Publication: Eurasia Daily Monitor Volume: 4 Issue: 94

While Russian President Vladimir Putin has recently had serious disagreements with the United States and the European Union and bitter quarrels with Belarus and Ukraine, he has always been at his diplomatic best in Central Asia. Putin’s ongoing six-day visit to the region appears to signify a well-prepared breakthrough. His first stop was Astana, and Kazakhstan’s President Nursultan Nazarbayev made his day by confirming that Kazakhstan was “absolutely committed to transporting most if not all of its hydrocarbons through Russian territory” (Vremya novostei, May 11). The second stop was Ashgabat, Turkmenistan, where talks with President Gurbanguly Berdimukhamedov were augmented by a cultural program that included laying the foundation for a new Russian school (Rossiiskaya gazeta, May 12). The key event, however, was staged in the Caspian port that the late President Saparmurat Niyazov had re-named “Turkmenbashi,” after himself — the self-appointed “father-of-all Turkmen.” Putin, Berdimukhamedov, and Nazarbayev agreed on a deal to construct a gas pipeline along the Eastern shore of the Caspian Sea that would carry Turkmen gas to Russia.

These gifts are far more valuable for Putin than the magnificent horse that he chose for himself at the horse races in Ashgabat (Kommersant, May 12). Yet, a closer look suggests that his oil and gas triumphs are not quite as monumental and far less certain than the Kremlin propaganda machine trumpets. Nazarbayev is a very shrewd negotiator and he continued his bargaining strategy while hosting Putin for a two-day break in the Caspian port Aqtau, a remarkably long face-to-face encounter for two leaders who normally meet 10-12 times a year in different formats. One of Nazarbayev’s demands is to share the profits from exporting gas to Europe by the Kazrosgas joint venture, which would, in practical terms, mean setting the price of gas on the Russia-Kazakhstan border at a level nearly three times higher than the current domestic price in Russia (Kommersant, May 11). Another and more difficult demand relates to increasing the capacity of the Tengiz-Novorossiysk oil pipeline, opened in mid-2001 and operating now at full capacity of 31 million tons a year (Vedomosti, May 11).

The Kremlin is not particularly keen on that proposal, since this pipeline is the only one in Russia that is not controlled by the state company Transneft; instead, it is owned by the Caspian Pipeline Consortium (CPC), where Russia’s share is only 24%. Moscow’s counter-proposal for exporting more Kazakh oil through the expanding terminals near St. Petersburg is not interesting for Nazarbayev, who links directly the new pipe to Novorossiysk with the recently agreed by-pass pipeline Burgas-Alexandropolis (EDM, March 16). Kazakhstan also wants a share in the latter project, so Moscow would need to negotiate with its partners in Bulgaria and Greece and reduce its controlling share of 51% (RBC Daily, May 11).

Putin may not like these concessions, but they would be much sweetened by the prospect of undermining simultaneously two pipelines perceived as “anti-Russian”: Odessa-Brody and Baku-Tbilisi-Ceyhan (BTC). The first one was much discussed at the recent energy summit in Krakow, where leaders of Poland, Azerbaijan, Georgia, Lithuania, and Ukraine were disappointed by Nazarbayev’s no-show (Vremya novostei, May 11). The second one has been working fine for the past year, and in the next few years would generate nice returns on the huge investments by the BP-led international consortium, but beyond that its future is quite uncertain, as the oil reserves in Azerbaijan’s sector of the Caspian seabed are rather limited.

What now is even more uncertain is the project for constructing a pipeline across the Caspian in order to bring gas from Turkmenistan to Europe via the much-advertised Nabucco project (see EDM, May 10). Berdimukhamedov cautiously suggested that the Trans-Caspian project was not quite abandoned, but it is clear that the pipeline can go either across the sea or along its coast (the prefix “trans” is in fact quite misleading). The final decision has been postponed until September, but Putin is confident that his Turkmen counterpart will not renege on his word (Gazeta.ru, May 12). He might receive a few tempting offers, but the symbolism of striking the deal with Moscow exactly on the two-year anniversary of the uprising in Andijan, Uzbekistan, that was squashed by President Islam Karimov, hardly escaped him. This seasoned vizier of Niyazov’s court hardly contemplates any perestroika — and Putin, unlike any Western suitor, can promise him unwavering support should the need arise to disperse a rally or to decapitate an opposition movement.

The uncertainty for Moscow in this gas deal stems not only from the doubts about the leadership qualities of the new Turkmenbashi but more from the concerns about the infrastructure of gas production in Turkmenistan. Gazprom was promised only limited opportunities to invest in exploration, and this giant company does not have a good record in expanding its own production base (RIA-Novosti, May 12). Advancing the cause of “resource nationalism,” Russia may suddenly fall victim to somebody else’s zeal to protect a “national treasure” (Vedomosti, May 11).

The questions about actually implementing the oil and gas deals may demand new attention later this year, but later this week Putin will open the Russia-EU summit in Samara from his “position of strength” gained in Central Asia. Under the smoke screen of speculations about a “gas OPEC,” he has built a real gas cartel that grants him leverage sufficiently strong to brush aside the Energy Charter, as his aides have rushed to clarify (Newsru.com, May 2). Last autumn, the EU managed to form a common energy front under the Finnish chairmanship, but now Putin hopes to undermine it as the expectations to diversify the sources of supply evaporate. He might succeed in this, but that would hardly signify a major success in Russia’s European policy. By consolidating its dominance on the European gas market, the Kremlin also drives Russia further away from European norms of political behavior. Energy omnipotence emboldens Putin’s courtiers to raise hell against Estonia and to unleash OMON troops on the “discontented”; they feel untouchable — and free to violate every European trait that Russia has earned by overcoming the heavy burden of its history.