World's Energy

04-24-2009 - EurasiaNet by Deirdre Tynan - The outcome of a two-day energy security conference, which concluded April 24 in the Turkmen capital of Ashgabat, has to be considered a disaster for Russia’s energy policy. The Kremlin-controlled conglomerate Gazprom currently enjoys a near-monopoly of Turkmen natural gas exports. But as a dispute between Ashgabat and Moscow over responsibility for an early April pipeline explosion continues to fester, Turkmen leader Gurbanguly Berdymukhamedov used the conference to proclaim Turkmenistan’s energy independence from Russia. In comments to conference participants, Berdymukhamedov let it be known that Turkmenistan would no longer be cowed into going along with the Kremlin’s energy agenda, and that he was intent on loosening Gazprom’s vice grip on Turkmen energy exports. "Today we are looking for conditions to diversify energy routes and the inclusion of new countries and regions," Berdymukhamedov said. "Turkmenistan must create a new system of relations with Europe. In the current situation, the diversification of energy routes could help to stabilize the global economy." To compound Russia’s woes, Berdymukhamedov indicated that if Gazprom wanted to keep doing business with Turkmenistan, then the conglomerate could not expect any discounts. "It’s logical that the country of production determines the price based on the cost of gas production," the Russian newspaper Vremya quoted the Turkmen leader as saying on April 24. Russia’s energy export agenda is largely predicated on its ability to obtain relatively low-cost gas from Turkmenistan. Without such access, the entire Russian economic edifice erected during the Vladimir Putin era is vulnerable to collapse. The Ashgabat energy conference seemed to bring Russia’s current vulnerabilities into sharp relief. A high-level Russian delegation in attendance - led by Deputy Prime Minister Igor Sechin, Energy Minister Sergei Shmatko and Gazprom boss Alexei Miller - could only sit in silence as Berdymukhamedov sought to remake the Caspian Basin’s energy order. According to a report distributed April 24 by the semi-official Turkmenistan.ru news website, Ashgabat will start pressing for a "fundamentally new, universal model for relations in the world energy market" that is based on the "multilateral balance of interests." In other words: Moscow will no longer be able to bully the countries of Central Asia into going along with the Kremlin’s wishes. Berdymukhamedov’s comments were just what US and European Union officials have long been waiting to hear. A bevy of Western officials and energy executives participated in the conference, mainly to reaffirm their interest in doing deals with Ashgabat. On April 24, US Deputy Assistant Secretary of State George Krol urged Turkmenistan to diversify its energy export routes. Washington is most interested in securing a Turkmen commitment to export via the long-planned trans-Caspian pipeline route. But in one of the more interesting tidbits to emerge from the conference, Krol indicated that the United States was open to the possibility of Turkmen gas being shipped westward via Iran. Although the Ashgabat conference was ostensibly designed to mull energy security issues, in practice the gathering turned into a deal-making scrum, in which Turkmen officials and Western energy company representatives explored the parameters of potential ventures. "The main task of the conference for Turkmenistan [was] to feel the ground for opportunities to supply gas to European partners and feel the readiness of western investors to be present in the Turkmen market," Valery Nesterov, an energy analyst at Moscow-based Troika Dialog, told EurasiaNet. The coming weeks and months could prove critical for energy cooperation between Turkmenistan and Western companies, suggested Andrei Hrienko, an analyst at the Vector International Institute for Strategic Studies in Moscow. Ashgabat, despite its current posturing, will not make a move until it feels assured that it won’t suffer economically. "A big part of Turkmenistan’s income depends on reliable relations with Gazprom, but if the United States, EU and other countries can significantly compensate any economic loss if Turkmenistan was to stop interacting with Russia, [then Turkmenistan’s] geopolitical direction could change," Hrienko said. If US and European entities can strike deals with Ashgabat, there may be little that Gazprom can do to stop them from going forward. Due to its recent economic difficulties, Gazprom is experiencing cash-flow problems, meaning the company may not have the financial flexibility to outbid the West for Ashgabat’s energy. While the situation may appear bleak for Russia at the moment, Nesterov suggested that the Caspian energy game could still take an unexpected turn. Less than a year ago, he noted, Russia’s energy position in Central Asia seemed unassailable. But the onset of the global economic crisis quickly sapped Russia of its economic might. A source of encouragement at this stage for the Kremlin is the fact that Turkmenistan’s alternative Europe-bound gas export options exist only on paper and could take years to construct. Thus, the Kremlin still has time to snatch victory from the jaws of defeat. But Nesterov and other experts agree that it is late in the game for Russia and the clock is ticking.