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Will gas become divisive point between Russia and Turkmenistan?

3 August 2015 10:00 (UTC+04:00)
Will gas become divisive point between Russia and Turkmenistan?

By Huseyn Hasanov

Turkmenistan’s President Gurbanguly Berdimuhammadov had a phone conversation with his Russian counterpart Vladimir Putin at the initiative of the Russian side.

The presidents had this conversation against the backdrop of strained relations between the gas concerns of the two countries.

Turkmenistan’s government said July 31 that during the phone conversation, the president expressed confidence in the prospects for boosting the mutually beneficial cooperation.

Trade and economic spheres, transport and communications, urban development, agro-industrial complex and other areas were named as the important vectors of cooperation by the two sides.

Gas sphere was one of the strategic areas of partnership between Turkmenistan and Russia until recently. Turkmenistan transports its gas to Russia via the Central Asia-Center gas pipeline that was constructed during the Soviet period and monopolized by Russia’s Gazprom company.

Turkmenistan’s Ministry of Oil and Gas Industry and Mineral Resources said in mid-July that Gazprom Export LLC (100-percent subsidiary of Russia’s Gazprom company) doesn’t pay the remaining money for the actually delivered Turkmen natural gas, without explaining the reason.

Later, the world media reported citing the sources close to Gazprom that the company has filed a lawsuit in Stockholm Court against Turkmenistan’s Turkmengaz company demanding to revise the prices in the gas supply contract.

Gazprom said in early 2015 that it will purchase only 4 billion cubic meters of gas from Turkmenistan and was going to challenge the terms of the contract in the Stockholm arbitration.

The gas monopoly attributed reduction in gas purchases to the fact that demand for Russian gas in Europe and in Ukraine had shrunk, said Forbes.

Due to declining gas export prices in Europe, linked to the constantly falling oil prices, the previously set price for Turkmen gas at $240 per 1,000 cubic meters appeared unsatisfactory to the Russian side.

Having failed to negotiate lower prices, Gazprom unilaterally shifted to payments at European export breakeven price in January, said Forbes.

“Gas payments in the first five months of this year have been carried out by Gazprom under this scheme.”

Gazprom was the largest purchaser of Turkmenistan’s natural gas (up to 42 billion cubic meters) till 2009.

At the time, Gazprom had a desire to buy Turkmen gas, since it was receiving this gas at low prices and got great dividends from reselling it to CIS and European countries.

Gradually, starting from 2009, Turkmenistan also started to sell natural gas at lower prices.

However, in April 2009, Gazprom Export LLC sharply reduced the purchase of Turkmen natural gas that led to the explosion of the pipeline, according to Ashgabat. The supply of Turkmen gas was suspended till early 2010.

Despite the contracted annual volumes of 70-80 billion cubic meters, firstly, the volumes were decreased to 10-11 billion cubic meters per year throughout five years. The annual volumes dropped by 2.5 times in 2015 and stood at 4 billion cubic meters.

Turkmenistan’s government today drew the attention to the fact that during the conversation, Berdimuhammadov and Putin mainly focused on discussing the process of implementation of the earlier reached agreements aimed at deepening the partnership based on the principles of equality, trust and mutual respect.


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