and gas conference, "Turkmenistan-Europe: Prospects for Cooperation on March 14-15 in Berlin, turkmenistan.ru reported. Turkmenistan has kept the door open to the Trans-Caspian Pipeline -- one of Berdymukhamedov’s loyalist rivals in his choreographed 97% landslide elections campaigned on promotion of the Trans-Caspian as part of Turkmenistan’s diversification strategy. Meanwhile, the EU doesn’t seem to be beating a path to Ashgabat’s door as it was last year. Constant delays from Ashgabat took their toll and several factors diminish the necessity for alternative routes. When Gazprom cut off Ukraine’s gas in 2009, the EU felt a particular urgency to develop projects in the southern corridor. But now Nord Stream routes around Ukraine, removing the friction for Russia.

In December, Ashgabat reportedly failed to respond to the Kremlin’s rumored offer to buy more gas. Putin then moved masterfully to announce the hastened construction of South Stream, in fact a project costing twice as much as Nabucco’s constantly-rising estimates, and political in its own way for co-opting Europeans. There's still theoretical talk that South Stream and Nabucco are compatible, but that assumes rising European demand. In a February 14 interview with European Energy Review, South Stream CEO Marcel Kramer said "the market would decide" whether South Stream met Europe's needs and disavowed claims that South Stream was a Russian political move to cut out Ukraine. Yet Italian Paolo Romani has called the competing pipelines indeed incompatible.

Azerbaijan has moved ahead with Turkey to sign an agreement on the Trans-Anatolian pipeline to carry gas from the Shah Deniz II fields, leaving Turkmenistan aside for now. Last month, Berdymukhamedov said at Turkmenistan’s Caspian inter-agency commission that he would continue to work on the Caspian sea status – which includes the border dispute with Azerbaijan -- guided by “international legal norms.” While inconclusive, what is important is that Ashgabat remains cooperative rather than litigious, as it was in 2009, threatening to take the dispute to international courts.

By contrast with his only lukewarm acceptance of the Trans-Caspian, the Turkmen leader has far more energetically pursued plans for the Turkmenistan Afghanistan Pakistan India (TAPI) pipeline despite the obvious political and security risks.  It's not just that the current Afghan leadership may not be able to secure the pipeline’s passage through zones controlled by warlords. History indicates that when invaders leave Afghanistan, the leader they supported doesn't stay in power, and new leaders may not be interested in keeping bargains with others. According to a report from Vitaly Volk of Deutsche Welle, Yury Fyodorov of the Czech Association for International Relations believes, like others, that the Taliban will likely come to power and banks won't maintain their financing of TAPI.

Berdymukhamedov may be happy to deal with the Taliban, however -- Ashgabat has frequently offered to convene peace talks among the parties to the conflict and offers TAPI as a stabilization plan. In an interview with Deutsche Welle, Numruhammed Hanamov, exiled leader of the opposition Turkmen Republic Party recalled that past dictator Saparmurat Niyazov dealt with former Afghan leader Mullah Mohammed Omar until 2001. "The current leadership will not be stopped by a situation where its next partners in negotiations on TAPI will be the Taliban," says Hanamov. The US plans withdrawal of US troops by 2014 and is already in talks with the Taliban; Washington has already supported TAPI as part of their overall ideology of building a "new Silk Road" out of the military cargo route of the Northern Distribution Network.

President Hamid Karzai made a trip to Ashgabat on January 25 to discuss TAPI along with the Afghan-Turkmen railroad and more electricity imports, Afghan state media reported.  Recently, Pakistani and Indian officials agreed "in principle" on a uniform transit fee for TAPI, although India has raised the need for Turkmenistan's gas price to be cheaper than the spot price of liquefied natural gas, UPI reported January 26. Both parties have been upbeat about reaching an agreement with Ashgabat. Transit fees with Afghanistan would still have to be harmonized before signing the gas sale purchase agreement.

A year ago, the Russian and Afghan presidents announced that Russia would participate in TAPI, but Turkmenistan, which has been embroiled in gas pricing and other disputes with Moscow, resisted the concept. Then last November at the Oil and Gas Turkmenistan expo, Turkmen officials made an overture to a Russian deputy minister about Gazprom’s possible role in TAPI, the Turkmen state media reported. In 2011, Gazprom has kept the level of its purchases of gas from Central Asia and Azerbaijan at 27 billion cubic meters, the same as in 2010, RIA Novosti reported February 1. There were still plans to purchase 10 bcm from Turkmenistan. With a variety of customers, Turkmenistan appears unperturbed at the notion of serving as the cause of Nabucco’s demise, or being left out of other regional projects – its gas isn’t going anywhere, and it will wait for the right investment partner.

This article by Catherine Fitzpatrick originally appeared on Natural Gas Asia