06:25 GMT +317 January 2018
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    Russia, rivals vying for Turkmen gas supplies

    Russia, rivals vying for Turkmen gas supplies

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    MOSCOW. (RIA Novosti commentator Dmitry Babich) - The inauguration of a natural gas pipeline from Turkmenistan to China was held on Monday.

    MOSCOW. (RIA Novosti commentator Dmitry Babich) - The inauguration of a natural gas pipeline from Turkmenistan to China was held on Monday.

    The leaders of China and most of the influential Central Asian countries attended the ceremony, except Iran; Russia, which is not a Central Asian nation, was not invited.

    A contentious atmosphere for the resources of the former Soviet republics, especially Turkmenistan, is brewing, with China seemingly on the inside track. Russia and Iran - given that they still wish to consolidate or at least preserve their positions - will have to pursue more flexible policies with regard to these newly independent states and by no means look down their noses at them.

    The new 7,000 km gas pipeline will carry mainly Turkmen gas to China across Uzbekistan and Kazakhstan. Its planned capacity is 40 billion cubic meters a year. Until recently, Gazprom accounted for a similar amount of Turkmen gas supplies (44 bcm), nearly monopolizing the purchase of Turkmen gas exports.

    Iran was the second largest customer for Turkmen gas, annually consuming a mere 5 billion cubic meters. It is easy to calculate that, in a worst-case scenario, China could take Russia's place as the largest exporter of Turkmenistan's gas. Yet, Russia still has time to try to reverse this possibility: the pipeline to China will not reach its target capacity of 40 bcm until 2012, while Iran's inflexible legislation and strained relations between Iran and the West (the United States and the EU) make Turkmen gas exports to Iran unattractive for Western companies. Therefore, this business is unlikely to grow fast.

    Turkmenistan began focusing on China as a trade partner in April, after an accident at the Central Asia-Center pipeline. Gas supplies to Russia were cut off by an explosion in a Turkmen section of the pipeline and never resumed.

    Turkmen authorities blamed Russia for what Foreign Minister Sergei Lavrov described as a "purely technological" incident, saying that Gazprom unilaterally cut the amount of gas withdrawn from the pipeline, which led to the accident. The Turkmen Foreign Ministry said Gazprom broke its contract obligations. Even though Turkmenistan admitted that Gazprom had notified it before cutting imports, they claimed the notification was not in accordance with the contractually-established procedure.

    At this point, what really caused the explosion in the Dovletobad-Deryalyk gas link, is only of secondary importance. What is important is that the incident caused an outburst of popular Turkmen rhetoric calling for a "reduction of dependence on the Russian monopoly."

    Plans to divert exports to China instead of Russia, which were not forgotten during the Turkmenbashi (President Saparmurat Niyazov, 1991-2006) regime, or later as a more concerted effort was pursued in the spring and summer of 2009. China saw an opportunity and responded by issuing Turkmenistan a $4 billion loan with perfect timing in June 2009, when Turkmenistan was in the direst straits due to tensions with Gazprom.

    Chinese President Hu Jintao, who arrived to inaugurate the pipeline, emphasized that the loan had to be primarily channeled into the development of the country's largest gas field, South Eleten.

    It should be noted that at the beginning of this year Gazprom bought Turkmen gas at the exorbitant price of $375 per 1,000 cubic meters. Russia was selling gas to Europe at $280 at the time, which meant that Gazprom was operating at a loss.

    Mikhail Krutikhin, a partner in Moscow's RusEnergy Consulting, said the reason for the friction was rivalry between South Stream and Nabucco, which Turkmenistan's Western partners actively promoted and proposed to Turkmenistan, Azerbaijan and Turkey as an alternative to the Russia-backed project.

    "Gazprom offered Turkmenistan a high price in a desperate attempt to divert its gas from Nabucco. Later, however, Gazprom was compelled to stop the unprofitable acquisitions," Krutikhin said in an interview with the RIA Novosti commentator. "Turkmenistan interpreted that as a breach of a business contract and justifiably took offence. China immediately grasped at the opportunity, as that country had been long pursuing a very measured and determined policy in the region. China is taking its time, waiting for Central Asian gas suppliers to come of their own accord."

    President Dmitry Medvedev must certainly have something to offer Turkmenistan, as he is now dealing with the problem directly. He has recently received Turkmen President Gurbanguly Berdymukhamedov in his Zavidovo residence and will visit Turkmenistan later this month.

    The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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