Turkmenistan Must Provide “Incentives” for Companies on TAPI: US Official

Since the flare-up of the long-standing Caspian Sea border dispute between Azerbaijan and Turkmenistan, neither side has budged to resolve the matter in order to move forward on joint projects, notably the Trans-Caspian Pipeline. In June, Turkmenistan's Foreign Ministry protested what it deemed "illegal measures" by Azerbaijani border guards who halted a Turkmen ship said to be conducting research in the disputed zone. While Ashgabat insists that its vessel involved in seismic testing was “scientific,” Baku said it was “sampling” illegally, as the two countries had agreed in 2008 not to conduct exploration or extraction until the dispute was resolved. Turkmen Oil and Gas Minister Kakageldy Abdyllayev then declared that Turkmenistan would contest the disputed zone at the United Nations' International Court of Justice (ICJ).

Other countries such as the US and Canada have resolved maritime border disputes at the ICJ, yet neither Azerbaijan or Turkmenistan have ever submitted a formal ICJ jurisdiction declaration to be eligible for a case. Even if both countries were to complete this process and recognize the judges’ decisions as binding, there is no way to enforce the decision. ICJ judgments cannot be appealed, but interpretations can be requested and if new facts come to light, a revision may be sought -- a laborious process that may not be the best way to resolve what is essentially a political, not a geographical problem.

The border conflict has lasted some 15 years and could easily last another 15 years; beyond the immediate technicalities of how to demarcate the border, there are powerful forces working against a resolution. Russia does not want the TCP to go forward, as it is designed to reduce the European Union’s dependency on Moscow. Russian Foreign Minister Sergei Lavrov made in clear that the EU could not push for the pipeline without consideration of Russia's interests and invoked "legal and environmental concerns", eurasianet.org reported July 11.#

And Iran does not want any Caspian issues to be resolved bilaterally or commercial projects that do not involve the consent of all the littoral states. The reality is that no international body has ever been able to resolve any dispute on boundaries, water, or hydrocarbons resources in Central Asia, despite active engagement. In 2009, when Turkmenistan said it would submit the dispute to ICJ , eventually it climbed down when both countries began to work on the TCP, Rauf Orujiev commented in Zerkalo July 6. Now there is no longer the momentum to carry them over this latest dust-up when BP, Total, and SOCAR are going ahead with TANAP and not waiting for Turkmenistan and the TCP -- although the EU still makes statements that it hopes to conclude the TCP agreement with Azerbaijan and Turkmenistan.#

Azeri Minister for Energy Natiq Aliyev recently said that Azerbaijan will not invest in the Trans-Caspian and does not believe it will happen any time soon, Reuters reported#. He claimed that the long-standing maritime border dispute would not impact the TCP, yet generally analysts have conceded that investors would want to see an end to the contentious issue before commitment.

On his last trip before the end of his term, Pierre Morel, special envoy for Central Asia, and Patricia Flor, his successor, traveled to Ashgabat in July to meet with Turkmen President Gurbanguly Berdymukhamedov. Flor "highly appraised the policy of large-scale reforms being implemented by the Turkmen president" and urged greater cooperation. Nothing about the dispute with Azerbaijan was mentioned publicly. As usual, the Turkmen president was vague, merely expressing satisfaction with the "constructive partnership" and "the establishment of close mutually beneficial contacts " as a goal of his foreign policy, and indicating Turkmenistan is investing in major oil and gas fields and would "strictly observe partnership obligations" without providing specifics.

The US has not commented on TCP but has preferred to focus on the Turkmen-Afghanistan-Pakistan-India (TAPI) pipeline consistent with its larger concerns to wind down the conflict in Afghanistan and build stability and prosperity in the region. At a press conference in Almaty on August 15 while touring Central Asia, Robert O. Blake, Jr. Assistant Secretary of State for South and Central Asian Affairs told reporters that he believed there were sufficient gas supplies for TAPI#. He characterized TAPI as “particularly important” because it joins Turkmenistan, with its enormous reserves, and India which has “gigantic energy needs because of its fast-growing economy.”

“There is now a real market in India and they can afford to pay for the gas,” Blake said. He also believes the pipeline could provide “significant” transit revenues for both Afghanistan and Pakistan. He noted that the TAPI road show will begin in September and will be going to the US and other countries. Asked by reporters if US companies expected to participate in TAPI, he said there are “a lot of risks” involved and that companies will be looking to see “what kind of incentives Turkmenistan will be prepared to offer international companies to get involved.”

At a hearing before the Foreign Affairs Committee, Subcommittee on Europe and Eurasia on July 24, unprompted by members of Congress, Blake made an uncustomary mention of concerns about human rights and urged Turkmenistan to build “clear and transparent mechanisms for investment in its country”.#

In the past, the US diplomatic emphasis has been on establishing good relations, while humanitarian concerns have been kept to quiet diplomacy. The statement may be an indication of the level of frustration Western governments and companies feel lately in dealing with Turkmenistan’s prolonged and repeated assurances of cooperation which never amount to actual deals.

Turkmenistan has been busy building the East-West pipeline across its territory, designed to connect with international pipelines. Workers completed one hundred kilometers of large-diameter pipes and plan to finish another 162 kilometers by the end of the year, the state media reported The nearly 800-kilometer pipeline is scheduled to be completed within five years. The EU has taken Turkmenistan at its word when it says it only wishes to sell its gas at the border, i.e. not to have foreign involvement in production.

The exception is China. While the EU is speculating about Turkmenistan's intentions, the Chinese National Petroleum Company has been the main beneficiary of Turkmenistan‘s avowed “diversification“ policy. In a rare statement about its projects,# CNPC said it is assisting Turkmenistan with building infrastructure in the Galkynysh field (the new name for a region which includes the South Yolotan field). A Chinese engineering company affiliated with the CPNC is working on 15 projects, said a representative, including a gas refinement plant, roads, a railroad, a fire department, and a rescue service, energyland.info reported July 30. The Chinese state company began working in Turkmenistan in 2007 and completed a pipeline in 2009 that runs through Central Asia to China. CNPC now anticipates a number of projects to assist the development of Galkynysh, including construction of a village of 2,000 shift workers who will serve the plant, with amenities like a gym and shopping center. It is also working on a railroad as well as "detailed geological works" for the transfer of a gas pipeline and a gas-collecting pipeline.

By Catherine A. Fitzpatrick

1. http://www.eurasianet.org/node/65646
2. http://en.trend.az/capital/analytical/2042581.html
3. http://www.naturalgaseurope.com/azerbaijan-wont-invest-trans-caspian-pipeline-
4. http://iipdigital.usembassy.gov/st/english/texttrans/2012/08/20120815134719.html#axzz23sy4PcSg
5. http://www.state.gov/p/sca/rls/rmks/2012/195500.htm
6. http://energyland.info/news-show-tek-neftegaz-91034