TURKEY EMERGES AS MEDIATOR IN TURKMENISTAN-AZERBAIJAN DISPUTE

Turkey’s assiduous efforts to turn itself into a regional energy transport hub and to secure its own energy supplies have led it to attempt to mediate a diplomatic dispute between two post-Soviet energy giants, Azerbaijan and Turkmenistan. At issue is the legal status of the Caspian Sea, an issue that remains unresolved 17 years after the collapse of the USSR, which left five bordering states (Russia, Iran, Kazakhstan, Turkmenistan, and Azerbaijan) in place of two.

While massive new hydrocarbon developments have taken place in the Caspian riparian countries, deep-water drilling projects and undersea pipelines have been stymied due to the lack of a definitive treaty delineating the seabed and waters. If Ankara’s “good offices” can help amicably resolve the dispute, it could pay off handsomely for Turkey by both securing its position as a regional energy corridor while giving it first access to Caspian energy exports.

While Turkey has already secured the 1,092 mile-long Baku-Tbilisi-Ceyhan, Turkmenistan remains the Caspian’s last glittering “Wild East” energy frontier.

The ultimate prize is Turkmenistan’s vast natural gas deposits, estimated to range between 2.1 trillion and 7.0 trillion cubic meters, placing the deposits at the fourth- to fifth-largest in the world. While Azerbaijan is the sole ex-Soviet petro-state to free itself from dependence on Russia’s pipeline monopoly for export, Turkmenistan has been dangling its vast energy reserves in front of foreign oil companies, coyly implying that a sub-sea Caspian gas pipeline is a distinct possibility.

President Gurbanguly Berdimukhamedov, who succeeded the late Saparmurat Niyazov in December 2006, has held Gazprom over a barrel to agree to pay $130 per 1,000 cubic meters for Turkmen gas for January-June 2008, a 100% jump from the price just 14 months ago, Ashgabat chafes under the knowledge that Gazprom, in turn, sells its gas to Europe for more than twice the price Turkmenistan receives, noting that Baku gets world market pricing for its hydrocarbon exports.

Turkey is also actively courting Kazakhstan, which is also held hostage by Moscow for its energy exports. Turkey’s Calik Enerji is a partner with Italy’s ENI, a major investor in Kazakhstan’s massive Kashagan offshore Caspian development. As Calik Enerji and ENI are behind the proposed Samsun-Ceyhan pipeline, proposed in 2004 as a conduit for Russian and Kazakh oil, the recent settlement of disputes over Kashagan’s development is seen as a potential major opportunity for Turkey to further its dreams as a major energy transit corridor (Milliyet, January 21).

Even though the final delineation of the Caspian remains a distant dream, an Azerbaijani-Turkmen undersea pipeline through their respective sectors would sidestep the diametrically opposed Russian and Iranian positions on the topic. Russia wants a division based on the Caspian shoreline, while Iran supports an equitable 20% division. Both share a common interest in blocking further U.S. expansion into the region, but the pair’s arbitrary energy policies toward Ankara have greatly alienated the Turkish government, whose diplomacy could unlock the West’s favored option for Turkmen gas exports, a subsea Trans-Caspian pipeline from Turkmenbashi to Baku.

Recent events have driven home to Ankara the capricious nature of its current energy arrangements with Moscow and Teheran. On December 31, citing technical difficulties, Turkmenistan halted its natural gas deliveries to Iran. Tehran promptly reduced its gas exports to Turkey by 75%, cutting supplies completely eight days later, forcing Ankara to use as much as a third of its stored fuel. Turkey then halted gas flows from Azerbaijan to Greece. Russia, Turkey’s other major gas supplier, played more pipeline hardball by also reducing gas exports.

Despite Turkey’s resentment over the arbitrary cutoff, the simple fact is that for the present Iran and Turkey need each other, Iran for Turkey’s domestic market, which thwarts Washington’s sanctions regime, while Turkey is dependent on foreign imports for almost 80% of its gas needs and 90% of its total energy requirements (Today’s Zaman, January 21). To secure its energy imports Turkey has been willing to endure Washington’s disapproval, most notably last July when Turkey signed a $3.5 billion contract with Iran to develop phases 22-24 of Iran’s offshore Caspian South Pars project, while potential pipeline projects include 2,200 miles of gas pipelines to transport up to 40 billion cubic meters of gas annually to Europe via Turkey. In a blunt rejoinder to Washington’s negative reaction, Turkish Energy Minister Hilmi Guler said, “At this point, the interests of our country are above everything. These efforts should by no means be considered a reaction, this is an action” (Kahyan, December 2). But the relationship is hardly smooth, with Turkish officials suspecting that the real reason for Iran’s decision to halt gas supplies to Turkey was Tehran’s frustration with Turkey over implementing the South Pars agreement.

Small signs seem to indicate that events are moving in Turkey’s favor; Turkmenistan is reopening its embassy in Azerbaijan as the two governments continue consultations on mutual debts, bilateral cooperation, and the legal status of the Caspian (Turan, January 18). Doubtless Turkmenistan is eying Azerbaijan’s oil boom, which last year gave Azerbaijan a $21 billion economy, currently expanding at more than triple the rate of China’s and an annual growth exceeding 30%.

For Turkey, strengthening its relationship with Azerbaijan and reaching out to Turkmenistan and Kazakhstan is a win-win situation. Turkey would get back in Washington’s good graces while lessening its dependence on Iran and insulating itself from Russia’s greed while securing its own energy supplies and reaping hefty transit fees. For Kazakhstan and Turkmenistan, the Turkish initiative would allow both countries to retain more profit from their most valuable export at a time of record-high energy prices. In Ankara, doubtless many officials are remembering the old Turkish proverb, “Great patience is the key to joy.”