Turkmenistan’s Pipeline Politics: Turkey, Iran, and Others Shiver Together

There have been stories this past week or so about the severe winter and  gas shortages  in Iran, and their resulting cut in supplies to  Turkey.  The Iranian domestic shortage was supposed to be made up from  Turkmenistan.  Unfortunately the shortfall from Iran to Turkey was supposed to be made up by increased supplies  from Russia, but those also are falling short.  As noted by The Oil Drum:

“…This is similar to a year ago we saw some of the same discussion about supplies from Turkmenistan, through Russia, to Europe, with shortfalls and price increases – particularly relating to the gas supplies to  Ukraine,  through which the pipelines flow. At the end of that discussion the Turkmen got an increase in the price of their gas. It is therefore not surprising to see that Turkmenistan is seeking to double the price  it gets from Iran.

 All of this does not leave a warm and fuzzy feeling about future gas supplies that rely on Russian and Turkmen sources. The concern gets a little deeper when one notes that  Kazakhstan  wants to raise transit prices and that  Uzbekistan  also wants a raise, perhaps similar to the 30% increase that the Turkmen just got from Gazprom.

This is all happening as the  Chinese  get ready to invest another $2.2 billion in a pipeline from Turkmenistan to China. The line will carry 30 billion cubic meters per year, and start flowing next year.

…We are … entering a time of sobering reality, where transient breaks in gas supplies will transition from the odd week without for remote villages in Iran, to larger outages in more visible parts of the world. Turkey’s current scramble to find alternate supplies will, in time, be matched by others across Europe. Needs for natural gas can only be expected to increase.

And, as Energy Daily cogently points out Turkmenistan’s recent “pipeline politics” had an immediate impact far beyond Iran:

“…After the cutoff, Iran reduced its gas exports to Turkey by 75 percent, from 20 million to 5 million cu m, as inclement weather hiked domestic demand and gas distribution to some Iranian cities was disrupted. Turkey is Iran’s sole export market for natural gas, but the relationship has not been smooth. In January 2006 Iran halved its supplies of natural gas to Turkey to around 7 million cubic feet per day, citing climactic conditions and increased domestic need, while in December 2006 it temporarily shut off supplies completely.

On Jan. 8, Iran stopped all natural gas exports to Turkey as worsening weather boosted domestic demand, forcing Ankara to use as much as a third of its stored fuel. The following day, Turkey halted the flow of Azeri gas to Greece because of the suspension of gas supplies from Iran. Adding to Turkish anxieties, Russia, Turkey’s other main supplier of natural gas, also reduced exports, citing severe weather.

Energy-poor Turkey imports almost all its natural gas from Russia and Iran, which powers half of its power generating stations. As Turkey’s economy has expanded, gas consumption has risen accordingly. This winter’s usage has soared to as much as 140 million cu m, a 17-percent increase over the previous year.

…The dispute may also have its origin in additional fiscal disputes between Tehran and Ashgabat; in December the Fars news agency quoted a knowledgeable official who said Turkmenistan had defaulted on a $170 million debt that it owed Iran for construction of the friendship dam, proposing to cover the outstanding amount by exporting water to Iran instead.

Despite inclement weather and technical problems, the explanation may be simpler, that Turkmen President Gurbanguly Berdymukhammedov is simply playing by the Gazprom playbook of charging customers rates that they can (barely) bear. After all, in the last 18 months, Ashgabat has managed to force Gazprom to raise its price for Turkmen gas from a paltry $65 per 1,000 cu m to a current rate of $130, which will soar to $150 by year’s end. Berdymukhammedov may simply be reprising his tough bargaining position for leverage against Iran. In a world of $100-per-barrel oil, doubtless Ashgabat feels its consumers are getting a bargain, however much they complain, and if they don’t like the post-Soviet market realities, they can always shop elsewhere.”

This entry was posted on Tuesday, January 15th, 2008 at 11:43 am and is filed under Gazprom, Iran, Russia, Turkey, Turkmenistan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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