WILL TURKMEN GAS GO SOUTH AS WELL AS WEST?

Most commentary on Turkmenistan’s energy future has focused on the possibility of its being able to sell gas directly to Europe instead of having to go through Russia to do so. Thus, international attention has been focused on the projected Nabucco or trans-Caspian pipeline that would carry Turkmen and Kazakh gas to Europe through the Caspian Sea. This focus, however, has diverted attention form Turkmenistan’s other pipeline possibilities, the first to China, which is now being built, the and second to India, which is under negotiation. The so called TAP or TAPI line that would bring Turkmen gas through Afghanistan and Pakistan to India has been under discussion for over 10 years. At one point, in 1997, the US and the Taliban were both promoting it, but Taliban rule led to its dismissal. Since 2001 the Asian Development Bank, the governments involved, and the US have emerged as staunch supporters of the project. Washington supports it because it will give Turkmenistan alternatives to exclusive dependence on Russia and also because it would lessen the chances of a rival or parallel Iran-Pakistan-India (IPI) pipeline, which is also now under discussion.

In April the discussion of the TAP line and of overall Indo-Turkmen energy relations accelerated. On April 5 India announced that it would produce natural gas in Turkmenistan and deliver it through the TAP line (ITAR-TASS, April 6). The bilateral Memorandum of Understanding opens the way to bilateral cooperation in both upstream and downstream hydrocarbon projects. Specifically, India has obtained the right to explore for gas in offshore (i.e., Caspian Sea) blocks but wants to obtain what China has received, an already discovered field (The Indian Express, April 5). India also wants to be able to invest in hydrocarbon technology, liquefaction facilities and ports for liquefied natural gas (LNG), refinery construction, and setting up gas distribution and petrochemical plants in Turkmenistan in return for those discovered fields (The Indian Express, April 5).

Pakistan and India, as well as Afghanistan, are pressing for the TAP project to go forward even though everyone concerned recognizes that fighting in Afghanistan casts a serious question over the entire project. Nevertheless, the project is now estimated to cost $6 billion and is supposed to export some 33 billion cubic meters (BCM) of gas from the Dauletabad field in Turkmenistan annually. The field is not expected to be completed earlier than 2018, so this, like the IPI, is a project for the future. Through them, suppliers hope to find new customers in Asia, and consumers hope to gain access to new sources of supply. From Ashgabat’s standpoint, the completion of this deal in addition to its existing agreements with China, the resumption of its gas sales to Iran, and its announced intention to sell gas to Europe through the Trans-Caspian pipeline would secure its standing as a major Central Asian energy hub (www.neweurope.eu, April 14).

India has announced that it supports both the TAP line and the IPI (The Economic Times, April 22; ITAR-TASS, April 23). It is obvious that this trend has significant implications beyond Turkmenistan. First, Turkmenistan is now competing with Iran to satisfy southern Asian consumers as both the projected IPI and TAP lines will be competing for financing and project support in technology, etc. Second, Russia has been a strong supporter of the IPI to boost Iran with which it has an increasing number of joint energy projects, and at the same time it would like to prevent Turkmenistan from escaping its control. The Russian press has consistently criticized Turkmenistan’s claims to have enough gas to supply not only its own market, but Russia, China, and prospectively Europe and India as well (www.kommersant.com, April 28). While many observers have been wary of Turkmenistan’s claims about its gas reserves, this consistent line also reflects Moscow’s efforts to discourage foreign interest in Turkmen gas and to constrain Ashgabat’s export possibilities so that they will only flow through the Russian channel. Inasmuch as Russia’s domestic energy economy depends on paying less for Turkmen gas, which it then sells to Ukraine and Europe at higher prices or uses for its subsidized domestic market, the potential future loss of the ability to monopolize that gas is critical. Furthermore, Moscow and Tehran are still trying to promote a gas cartel that they would dominate the market (UPI, April 15). Turkmenistan’s ability to export independently to India and China and even beyond to the rest of the world through Pakistani or Indian ports would vitiate that project at its core. For these reasons the progress of all foreign pipeline deals involving Turkmenistan is an issue of great international interest and importance.