Publication: Monitor Volume: 7 Issue: 124

A window of opportunity is reopening for the Trans-Caspian Gas Pipeline (TCGP), planned to carry Turkmen gas to Turkey and on to Europe. The American companies Bechtel and General Electric and the Anglo-Dutch company Shell are behind that project. Backed by the United States and regional countries, the plan has been held up for almost two years by Turkmen President Saparmurat Niazov’s political gamesmanship and eccentric financial preconditions.

Because of this delay, the rival Blue Stream project has overtaken TCGP. A joint venture of Russia’s Gazprom and Italy’s state-controlled ENI, Blue Stream aims to lay a pipeline from Russia to Turkey across the bottom of the Black Sea. Turkey is the world’s fastest-growing national market for gas. As long as Blue Stream looked firmly on track and forging ahead, it seemed to preempt most of Turkey’s import requirements and made TCGP appear redundant; that in turn inhibited financing for TCGP. International creditors have deemed the two projects mutually exclusive.

Three recent, concurrent developments may give TCGP another chance. First, work on Blue Stream is lagging behind schedule. The pipeline’s overland sections in Russia and Turkey are approaching completion, but work on the seabed section is almost one year behind. This situation is partly attributable to the technical difficulties on that section, which are considerably greater than those of a trans-Caspian pipeline.

Second, Turkey now taking a harder look at Blue Stream. The political party that almost singlehandedly pushed this project in Turkey has been ousted from the government. The propriety of some contractual terms–including some that were meant to be kept secret–is being questioned; state prosecutors are investigating officials and companies suspected of having received kickbacks. And the influential military is now asking questions about the implications of a deal that would render Turkey heavily dependent on Russian gas.

Third, and perhaps most important, the Bush administration’s energy policy–as outlined by the working group under Vice President Richard Cheney–is strongly encouraging the transit of Caspian gas via Turkey to Europe. That view is consistent with the European Union’s proposal–as part of the INOGATE project–for Turkey to link its gas pipeline network with that of Greece, in order to enable gas from points east of Turkey to reach Europe. These plans would expand Turkey’s role from that of a gas consumer country to that of a major transit country for gas. As a result, Blue Stream and TCGP would no longer be mutually exclusive; and the head start of the former would no longer prevent the latter from going ahead.

For similar reasons, the planned TCGP is fully compatible with existing agreements on the supply of Azerbaijani gas to Turkey. Those deliveries are due to begin in 2004-2005 from Azerbaijan’s Shah-Deniz field through a pipeline to Erzurum, both operated by British Petroleum. When TCGP was under active consideration last year, Azerbaijan and Turkmenistan agreed on sharing the throughput capacity of the planned pipeline to Turkey to their mutual satisfaction.

Reactivating the TCGP would greatly benefit the producer and transit countries, but would be vital for Turkmenistan as a nation state. At present, the only major gas export pipeline out of Turkmenistan goes to Russia. Russia is also a major customer for Turkmen gas, but is at the same time Turkmenistan’s competitor. The Russian government, Gazprom, and the latter’s offshoot Itera are buying Turkmen gas below market prices and transiting it to third countries or reselling it with a markup. Niazov has repeatedly complained about this situation and has at times refused to sign supply contracts on Russian-imposed terms. The limited export options in turn constrain Turkmenistan’s gas extraction, the level of which is well below the country’s potential.

By exporting its gas to Turkey and beyond, Turkmenistan would obtain market prices and full cash payments; it would be dealing with politically friendly transit and customer countries, and would escape Moscow’s stranglehold on Turkmen gas exports. It is up to Niazov to lift the logjam on the TCGP project. (Roundup based on recent Western and Turkish news agencies reporting; see the Monitor, January 4, February 1, March 15, June 15).

The Monitor is a publication of the Jamestown Foundation. It is researched and written under the direction of senior analysts Jonas Bernstein, Vladimir Socor, Stephen Foye, and analysts Ilya Malyakin, Oleg Varfolomeyev and Ilias Bogatyrev. If you have any questions regarding the content of the Monitor, please contact the foundation. If you would like information on subscribing to the Monitor, or have any comments, suggestions or questions, please contact us by e-mail at, by fax at 301-562-8021, or by postal mail at The Jamestown Foundation, 4516 43rd Street NW, Washington DC 20016. Unauthorized reproduction or redistribution of the Monitor is strictly prohibited by law. Copyright (c) 1983-2002 The Jamestown Foundation Site Maintenance by Johnny Flash Productions