Publication: Monitor Volume: 4 Issue: 20

In Ashgabat yesterday, Presidents Leonid Kuchma and Saparmurad Niazov signed an agreement on Turkmen gas deliveries to Ukraine, envisaging 20 billion cubic meters annually from 1998 to 2005. Pricing will depend on Russian transit fees, and the deliveries themselves are subject to Russia’s consent to the use of its pipeline network. Kuchma and Niazov announced yesterday that they have jointly cabled a request to Russian President Boris Yeltsin to exercise his influence in lifting obstacles to the transit. Kuchma added that he will raise the issue at his impending meeting with Yeltsin. Earlier this week, Russian Prime Minister Viktor Chernomyrdin and the management of Gazprom set prohibitive conditions for Turkmen gas deliveries to Ukraine and other customers. (See Monitor, January 28)

Elaborating on those conditions, Niazov disclosed that the Russian side currently sells gas to Ukraine at a price of $80 per thousand cubic meters, almost triple the price ($28 to $32) at which Moscow offers to buy Turkmen gas for resale to Ukraine. The difference far exceeds the cost to Gazprom of transporting the gas through its own pipelines. For transit fees, the Russian side demands $1.6 to $1.75 per thousand cubic meters for every 100 kilometers of pipeline. Moscow proposes a circuitous 1,500-kilometer route through Russia instead of the usual direct 600-kilometer route. The two presidents pointed out the routes on a map at yesterday’s briefing.

Kuchma and Niazov announced that they are asking the Russian side to use the direct route and to charge the same transit fee — $ 1.09 — that Russia itself pays to Ukraine for transiting Russian gas to European consumers. Moreover, Kyiv and Ashgabat are asking Moscow to accept transit fees from Turkmenistan in the form of gas, rather than cash — "the same way as Russia pays for transiting its gas through Ukraine." This linkage seems to open the possibility that Kyiv might change the transit fees for Russian gas, if Moscow insists on excessive fees for transiting Turkmen gas bound for Ukraine.

Ukraine currently owes Turkmenistan approximately $550 million for gas received through 1993. That debt was restructured in 1996 and Kyiv is repaying it on schedule, having transferred $185 million in cash and goods to Turkmenistan in 1997. Niazov described Ukraine as a "good debtor." Nevertheless, the sides have yet to negotiate the ratio of cash and goods in Ukraine’s payment for Turkmen gas — if Russia allows it to pass.

Niazov took issue with a senior Gazprom executive’s public comment that Russia can wait and deny Turkmenistan access to customers "until Turkmenistan is ripe for coming to terms." According to Niazov, Moscow’s tactics "only mobilize us to push for alternative pipeline routes." He predicted that after several years Turkmenistan will be able to export its own gas to Asian customers via Afghanistan and to European countries, including Ukraine, via Iran and Turkey.

The Turkmen president described Russian tactics as being dictated by commercial rather than political considerations. However, Chernomyrdin most recently cast the issue in clearly political terms when he lashed out at Central Asian leaders after the January 5-6 Central Asian summit in the Turkmen capital — condemning their efforts to open up alternative pipeline routes. In so doing, the Russian prime minister charged, those leaders are "trying to fence themselves off from Russia" and catering to "interests of far-away countries." (Ukrainian and Russian agencies, Eastern Economist Daily, January 28-30. See also Monitor, January 9)

Government Support for Ethnic Kazakh Repatriation Continues.