In 2003, during the visit of the President of Turkmenistan Saparmurat Niyazov to Moscow, two key agreements were signed, focused on cooperation in the energy sector and interaction in the field of security [Kremlin.ru, 2003]. The priority area of cooperation between the two states has always been the oil and gas industry, which is due to the rich deposits of hydrocarbons in Turkmenistan. According to the British Petroleum (BP) Statistical Review, Turkmenistan is the world’s fourth-largest natural gas giant with proven natural gas reserves of 19.5 trillion cubic meters, after Russia (38 trillion cubic meters), Iran (32 trillion cubic meters) and Qatar (24.7 trillion cubic meters). Thus, Turkmenistan accounts for 9.8% of the world’s proven natural gas reserves [BP Statistical Review, 2019]. The economic development of Turkmenistan is largely dependent on energy prices, the sale of which forms the country’s budget by 85% [Garbuzarova, 2020]. Due to its geographical location, it has the ability to export its rich natural gas reserves to neighboring markets, especially to Russia, Iran and China.
As it is known, Russia has been an important buyer of Turkmen natural gas since 1991 and was re-exporting Turkmen natural gas, which procured at a low price, to Europe. Natural gas shipments between Russia and Turkmenistan were consolidated in 2003 with a 25-year contract, which envisages the transfer of natural gas from 5 billion cubic meters per year in the first phase to 70-80 billion cubic meters annually to Russia [Gazprom.ru, 2003]. The natural gas transportation to Russia is carried out through the Central Asia-Central gas pipeline with an annual capacity of 45 billion cubic meters. But the explosion in the natural gas pipeline carrying Turkmen gas to Russia in 2009, the Russia-Ukraine gas conflict and the decrease in gas supplies to Western European countries caused Russia to stop importing gas from Turkmenistan in 2009. Russia’s suspension of imports of Turkmen gas for more than six months led to a decrease in its production in Turkmenistan, when about 150 wells were suspended [Kuzmina, 2012]. During this period, the authorities of Turkmenistan began to actively pursue a policy of diversifying hydrocarbon export routes, developing oil and gas cooperation with China and Iran.
Russia resumed gas imports from Turkmenistan in 2010, but gradually reduced purchases of Turkmen gas, in 2016 the Russian “Gazprom” decided to completely abandon gas imports, motivating the decision “by the changed situation on the international gas market” [Neftegaz.ru, 2017]. However, the disagreements mainly concerned gas prices, which the two sides could not agree on.
In October 2017, Russian-Turkmen relations reached the level of strategic partnership. Following the official visit of the Russian President Vladimir Putin to Turkmenistan, a corresponding agreement was signed. In addition to this, the legal framework of bilateral cooperation is formed by a package of 180 international documents of interstate, intergovernmental and interdepartmental levels [Garbuzarova, 2020].
After a three-year hiatus in 2019, Gazprom’s management announced that it was resuming gas purchases from Turkmenistan by signing a five-year contract, albeit with a modest annual volume of 5.5 billion cubic meters. The drift of Russia towards Turkmenistan is rather related with the interests of ensuring security rather than the desire to purchase Turkmen gas. Meanwhile, experts note that Russia has no need to purchase gas from Turkmenistan due to problems with its recoupment [Garbuzarova, 2020]. Consequently, the reasons for the resumption of imports of Turkmen gas by Russia are political. Russia views Turkmen gas as an instrument – in exchange for foreign economic and foreign policy concessions from the Turkmenistan side [Panfilova, 2018]. By resuming purchases of Turkmen gas, Russia is counting on the loyalty of the Turkmen leadership in security matters, which implies close coordination of the activities of the special services, law enforcement agencies and the constant exchange of information.
Gas trade with China, which became the main buyer of Turkmen gas and was its only buyer from 2017 to 2019, has not been particularly profitable, despite the large volumes, as Ashgabat had to repay Chinese infrastructure loans. As a result, the financially distressed political regime was even forced to curtail the free provision of some of the public services that were pillars of the informal “social contract” with the population, and faced food shortages that even led to small-scale and isolated protests in different parts of the country [Muhamedov, 2021]. Thus, the resumption of gas imports by Gazprom was a top priority for Ashgabat, since this could mitigate its financial difficulties. The resumption of activities, albeit in small volumes, will help generate much-needed cash flows and stabilize the domestic economic situation. In addition, this strengthens the position of the Turkmen side in negotiations with China on export gas prices, since the latter no longer has a complete purchasing monopoly.
The return of Gazprom to Turkmenistan could solve two main tasks for Russian foreign policy in Central Asia. Firstly, the possibility of strengthening the positions of third countries in the region is blocked. Secondly, Russia gets a chance to fill the Turkish Stream with Turkmen gas, which in turn will reduce transportation costs and will allow redirecting gas from the Yamal and Western Siberia fields to the Nord Stream 2 and Baltic LNG projects [Smirnov, 2019].
In May 2021, the President of Turkmenistan, Gurbanguly Berdimuhamedov approved a New Program [Economy.gov.ru, 2021] of economic cooperation between the countries for the period 2021–2023, which provides for the further expansion of cooperation in a number of areas, including industry, agriculture, high technology, finance and energy. In the first quarter of 2021, gas exports from Turkmenistan almost doubled to 2.2 billion cubic meters from 1.3 billion cubic meters a year earlier. Based on calculations and taking into account seasonal fluctuations, it can be predicted that by the end of 2021 the volume of gas supplies from Turkmenistan to Russia will exceed 8.8 billion cubic meters [Kadyrova, 2021]. Considering that the natural gas purchase between the two countries was previously carried out in the band of 40-50 billion cubic meters, it is obvious that the current amount is not a number that would satisfy Turkmenistan.
As a result, for Turkmenistan, which is a natural gas giant and provides most of its state budget from natural resources, it is very important to diversify its natural gas exports and ensure a stable income. In this context, it is important for the country’s economy that relations with Russia, which is the oldest and largest buyer of natural gas, resume, albeit in small volumes. On the other hand, energy cooperation constitutes an important element of Russian foreign policy in protecting Russia’s sphere of influence in Turkmenistan.
References
BP.com (2019). BP Statistical Review. Retrieved from https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2020-full-report.pdf. Accessed on 04.01.2022.
Ecomomy.gov.ru (2021). Russia and Turkmenistan adopted a program of economic cooperation for 2021-2023. Retrieved from https://www.economy.gov.ru/material/news/rossiya_i_turkmenistan_prinyali_programmu_ekonomicheskogo_sotrudnichestva_na_2021_2023_goda.html. Accessed on 03.01.2022.
Garbuzarova E. (2020). Russia in Turkmenistan: The policy of strengthening cooperation, Retrieved from https://www.postsovietarea.com/jour/article/view/228/220. Accessed on 03.01.2022.
Gazprom.ru (2003). Gazprom signed a long-term contract for the purchase of Turkmen gas. Retrieved from https://www.gazprom.ru/press/news/2003/april/article54360/. Accessed on 13.10.2022.
Kadyrova E. (2021). The volume of supplies of Turkmen gas to Gazprom may approach 9 billion cubic meters by the end of 2021. Retrieved from http://www.newscentralasia.net/2021/06/23/obyom-postavok-turkmenskogo-gaza-gazpromu-mojet-priblizitsya-k-9-mlrd-kubometrov-k-kontsu-2021-goda/. Accessed on 05.10.2022.
Kremlin.ru (2003). President Vladimir Putin held talks with Turkmen President Saparmurat Niyazov who arrived in Russia for a visit. Retrieved from http://en.kremlin.ru/events/president/news/28450. Accessed on 03.01.2022.
Kuzmina E. (2012). Turkmenistan at the present stage: problems and development opportunities. Russia and the Muslim World. No: 9, 2012. pp.75-91.
Muhamedov R. (2021). Turkmenistan – Russia: breakthroughs and limits of cooperation. Retrieved from https://cabar.asia/ru/turkmenistan-rossiya-proryvy-i-predely-sotrudnichestva. Accessed on 03.01.2022.
Panfilova V. (2018). Russia will resume purchase of Turkmen gas, Retrieved from https://www.ng.ru/cis/2018-10-10/6_7329_turkmenia.html. Accessed on 03.01.2022.
Smrinov S. (2019). “Bubble” of gas happiness in Turkmenistan. Retrieved from https://www.ritmeurasia.org/news–2019-03-21–puzyr-gazovogo-schastja-turkmenii-41705. Accessed on 03.01.2022.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.