Another Nail in Europe's Energy Sufficiency Coffin?
Europe's plan to secure a cheap and reliable source of energy by bypassing Russia was dealt a hard blow recently with the signing of a new agreement between Russia, Kazakhstan and Turkmenistan. The agreement, which came as a result of two days' talks between the countries' leaders in Turkmenbashi, is to build a new pipeline bringing Turkmenistan's large gas resources through Kazakhstan to Russia. Robin Adams reports from St. Petersburg.
The three leaders, Putin, Nazarbayev and Berdymukhamedov, pledged to sign a treaty by September and to begin work on the pipeline in the second half of 2008. The deal also involves the restoration of existing pipelines between Turkmenistan and Russia, which date from 1974. According to Russia's Energy and Industry Minister, Viktor Khristenko, once repaired, the existing system will be able to transport more than 90 billion cubic metres of gas per year. "Two declarations that were signed today basically outline the future development of the largest infrastructure projects in the entire Central Asia," he said.
Turkmenistan already relies very heavily on Russia for the exporting of its huge gas reserves. The main means of transportation of gas from Turkmenistan is Gazprom owned pipelines, leftovers from the Soviet era. As a result, Russia can buy Turkmen gas at a price of $100 per 1,000 cubic metres; well below the market price. It then sells the gas on to Europe at an average price of $250 per 1 ,000 cubic metres.
Up until the end of last year, Turkmenistan was ruled by the totalitarian and isolationist Saparmurat Niyazov. He was most famous for his eccentric and unusual presidential decrees, including officially renaming the month of April and the word for bread after his late mother, Gurbansoltanedzhe. Niyazov's isolationist politics made any kind of cooperation with the central Asian state practically impossible.
Since Niyazov's death last December, it was hoped that Turkmenistan's new President, Kurbanguly Berdymukhamedov would provide the opportunity for an alternative, non-Kremlin controlled route for gas from Turkmenistan. The US, EU and China have all been lobbying for direct access to Turkmenistan's gas in order to cut out the Russian middle-man.
The EU, backed by the US, planned to build a pipeline bringing gas from Turkmenistan under the Caspian Sea through Azerbaijan and Turkey, so as to reduce its dependence on Russia for energy. Although President Berdymukhamedov has said that the Trans-Caspian pipeline is still a possibility, it seems a long way from fruition now that Moscow has secured this deal.
The EU imports about 63% of its natural gas. 45% of this is imported from Russia, making the EU Russia's biggest energy market. Europe's high dependence on Russia in the supply of energy is cause for concern in Brussels. The trend of Russia to use its vast resources as a political tool, not to mention the increasingly high prices demanded by Gazprom, make it a less than stable partner in the eyes of Europe. Brussels has already seen how Russia used its gas supply to influence events in Georgia, Ukraine and Belarus and is apprehensive that the same could happen to EU countries. The Russian ban on Polish meat and boycott of Estonian goods are recent examples of Russia using its economic clout for political ends.
The tripartite meeting in Turkmenbashi coincided with an energy summit in Poland, its main aim the reduction of energy dependence on Russia. The presidents of Azerbaijan, Georgia, Lithuania and Ukraine were all in attendance, but Kazakhstan's leader Nursultan Nazarbayev pulled out of the summit in order to be in Turkmenbashi. "From the outset it was clear he wouldn't come," said Polish Prime Minister, Jaroslaw Kaczynski. "Now you can see how important this conference is. If President Putin goes to Kazakhstan especially to stop President Nazarbayev, who will by the way take part in the conference over the phone , from attending with his own physical presence, then that shows how important are the actions we are taking." Clearly this is a very emotive issue for Poland, which depends on Russia for 90% of its hydrocarbon imports.
On the Russian side, the summit in Poland was branded "anti- Russian" by the daily newspaper Kommersant, which described the Turkmenbashi agreement as "a decisive counter-attack". There is a growing sense in Russia that Europe, in particular the accession states, have been very quick to forget their historic links with Russia, in favour of their new western allies. The contentious removal of a Soviet war memorial in Tallinn just days before the Russian victory day and the decision to remove some 200 similar statues in Poland contribute to the feeling of betrayal and perceived anti-Russian sentiment. This was an issue touched on by Putin in his State of the Nation address earlier this year.
Some commentators view the new deal between Russia , Turkmenistan and Kazakhstan as a gesture of solidarity between the former Soviet countries. Kazakh President Nazarbayev denied these claims, saying "This is a purely pragmatic commercial project ... There is no politics there."
European relations with Central Asia, which have in the past concentrated on human rights issues, have changed in respect of the area's growing strategic importance. Brussels feels that its policy of limited engagement with central Asian states which have a bad human rights record has not worked, and that a new strategy is needed. In 2006, the European Commission voted to grant Turkmenistan "Most Favoured Nation" trading status with EU, a move condemned by many human rights campaigners. Despite it being the biggest producer of gas in the former Soviet Union (not including Russia), most of Turkmenistan's 5 million people live in poverty.
The full extent of Turkmenistan's gas reserves is still not known, the government has not consented to any independent assessment. BP's statistical review estimates the figure to be around 2.9 trillion cubic metres, but the Turkmen government claims to have about ten times that amount.
Turkmen President Berdymukhammedov was keen to stress at the announcement of the deal that the possibility of other routes for gas out of Turkmenistan was by no means dead. The Turkmen government has already promised to build a pipeline to Russia and is considering links to Afghanistan and India.
It seems that one of Europe's biggest obstacles to direct access to Turkmenistan's gas is funding. Because of the uncertainty as to just how much gas reserves Turkmenistan actually has, investment from the private sector is proving hard to come by. If Europe really wants direct access to Turkmen gas it will have to put its money where its mouth is and invest on a public level . As Valery Nestov, an analyst at Troika Dialog said , "If politicians really have a strong desire to get more gas that would bypass Russia, they could offer to incur some financial losses and risks." Political will in Brussels is not yet strong enough to undertake such a commitment, but if Russia continues to raise its gas prices, such a move may become necessary.