TURKMEN GAS EXPORTS CONTINUE TO STOP AND START.

Publication: Monitor Volume: 6 Issue: 39

Despite ambitious plans for natural gas exports in 1999, actual results for the year have been disappointing for the Turkmen authorities (PlanEcon Energy Report, January 2000). In the first half of 1999, the Turkmen economy appeared to “boom” as gas production rose to 22.4 billion cubic meters (bcm), compared to just 13.3 bcm in 1998. The gas and oil industries account for almost half of the country’s industrial production. The increase in gas exports was the primary reason Turkmenistan’s total exports doubled in the first half of 1999. Turkmenistan relies heavily on exports of natural gas; they represented approximately 40 percent of the country’s merchandise exports. Most of the increase in exports, however, was due to a temporary resumption of gas exports to Ukraine (Turkmenstatprognoz: Social and Economic Conditions of Turkmenistan for 1999). Historically, Ukraine has been the largest buyer of Turkmen gas, but has not been a reliable customer. In most years, Ukraine has not paid its gas bill to Turkmenistan. Following the old pattern of “fits and starts,” Turkmenistan stopped supplying gas to Ukraine in May 1999 because of overdue payments; since that time gas exports to Ukraine have been negligible. Turkmen officials have made any resumption of gas exports conditional upon payment of at least 30 percent of the US$100 million outstanding debt for earlier deliveries (RFE/RL Newsline, December 20-24, 1999). Overall, dependence on exports to Ukraine remains a major source of vulnerability for Turkmenistan, due to Kyiv’s continuing cash-flow problems and overall economic decline.

The country’s economic prospects, however, have improved since the signing of a new agreement in December 1999 to resume large-scale gas exports to Russia after a two-year interruption. Exports to Russia are expected to reach 20 billion cubic meters in 2000. This welcome news has partially offset the continued problems with exports to Ukraine. Meanwhile, the United States is trying to promote plans for construction of a new gas export pipeline to Turkey under the Caspian Sea via Azerbaijan, though the project does not appear viable from an economic point of view. A pipeline (with a diameter of 30 inches) already exists along the southern shore of the Caspian Sea, channeling Turkmen gas to northwestern Iran. This pipeline can be extended into Turkey if the Iranian political climate continues to thaw.

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