Turkmenistan stands by Caspian pipeline

Asia Times Online (Hong Kong) Nov 4, 2011

By Robert M Cutler *, Montreal

Turkmenistan’s foreign ministry issued a definitive rebuke last week to political forces trying to use diplomatic and legal stratagems to block conclusion of an agreement on constructing the Trans-Caspian Gas Pipeline (TCGP) across the Caspian Sea bed to Azerbaijan, from where Turkmenistan’s gas would transit through Turkey to Europe, presumably through the Nabucco pipeline.

Russia’s President Dmitry Medvedev had said just days before that in Moscow’s view the « coordination of positions » of all Caspian littoral states was necessary, meaning that any single country’s veto should be enough to halt to halt the project.

In May 2008, Turkmenistan and the European Union signed a memorandum on energy cooperation, and they have been engaging in regular bilateral meetings at various levels, including an ad hoc working group at the ministerial level. The EU’s authorization given to the European Commission just over seven weeks ago to negotiate the TCGP is, in Ashgabat’s words « a logical continuation of that process ».

A document setting forth « the essential provisions regulating the supply of natural gas from the Caspian [Sea] region to Europe » is now under negotiation. What is involved is nothing less than a legally binding treaty with Azerbaijan and Turkmenistan, according to Bloomberg News.

There is nothing new about this manner of proceeding. The contracting parties need the security of such a commitment. When the Baku-Tbilisi-Ceyhan (BTC) oil pipeline was constructed over a decade ago, it was the first energy pipeline in the history of the industry that involved different producer countries, transit countries, and consumer countries. It required the innovation of a structure of commitments.

In the end, four agreements were signed in the margin of the November 1999 summit meeting in Istanbul of leaders of the members of the Organization for Security and Cooperation in Europe. They included agreements on cost guarantees, one between investors and the transit states, one on the pipeline itself, and a construction contract. To provide further political and economic guarantees, these were subsequently ratified by the parliaments of the states concerned and given the status of treaty superseding national law.

They were formulated as bilateral intergovernmental agreements, yet they covered all bases: the first basically dealt with the responsibilities of governments; the second, with those of governments and investors; the third, with those of governments, investors and the pipeline management and operating authority to be created; and the fourth, those of the last three plus the contractors. The structure and content of that package have since been criticized on various grounds, and varying arrangements have been found for other international energy pipelines built since then.
There is no guarantee that the documents that will result from the EU-Azerbaijan-Turkmenistan negotiations will be structured in such a manner, and in all likelihood they will not be. Yet the fact remains that documents covering this complex of issues are, in some form, the necessary prerequisite to insuring the security of the business environment without which insurance investors will not invest and builders will not build. Turkmenistan’s cooperation with its European partners is conducted « in a businesslike and constructive atmosphere », the Turkmenistan foreign ministry statement said, adding pointedly, « and this will continue ».

The Russian objection, pretending that « all the main issues » concerning the Caspian Sea had to be decided by the coastal states acting together, referred to accords reached at the October 2007 Teheran summit and affirmed at the November 2010 Baku summit, both of which brought together leaders from the five littoral countries – Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan. However, the only issue areas specifically mentioned in the joint document signed in Baku a year ago were drug trafficking, human trafficking, organized crime and terrorism.

Nor was this document even a finalized security arrangement. Azerbaijan’s President Ilham Aliev called it « an important step » of a process that is still « at the preparatory stage ».

Meanwhile, Russian-Kazakhstani cooperation in energy exploration, development, and production has continued in the northern offshore of the Caspian Sea without any reference to the need for all parties to approve it. Indeed, the evidence is that Kazakhstan supported Azerbaijan and Turkmenistan at the November 2010 summit in Baku over their right to make their own decisions about their own pipeline.

Preparations for the realization of eventual contracts that the trilateral agreement will make possible also continued apace, as Turkmenistan’s President Gurbanguly Berdimuhamedow approved the composition of the supervisory board for selling the country’s oil and gas and chemical products to foreign countries. A new gas compressor station with a capacity of 20 billion cubic meters per year (bcm/y) was commissioned at the Dauletabad complex in the country’s southeast.

This is not for the prospective Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, because Berdimuhamedow informed Ashgabat’s partners last year that gas for TAPI would come from not from Dauletabad, as originally planned, but instead from the South Yolotan field, which also feeds the recently constructed natural gas pipeline to China. (The latest iteration of the Gaffney Kline audit of South Yolotan establishes it as the second-largest natural gas deposit in the world with reserves estimated between 13.1 and 21.2 trillion cubic meters.)

However, Dauletabad feeds the East-West Pipeline running across the south of the country to Ashgabat’s Caspian Sea coast. Turkmenistan has been refurbishing and reconstructing the East-West Pipeline in the anticipation that it will in turn feed the TCGP. Its projected 30 bcm/y new volume is equal to the figure commonly cited for the TCGP’s throughput and also almost the same as the volume projected for the Nabucco natural gas pipeline.

* Dr Robert M Cutler (http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, has researched and taught at universities in the United States, Canada, France, Switzerland, and Russia. Now senior research fellow in the Institute of European, Russian and Eurasian Studies, Carleton University, Canada, he also consults privately in a variety of fields.