RFE/RL
July 8, 2008
Despite Lack Of Deals, Russia Touts Medvedev's Caspian Tour
By Bruce Pannier
Copyright (c) 2008. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036. www.rferl.org
On paper, Russian President Dmitry Medvedev returned home from last week's visit to the Caspian with little to show. However, the newly minted leader may have had success in promoting the future use of Russian export routes for Caspian energy resources.
From July 3 to July 6, Medvedev visited Azerbaijan, Turkmenistan, and Kazakhstan -- all key players in the strategies of Russian energy export companies. The visit by Medvedev, a former Gazprom chairman, was aimed at strengthening Moscow's regional influence -- and ensuring that Caspian oil and natural gas are exported via Russian pipelines.
"There is also a very important reason why the Russians are doing this, and that is that some have cast doubts [on] the ability of Gazprom to actually satisfy its customers when it comes to the amount of natural gas that Gazprom is able to produce and transport and deliver," Federico Bordonaro, an analyst for Milan-based equilibri.net, told RFE/RL. "And apparently, if they can have a more solid grip on Turkmen and Azeri gas, they will be able to avoid the risk of being able to count on only the Russian reserves and they will be more able to satisfy the conditions of the deals with their customers."
Medvedev did not sign any agreements on oil or gas exports. Yet his aides as well as some leaders of Russian energy companies portrayed his Caspian visit as a success for Russia's strategic interests.
In Baku, Medvedev was accompanied by Gazprom chief Aleksei Miller. One month earlier, Miller had offered to buy all of Azerbaijan's natural gas at market prices for export via Russian pipelines. The offer still stands but Azerbaijan has not yet responded. Nonetheless, Miller painted a bright picture, suggesting that there was progress when he told journalists, "Gazprom and Azerbaijani colleagues decided to start talks...on conditions for buying Azeri gas."
In 1993, Azerbaijan set an example for Caspian states when it agreed to the Baku-Tbilisi-Ceyhan (BTC) oil pipeline project. BTC's success showed officials in Baku as well as in Turkmenistan and Kazakhstan that energy exporting was possible without Russian participation.
China, for one, has increased its participation in energy export projects, financing the construction of an oil pipeline from Kazakhstan and a natural gas pipeline from Turkmenistan. The European Union is trying to follow China by negotiating with Azerbaijan, Turkmenistan, and Kazakhstan and offering to finance the construction of new export routes to Europe.
When Medvedev arrived in Turkmenistan, his second stop on the tour, Russian officials with him downplayed the potential of the visit. Turkmenistan has some of the world's largest deposits of natural gas and Gazprom chief Miller has been a frequent guest there this year. While in Ashgabat, Miller said Gazprom is "in the process of increasing the volume of deliveries of Turkmen gas," which will be "greater than last year."
The statement seems to denote success for the Russian company but, in actuality, Gazprom has contracts to purchase some 50 billion cubic meters of Turkmen annually and still has not quite reached that point yet. Turkmenistan is demanding market prices for its gas, instead of the $150 per 1,000 cubic meters it is receiving now, and for weeks the two sides have been unable to agree on what that price should be.
Russian presidential aide Sergei Prokhodko spoke to journalists in Turkmenistan about the EU's proposed future energy export route, the Nabucco pipeline project, which is seen as a rival to Gazprom's hold over Turkmen gas exports. Headlines in Russia's ITAR-TASS and Interfax news agencies both said, "Turkmenistan does not intend to participate in the construction of the Nabucco gas pipeline," and went on to attribute that announcement to Prikhodko. But Prikhodko's actual quote was, "We did not hear the word Nabucco spoken even once by our Turkmen colleagues."
The omission of the word Nabucco could just as easily be taken as traditional Turkmen hospitality that tries to avoid upsetting guests. It could also be noted that since China is funding the construction of the pipeline to bring gas from Turkmenistan to western China, Turkmen officials may simply assume the EU intends, through private European companies, to pay for the construction of the pipeline to bring Turkmen gas to the heart of Europe.
Prikhodko also said there would be an agreement on the price of gas with Turkmenistan before the end of this year, which is seemingly a sign of progress. However, since Gazprom sells Turkmen gas to Ukraine, the failure to conclude a deal with Turkmenistan complicates Gazprom's talks with Ukraine on a price for gas exports in 2009.
Medvedev's real success came in his advertising of Russian energy export routes.
Medvedev pointed out in Azerbaijan that the same pipeline that, until last year, brought Russian gas to Azerbaijan could just as easily bring Azerbaijani gas into the Gazprom export network. Analyst Bordonaro said such a deal would be advantageous to Gazprom and detrimental to other energy export projects.
"If Gazprom reenters more powerfully the Azeri gas market, it can then acquire more Azeri gas together with Turkmenistani gas and sell it wherever it wants," Bordonaro said. "And this could put another wedge into the Western strategy of building the Trans-Caspian pipeline and the Nabucco pipeline."
Medvedev carried a similar message to Turkmenistan and Kazakhstan.
For most of the 1990s, Turkmenistan's only export route for its gas was via Russian pipelines. Those pipelines still carry Turkmen gas, but Medvedev reminded Turkmen officials that another pipeline is already being built from Turkmenistan to Russia along the northeastern shore of the Caspian Sea.
Medvedev also told Turkmen officials that a new railway line being built could carry energy supplies and Turkmenistan could ship supplies from the country's port at Turkmenbashi City to Russian Caspian ports where it could be exported further west.