YUSHCHENKO PROPOSES INTERNATIONAL CONSORTIUM FOR CENTRAL ASIAN GAS

On an official visit to Ashgabat on March 22-23, Ukrainian President Viktor Yushchenko proposed creating an international consortium to build, own, and operate a new large-capacity gas pipeline from Turkmenistan via Kazakhstan and Russia to Ukraine and on to Western Europe.

Yushchenko outlined the concept of an alliance of producer, transit, and consumer countries, extending from the Central Asia upstream to the European downstream, and based on a long-term supply strategy that would harmonize the interests of all. He called for major West European consumer countries or even the European Union as such to take part in the proposed alliance, and he objected to the notion of “dividing” the interested countries into producers and consumers. In this key respect, Yushchenko’s proposal differs fundamentally from Russian President Vladimir Putin’s concept of a “Eurasian” gas producers’ cartel (Russia, Turkmenistan, Kazakhstan, Uzbekistan) that would enable Russia to monopolize the marketing and dictate prices of gas in Europe.

The proposed new pipeline would run along the Caspian Sea coastline from Turkmenistan to Alexandrov Gai (Kazakhstan) to Novopskovsk (Russia) and on to Ukraine and European Union countries. With a throughput capacity envisaged at 60 to 70 billion cubic meters annually, this pipeline would provide an internationally controlled outlet for Central Asian gas. At present, the Soviet-era Central Asia-Center pipeline (Turkmenistan-Uzbekistan-Kazakhstan-Russia) is the sole major outlet for Central Asian gas, enabling Russia to monopolize the transit, and forming the basis of Putin’s cartel concept.

Turkmen President Saparmurat Niyazov seemed to endorse Yushchenko’s proposal in general terms at their concluding joint news conference. Niyazov stated that he would bring it up with the Russian side during upcoming negotiations (see below). Indeed Niyazov has occasionally in recent years called for a major export pipeline to be laid along the Caspian shore into Russia to carry Turkmen gas destined for countries other than Russia. No practical steps have ensued thus far, however. Niyazov is known for his habit of musing in public about various transit options for Turkmen gas, but he has yet to challenge seriously the existing Russian monopoly.

According to Niyazov at the press conference, Turkmenistan is capable of exporting 60 to 70 billion cubic meters of gas annually to Ukraine and a comparable amount to Russia, provided that a new Caspian coastal pipeline is completed as proposed. Those volumes seem broadly consistent with Turkmenistan’s gas export projections of some 120 billion cubic meters annually by 2010, which are realistic with relatively modest levels of investment in extraction. However, the current level of investment is insufficient, and Turkmenistan’s gas extraction actually declined in 2004 and early 2005.

(Interfax-Ukraine, UNIAN, March 22, 23)