Russia 090417 Basic Political Developments

Turkmen Deal Puts Putin on Defense

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Turkmen Deal Puts Putin on Defense
17 April 2009

By Anatoly Medetsky / The Moscow Times

Prime Minister Vladimir Putin struck a conciliatory note in a dispute with Turkmenistan on Thursday, telling Russian energy officials to reach out to Central Asian gas suppliers just as Turkmenistan signed a tentative gas deal with Germany's RWE.

"We need to maintain close contacts and coordinate all our actions with our strategic partners. ... I mean Uzbekistan, Kazakhstan and Turkmenistan," Putin told Deputy Prime Minister Igor Sechin and Gazprom chief Alexei Miller at a meeting. "Please, don't forget about this work."

In addition to Turkmenistan, the comments appeared directed at Azerbaijan, which agreed to consider selling gas to Russia starting next year. Azeri President Ilham Aliyev was scheduled to arrive in Moscow for a two-day visit Thursday.

Turkmen President Gurbanguly Berdymukhammedov signed a memorandum of understanding with RWE chief Juergen Grossman on Thursday that could allow the company to develop the offshore oil and gas Block 23 in the Caspian Sea. The deal also raised the prospect for the company to export the gas, which could help the European Union to diversify its gas imports.

"There are number of possibilities, and one of them is to go via the Caspian Sea, which is the option we are working on," Grossman, referring to potential export routes, told reporters in the Turkmen capital, Ashgabat.

The undersea pipeline has yet to be built, a project that would require five littoral states, including Russia, to complete long-running talks on the division of the sea. If built, the pipeline would allow Central Asian gas to bypass Russia on its way to the EU and raise hope for Nabucco, another planned pipeline.

EU-backed Nabucco, where RWE is a partner, seeks to draw gas from Azerbaijan and other countries in the region. The project hasn't advanced far because of uncertainty about securing enough gas. Socar, the Azeri state oil company, agreed last month to talk about selling its gas to Gazprom starting next year.

Turkmenistan has been maneuvering between Russia, China and the West to win better terms for its gas. In a further sign of such diplomacy, Berdymukhammedov met Richard Boucher, the U.S. State Department's assistant secretary for South and Central Asian affairs, on Wednesday and said his country was open to "constructive cooperation" in areas like energy. Boucher said the United States would send a delegation to an Ashgabat gas conference on April 23 and 24, Interfax reported.

Sechin and Miller are also going, Sechin said at the meeting with Putin.

In other foreign contacts, Berdymikhammedov met with the chief of the Korean National Oil Corporation on Thursday to invite the company to invest in the energy sector.

"We will be glad if our Korean partners join in the implementation of large-scale national programs," Berdymukhammedov said.

Ashgabat last week blamed Moscow for a rupture in its pipeline to Russia, the only export route for Turkmen gas. The pipeline burst after Gazprom reduced intake at a notice that Turkmen Foreign Ministry said was too short. Prompted by a drop in demand, Gazprom and other Russian producers are also reducing production.

Russia's policy of securing as much Turkmen gas as possible is faulted because it allows Ashgabat to exert diplomatic pressure and force questionable commitments on Moscow, said Konstantin Simonov, chief of the National Energy Security Foundation, a think tank. The price of $340 per 1,000 cubic meters of Turkmen gas that Moscow paid in the first quarter of this year was too high, he said.

"The softer we appear, the harder things will be for us later," Simonov said.

Moscow and Ashgabat fail to agree over the Caspian Coastal Pipeline

April 15, 2009

  • Analysis by: GLG Expert Contributor

  • Analysis of: Russia, Turkmenistan put off gas agreement

  • Published at:


The leaders of Russia and Turkmenistan have been unable to agree on terms for the (re)construction of a Soviet-era gas pipeline in western Turkmenistan. While subsequent negotiations are not excluded, Ashgabat has declared its intent to allow companies other than Gazprom, including Western companies, to bid for the work. In the context of recent developments, a pattern begins to form that may signify the breaking of what is left of Russia’s hold on Central Asian gas transport, to which its relationship with Turkmenistan has been central in the post-Soviet era.


The Caspian Coastal Pipeline (CCP, also called by its Russian name the Prikaspii and sometimes, by erroneous translation, the pre-Caspian) is part of the western branch of the Central Asia-Center (CAC) pipeline, a spidery network inherited from the Soviet era of which the earliest branches date back to the late 1960s. The CAC’s eastern branch consists of four lines that run to various gas fields in southeast Turkmenistan. They pass northward through western Uzbekistan and then western Kazakhstan before crossing into European Russia. (Another spur originating in Uzbekistan proper shoots more directly northward through west-central Kazakhstan, crossing into European Russia’s southeastern extremity.) The CCP, which runs along the Caspian Sea coast in Turkmenistan and southwest Kazakhstan, is connected to gas fields in eastern Turkmenistan through a pipeline running from east to west across the southern expanse of the country. After reaching the eastern coast of the Caspian Sea, it turns north-northwest and traces the coastline passing west of the Garabogazkoel Gulf, an inlet of the Caspian Sea in northwest Turkmenistan, then northward into Kazakhstan before turning northeast to rejoin the CAC’s Russia-bound main trunk.

Constructed over a third of a century ago, the CCP is in such disrepair that it has reportedly carried only 2 billion cubic meters per year (bcm/y) since being re-opened in the middle of the current decade. Nearly all gas exported from Turkmenistan and Uzbekistan to Russia has taken the CAC’s eastern-branch route. In 2003, Turkmenistan’s then-president Saparmurat Niyazov proposed to Russia’s then-president Vladimir Putin that the CCP be refurbished and its volume expanded. Agreement was not reached until mid-May 2007, when Niyazov’s successor Gurbanguly Berdimuhamedow agreed with Putin and Kazakhstani president Nursultan Nazarbaev, and a declaration was signed to this effect. Kazakhstan’s participation was necessary because of the CCP’s transit through that country after leaving Turkmenistani territory before entering Russia. At the time, Putin foresaw the final agreement being signed in July 2007, with work beginning in the first half of 2008 and increasing the route’s capacity by at least 12 bcm/y by 2012.

It was only seven months later, in mid-December 2007, that a draft agreement for the CCP was signed among state officials of Russia, Turkmenistan, and Kazakhstan. According to it, the three main national trusts (respectively Gazprom, Turkmengaz, and KazMunaiGaz) would construct a pipeline to carry 30 bcm/y along the land route, of which the first stage of the project would foresee at least 10 bcm/y that Russia would commit to purchase. This would include an upgrade of the existing CCP where feasible and appropriate but joining the main CAC trunk at the Kazakhstan-Russia border rather than further south, as does the present line, and moreover construction of an offshore pipeline to carry an additional 10 bcm/y (which latter the Russian media have taken to calling the trans-Caspian gas pipeline in their English publications, as if to confuse it in readers minds with the undersea Turkmenistan-Azerbaijan pipeline project long under discussion but not yet agreed).

With the December 2007 agreement, the construction that Putin foresaw beginning in the first half of 2008 had already been pushed back to the second half of 2009. It was with a view toward agreeing terms for that construction to start, that planned meetings took place between the Russian and Turkmenistani sides at the end of March. It was expected, in line with previous agreements to agree, and especially given an early July 2008 Memorandum of Understanding over bilateral energy relations more generally, that Gazprom would be tasked to coordinate and execute the lion’s share of the work concerned. But that was all before world energy prices crashed, followed by world stock exchanges in the ongoing global financial crisis that has severely restricted the availability of investment capital even for such asset-laden firms as Gazprom, the stock price of which had dropped in Moscow from 14 in early July 2008 to just below 3 last week. Gas sales to Europe are off by between one-quarter and one-third. Russia’s energy ministry, which was reportedly projecting sales of gas to Europe at US$280 per thousand cubic meters (tcm) has revised that figure down by almost 10%, and this following an average price of over US$ 400/tcm in 2008. An effect of this would be that Russia is less dependent upon Turkmenistan’s gas than in the past and may have offered a lower price for it than Turkmenistan expected.

A contract from the Niyazov era gives Gazprom the right to buy up specified quantities out until 2028, although prices must always be negotiated. The last agreement, signed in September 2006, covered only the years 2007-2009, during which Russia’s entitlement had been set at 50 bcm at $100/tcm. Byr last year, the prices demanded by Ashgabat and paid by Moscow had exceeded $300/tcm, and the figure must now be renegotiated to take effect from   he from 2010. It is this price that Moscow apparently sought to lower in the t most recent unsuccessful talks held in Moscow at the end of March. Those talks were expected by observers in Moscow to end with agreement on the so-called East-West gas pipeline that runs across southern Turkmenistan from the eastern gas fields to the beginning of the CCP. Berdimuhamedow would have had good reason to doubt Gazprom’s ability to finish the original grand project as first conceived: the cost of the East-West pipeline alone was originally estimated to run to US$ 1.5 billion, and when Putin finally signed the authorizing Russian draft legislation over to the Duma late last year, the terms included only the construction of a 20 bcm/y refurbished overland CCP and omitted mention of the offshore parallel segment.

The original tripartite agreement among Turkmenistan, Kazakhstan, and Russia provided that each party would be responsible for conducting the work for the CCP on its own national territory. It was in this context, and taking into account Turkmenistans longstanding ties with Gazprom, that it was anticipated that Gazprom would get the nod from Ashgabat to execute the work planned. However, now that terms have not been agreed as anticipated (and it is possible that Gazprom was the party that declined), Turkmenistan now indicates that it will seek other bids for the pipeline work. Of course it is possible that this is merely a negotiating tactic designed to extract better conditions from the Russian side. But reports from Moscow suggest that Berdimuhamedow had begun to doubt Gazprom’s ability to complete the work in its new financial situation, and had therefore hesitated to allow Gazprom monopsonistic control of volumes of gas to be transported through the CCP; and the move presents Western companies the opportunity to bid for the work.

Already in November 2007 Berdimuhamedow visited Brussels on a three-day state visit during which he engaged the highest-level EU officials in intensive discussions over a wide range of issues. A year later, the German energy giant RWE embarked on a joint venture with Austria’s OMV to pursuse projects for bringing Caspian Sea region energy resources to Europe and began working with Turkmenistan in other energy-related industries such as the electricity sector. Ashgabat signed an agreement to begin supplying 10 bcm/y to Europe through interconnecting its sources to Azerbaijani offshor rigs. Together with the ground-breaking for construction of an agreed pipeline to from Turkmenistan to China and Berdimuhamedow’s continuing evocation of interest in a Turkmenistan-Afghanistan-Pakistan pipeline, pattern is forming for Russia’s grip on Central Asian gas to be at least significantly weakened. Such a development would naturally increase the quantities available for export to Europe through an eventual Trans-Caspian Gas Pipeline as part of the Nabucco project, or else through the White Stream project from Azerbaijan to Ukraine under the Black Sea, whence further westward also on to Europe.

Medvedev makes changes in composition of Council for Religious Orgs

MOSCOW, April 16 (Itar-Tass) - Russia's President Dmitry Medvedev has made changes in the composition of Council for Interaction with Religious Organizations, the Kremlin press service said Thursday.

More specifically, he introduced priest Igor Kovalevsky, the Secretary General of the Conference of Roman Catholic Bishops of Russia in the list of Council members.

By the same resolution, Medvedev withdrew Archbishop Tadeusz Kondrusiewicz from the Council.

Mosignor Kondrusiewicz, formerly the Roman Catholic Archbishop and Metropolitan of Moscow, currently holds the position of Archbishop of the Roman Catholic diocese of Minsk and Mogilyov.

Power abuse charge against Storchak dropped

MOSCOW, April 16 (Itar-Tass) -- Power abuse is missing from the new, final list of charges brought against Deputy Finance Minister Sergei Storchak, his lawyer, Andrei Romashev, told Itar-Tass on Thursday.

According to the lawyer, his client is facing charges under Article 30 and Article 159 of the Criminal Code (attempted fraud). Part 2 of Article 285 (power abuse) has been dropped.

Romashev added that he and his client had been forced to stop reading the case files in early December 2008, when more investigative procedures were ordered.

“The case files began to be read again a week ago. The charges have now taken a new shape,” the lawyer said.

The case consists of 80 volumes, so it will take the defendants and their lawyers a while to read them.

Sergei Storchak was detained on November 15, 2007.

On November 23 he was accused of an attempt at gross fraudulent embezzlement, committed by an organized group. The sum in question is 43.4 million dollars. The other figures in the same case are the general director of the Sodexim company, Viktor Zakharov, president and board of directors chairman of the Inter-Regional Investment Bank, Vadim Volkov, and a member of the bank’s board of directors, Igor Kruglyakov.

The investigators argue the accused formed an organized group with the aim of defrauding the federal budget on the excuse of compensating for costs allegedly sustained by the Sodexim company.

In 1994-1998 Storchak first led a section at the Finance Ministry’s foreign credits and foreign debt department and then was promoted to the department’s deputy chief. In 1998 he took the position of a deputy chairman at Russia’s foreign economic bank Vneshekonombank. Returned to the Finance Ministry in 2004 to take over the department of international financial relations, the state debt and state financial assets. Appointed as deputy finance minister in November 2005.

Armed clash with a group of militants occurred in Chechnya; there are no losses

GROZNY, April 17 (Itar-Tass) -- An armed clash with a group of militants occurred in a remote highland region; there are no losses.

As a source in the law enforcement bodies of the republic told ITAR-TASS on Friday, “on Thursdays’ morning, an armed clash with a group of militants occurred in a highland forest four kilometers to the north-west of the settlement Dai of the Shatoi region.” According to the source, artillery fire was opened on the place of their location, however, they managed to escape thanks to the fact that the region was difficult of access.

While examining the site of the incident, a base of militants was found. According to the source it was destroyed by explosion.

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