Azernews.Az

By Aynur Karimova

Russian energy giant Gazprom has canceled a gas contract with Turkmengaz State Concern of Turkmenistan citing "serious violations".

Interfax reports that the Russian side has accused the Turkmen partner of creating conditions for termination of the contract.

"In January 2016, following "a serious violation of the contract by the Turkmengaz State Concern, we informed Turkmengaz about termination of the contract and termination of the gas purchase from Turkmenistan," states a memorandum on new issuance of Eurobonds of Gazprom.

Russia’s purchase of natural gas from Turkmenistan is regulated by the intergovernmental agreement of 2003, which envisages the cooperation until 2028. The document envisages the supply of up to 80 billion cubic meters of gas per year to Russia via the Central Asia - Center and East - West pipelines.

Gazprom reports in the memorandum for the first time that it requires retroactive revision of prices of Turkmen gas from 2010 to 2015.

Since early 2008, Gazprom was trying to revise the price of the gas purchased from Turkmenistan.

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.

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

In early 2015, Gazprom announced 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.

In mid 2015 Gazprom filed a lawsuit in Stockholm Arbitration Court against Turkmengaz, demanding to revise the price in the gas supply contract.

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.

Bruce Pannier believes that there was a political motive in Russia’s decision to suspend purchases of Turkmen gas.

The expert on Central Asia, and the Senior Correspondent at Radio Free Europe/Radio Liberty told Azernews earlier that Moscow has not been able to find a political mean to put pressure on Turkmenistan, but halting gas imports, even the relatively meager amount Turkmenistan was sending, hurts Turkmenistan in a very public way.

Gas supply 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 Gazprom.

Turkmenistan, which produces about 70-80 billion cubic meters of gas a year, is actively implementing an energy strategy aimed at increasing exports of the blue fuel and diversifying its supply routes to the largest global markets, where the demand for energy resources is growing.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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