Publication: Eurasia Daily Monitor Volume: 5 Issue: 128

President Dmitri Medvedev is apparently building strong momentum in his foreign policy activities, exploiting one success to achieve another. The remarkably cordial Russia-EU summit in Khanty-Mansiisk two weeks ago paved the way for his friendly visits to Azerbaijan, Turkmenistan and Kazakhstan last week; and this high-intensity Caspian tour has granted Medvedev some additional confidence for making the debut performance at the G8 summit this week. The central theme at all these meetings is Russia’s unique role in the global energy crisis. The European leaders demonstrated that their interest in Russian gas is far greater than their concerns about Russia’s political trajectory, so the three Caspian petroleum-producing states are becoming more positively inclined to take their energy business to Moscow; and Japan, which hosts this year’s G8 summit at Toyako, shows eagerness to take part in any new hydrocarbon developments in Siberia, despite getting a taste of Gazprom’s heavy-handedness with the Sakhalin projects (Rossiiskaya gazeta, July 2;, July 5).

Nobody expects any surprises from the G8 gathering, since the tradition of these summits puts style before substance. Medvedev’s Caspian trip, on the other hand, was devoted to the exclusively presidential business, gas trade, and so should have closed at least a few tantalizingly open issues (, July 6). He first arrived in Baku with a proposition that President Ilham Aliyev found hard to refuse: to start exporting gas to Russia from the newly-developed off-shore Shah-Deniz field (Vremya novostei, July 4). Until last year, Azerbaijan imported Russian gas, but now it covers domestic needs, supplies Georgia and exports to Turkey via the new South Caucasus pipeline. The key question for the mid-term is whether to expand this channel by laying the second trunk for this pipeline or to use the existing Baku-Mozdok-Rostov-on-Don pipeline for delivering gas to Russia.

Seeking to supply an answer, Alexei Miller, the CEO of Russia’s immense Gazprom, confirmed that he was ready to purchase all available volumes from Azerbaijan on the basis of “European” prices, adding for clarification that by the end of this year, Gazprom’s benchmark price for exporting to the EU would be $500 for 1,000 cubic meters (Vedomosti, July 4). Just a few weeks ago, this price was set at $400, but as the world oil price climbs to $150 per barrel, Miller feels free to speculate that the perfectly round price of $1,000 per 1,000 cubic meters of gas appears entirely possible. President Aliyev may or may not believe in such breathtaking prospects, but he cannot be happy about the present-day lost profit, as Turkey pays only about $120 per 1,000 cubic meters. Unlike oil that flows problem-free via the famous Baku-Tbilisi-Ceyhan pipeline, natural gas is a heavily politicized substance, so common economic sense is not necessarily the decisive factor. Aliyev did not say “yes” even to the most innocent Russian offer of an experimental swap-deal, delivering a small volume of gas to the border and pocketing the profit from Gazprom’s selling the same amount in Europe, but he promised to think about it (Kommersant, 4 July).

Talks in Turkmenistan were no less complicated, despite Russia’s unequivocal support for President Gurbanguly Berdimukhamedov in consolidating his grasp on power. “Here at least it is clear who makes the decisions” noted Miller, while the two leaders had a tête-à-tête, perhaps reflecting on the fact that he had been denied the privilege of seeing that “decider” during his previous visit (Kommersant, July 5). Berdimukhamedov confirmed the general commitment to deliver the bulk of Turkmen gas to Russia until 2025, but that was not what Medvedev came for and neither was the visit to the notorious museum of Turkmenbashi (RIA-Novosti, July 5). The breakthrough deal on constructing a new pipeline along the eastern shore of the Caspian Sea negotiated by Putin in May 2007 has still not been ironed out in terms of capacity and schedule, and Moscow’s promise to pay “European” prices was not sufficient to get the project going. That did not stop Sergei Prihodko, the key aid to Medvedev in foreign policy matters, to assert that the Nabucco pipeline “exists only in the virtual imagination of European bureaucrats,” since it had never been mentioned in the bilateral discussions (, July 4).

The visit to Kazakhstan was of a rather different nature, as Medvedev attended the ceremonies marking the tenth anniversary of moving the national capital to Astana. He congratulated President Nursultan Nazarbayev on the occasion of the anniversary (RIA-Novosti, 6 July). The two leaders did not find it opportune to mention the OSCE, as Medvedev had expressed a rather critical view about this organization, while Nazarbayev had just hosted its Parliamentary Assembly, which approved an appeal to Russia to refrain from expanding ties with the break-away Georgian republics (Vremya novostei, July 4). Medvedev preferred to ignore the new escalation of tension around Abkhazia and South Ossetia, expecting that nobody would be so tactless as to put these annoying matters on the G8 table. The visit to Astana also provided him with an opportunity to meet with Turkish President Abdullah Gul and King Abdullah II of Jordan, but what was most important to him was to secure Nazarbayev’s support for closing the deal with Turkmenistan.

Kazakhstan has a clear interest in becoming the main transit country for Turkmen gas but it also has a pronounced preference for a “multi-vector” policy, which includes a mature Western dimension. Medvedev, however, believes that Russia has one extra advantage in addition to being Kazakhstan’s largest neighbor, which he spelled out in a recent interview to Western journalists: “I think that the best support for democracy in any country is the course set by the people in power in that country.” This thesis might appear all but senseless, but in fact it contains an important message–Moscow has no problem with any Zimbabwe-type tyranny in the post-Soviet space. Messrs Aliyev, Berdimukhamedov, et al., who fancy themselves as “enlightened monarchs,” have to be convinced that beneath Medvedev’s ‘liberalism’ is the same total determination to keep power, and then the gas business will go smoothly.