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russian gazprom might resume turkmen gas imports

Russian Gazprom Might Resume Turkmen Gas Imports

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Aug 3, 2018

Russia’s state-owned Gazprom may resume negotiations with Turkmenistan regarding gas imports this Fall, according to Russia’s Deputy Energy Minister Anatoly Yanovsky. Yanovsky asserted since early 2016 that Russia would not import Turkmen gas until the end of 2019. While Deputy Chairperson of Gazprom Aleksandr Medvedev did not rule out the possibility of resuming the contract to purchase Turkmen gas, he also stated that Gazprom has reason to rescind it. Gazprom halted Turkmen gas imports in January 2016, marking what seemed like the final straw of the corroded relationship between Ashgabat and Moscow. Turkmenistan’s state gas company Turkmengaz was the first to report that Gazprom had suspended gas purchases, citing the evolving international gas market along with economic and financial issues within Gazprom Export for the cause of the decision. The strained relationship followed a 2007 agreement to construct a pipeline along the Caspian Sea’s shoreline through Kazakhstan and Russia; it fell through in 2009. Tensions between Russia and Turkmenistan rose when an unexplained explosion occurred along the Central Asia-Center pipeline network and both sides placed blame on the other. Two days after the explosion, Gazprom asked Turkmenistan to decrease imports by 90 percent, and price negotiations followed for nine months thereafter. Ashgabat struck a deal with Gazprom where approximately 30 billion cubic meters (bcm) of gas would be delivered by 2028. When gas supply resumed in 2010, Turkmenistan ended up exporting only 9.68 bcm to Russia — half of the amount before the pipeline explosion. Turkmen gas remained unattractive to Gazprom in the coming years as multiple Russian gas fields opened, including the Yamal Peninsula deposit which projected to output 15 bcm in 2011. Since then, imports of Turkmen gas steadily decreased, until the announcement in 2016 that all imports would come to a halt. Yanovsky announced in February of this year that Russia would not purchase any Turkmen gas until the end of 2019. Since Russia stopped buying Turkmen gas in 2016, followed by Iran, Turkmenistan has heavily relied on China as a customer, struggling to diversify its export routes and partners. Russia may be changing their policy toward Turkmenistan in order to open up the possibility of future negotiations between the two states. The fate of a trans-Caspian pipeline, which may be determined next week at the Summit of the Heads of State of the Caspian Littoral States, will influence how much leverage Turkmenistan will have in future talks with Russia. At the summit, the draft convention on the legal status of the Caspian Sea will be discussed. The draft contains a provision allowing pipelines and cables to be laid beneath the Caspian Sea. Approval of this provision would allow Turkmenistan to partner with Azerbaijan to construct a trans-Caspian pipeline — ultimately making Turkmenistan a viable competitor to Russia for European gas markets.

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