Gazprom Resumes Imports of Turkmen Gas After Three-Year Break

Publication: Eurasia Daily Monitor Volume: 16 Issue: 56

(Source: Azernews)

The spokesperson for Gazprom, Sergey Kupriyanov, stated, on April 15, that the company had resumed gas imports from Turkmenistan (News Central Asia, April 16). His announcement was immediately confirmed by a statement from TurkmenGaz, Turkmenistan’s state natural gas company (, April 15). Discussion on the resumption of imports accelerated following Gazprom CEO Alexei Miller’s series of visits to Ashgabat in late 2018 (see EDM, February 25) and in March 2019 (, March 27). While details on long-term annual volumes of imports and price are yet to be revealed, TurkmenGaz stated that, “Supplies resumed under the existing intergovernmental agreement until 2028, after a commercial pause [referring to the 25-contract signed back in 2003]” (, April 15). Gazprom declared that the company has agreed to purchase 1.155 billion cubic meters (bcm) of gas from Turkmenistan until June 30, 2019 (, April 16). Should the contract be extended, this number suggests an annual volume of 6 bcm. While this amount of traded gas is higher than the 4 bcm Russia imported from Turkmenistan in 2015, before ceasing purchases in January 2016 (Kommersant, April 15, 2019), it is much lower than the annual 80 bcm once envisioned under the 2003 agreement (Eurasianet, January 4, 2016).

Russia was the leading importer of Turkmenistani gas until it was displaced by China around the beginning of the decade. Following the 2003 agreement, imports from Turkmenistan reached 42.6 bcm in 2007 (see EDM, April 8, 2016) but stopped altogether in 2009, after an explosion in the pipeline, which Ashgabat claimed was engineered by Russia in order to halt further gas flows without legal repercussions (, February 2018). It is important to note that, according to the agreement, Russia was importing gas from Turkmenistan based on a fixed price; after the global financial crisis (2008–2009), this price became significantly higher than Russia’s oil-tied re-export prices to Europe. When imports resumed in 2010, they stood at 11 bcm per year, on average, until 2014 (The Diplomat, January 6, 2016). Russia offered to lower the volumes further, to 4 bcm, for 2015 and stopped imports altogether in 2016 due to continued disagreements over the price as well as Gazprom’s own excess production capacities. In 2015, Gazprom also brought suit against TurkmenGaz in a Stockholm arbitration court for $4.6 billion for overpayments, after Ashgabat complained that Russia was making only partial payments for supplies (, October 29, 2018).

China was quick to jump in to fill the vacuum left by Russia and commissioned the Central Asia–China pipeline in 2009. Turkmenistani gas supplies to China have grown ever since thanks to the repeated expansion of the pipeline. In 2015, they accounted for almost 49 percent (29.6 Bcm) of Chinese overall gas imports (, June 2016), although that proportion has been shirking since. The share of Turkmenistani gas in Chinese imports was 46 percent in 2016 (34.2 bcm) (, June 2017), and 39 percent in 2017 (36.1 bcm) (, June 2018). Turkmenistan was scheduled to supply China with 38.7 bcm in 2018 (, October 29, 2018). Thus, over the past decade, Ashgabat has grown increasingly dependent on Beijing—now the only real export market for Turkmen gas—whereas, China has continued to diversify sources of supply. Turkmenistan has also become increasingly dependent on Chinese loans: Ashgabat reportedly took out $8 billion in loans in 2011 and another undisclosed sum in 2013, making Beijing its largest lender (, January 30, 2017).

However, gas exports to China have so far not been particularly profitable—both due to the lower prices paid by China and the redirection of part of the revenue to pay off Ashgabat’s debt to China National Petroleum Corporation for the construction of the Central Asia–China pipeline and loans (CACI Analyst, March 26, 2016,, October 10, 2018). China’s near-monopsony position as a major buyer of Turkmenistani gas could have also empowered Beijing to force a price discount. Turkmenistan’s gas volumes to China sold for $340 per 1,000 cubic meters at the border in 2012, $215 in 2015 and, probably, $185 in 2017, according to energy experts (, October 25, 2018).

Turkmenistan also stopped gas exports to Iran on January 1, 2017, thus losing its second major gas market. In 2016, Iran received 6.7 bcm of gas from Turkmenistan via two pipelines commissioned in 1997 and 2010 (, June 2017); however, Ashgabat received little revenue from these sales. Due to international sanctions against Iran, Tehran paid Turkmenistan through a gas-for-goods barter arrangement—a problem for cash-starved Turkmenistan. Currently, Ashgabat wants an additional $1.8 billion from Tehran, and the case has gone to international arbitration (, November 8, 2017;, November 22, 2018).

Due to the combined impact of lower export prices and decreased export volumes due to losing customers (which also coincided with massive public spending to host the 2017 Asian Games), Turkmenistan faces a serious economic crisis, which steeply devaluated the currency, raised inflation, and caused shortages of basic goods. The economic troubles have also sparked isolated socioeconomic protests—something quite unusual for a country with such a repressive regime (, January 30, 2017). The government has imposed currency controls and cut subsidies, which were considered an important pillar of the regime’s legitimacy (see EDM, July 9, 2018).

As a result of its grave economic hardships and having become overly dependent on one customer—China—Turkmenistan urgently seeks to diversify its export routes and increase export volumes. The two most promising projects, namely the Turkmenistan–Afghanistan–Pakistan–India (TAPI) and Trans-Caspian Pipeline projects, can solve both problems; but they face a wide array of obstacles (see EDM, April 8, 2016). Moreover, even if those hurdles are overcome, it will still take many years for such large-scale projects to be materialized. The potential resumption of sizable exports to Iran is also dubious as the reintroduction of sanctions on Tehran by the United States seriously curbs the Islamic Republic’s ability to make hard currency payments. Therefore, the resumption of exports to Russia, even in small volumes, is an important development for Turkmenistan that can partly remedy its financial shortages and strengthen the country’s hand at the bargaining table with China over gas export prices. From Russia’s perspective, resuming these gas purchases will assist in meeting Moscow’s broader strategy for maintaining political and diplomatic influence in Central Asia. Additionally, as some argue, it could help dissuade Turkmenistan from pursuing the construction of the Trans-Caspian Pipeline, which seemed more possible after the signing the Convention on Legal Status of the Caspian Sea, last August, in Aktau (, October 25, 2018;, April 16, 2019).