Pipeline Politics in Central Asia

Frédérick Maranda-Bouchard Analysis, Conflict & Security, Russia & FSU

Turkmenistan might be well known for the eccentricity of its leader: whether it is Saparmyrat Nyỳazow Türkmenbașy’s statue of himself that rotates according to the position of the sun or his successor Gurbanguly Berdimuhamedow Arkadag’s habit of breaking into song. However, observers should note that the country, despite the media pleasantries, plays a serious role at the poker table that is being played out in the region, particularly over pipeline politics.

It is important that we do not underestimate the hand that holds the “independent, neutral Turkmenistan” card, as described by its own national anthem. The country is home to vast reserves of natural resources, the main one being natural gas. According to the Observatory of Economic Complexity, 75% of Turkmenistan’s exports are petroleum gas. The reserves in the Karakum are so extensive that a large tourist destination of the desert, the Darvaza’s “door to hell”, is a pocket of gas that has been burning for now almost 50 years.

Fossil fuel exploitation and how to manage the profits derived from it can be a source of great debate in any country, as we have seen recently in Canada. But as a domestic issue, however, these debates are of little or no concern to the global economy. Where the issue of fossil fuel exportation becomes an acute issue for the international community (and here it is of specific concern for Turkmen gas) is not when it is traded as a product for consumption but as a vector of trade. The trading of Turkmen gas has evolved into a threat to national security; the national security of the Russian Federation and its power position.

Gazprom, the Russian natural gas company, has been described extensively as having a monopoly on gas exportation to Europe. This monopoly has been used as an instrument of coercion by the Russian government. Russia, on its end, has not been producing all of the gas it was exporting. Gazprom purchases Turkmen gas, adding it to its own supply, and resells it to Europe. The amount of Turkmen gas being supplements has been getting lower every year, ultimately leading to the end of this practice in 2016. In a world like ours where Russia is attempting to regain control over the region of Central Asia, this proved to be a grave mistake on the Russian part.

Meanwhile, Turkmenistan has diversified its economic partners, virtually breaking its dependence on Russia. As of this article, China has now become the destination of most of the Turkmen gas. However, more importantly, a long-standing project linking Turkmen pipelines to the European market is being fast-tracked. This project has the potential to completely exclude Russia. Instead, the pipeline would connect the East-West Pipeline ending at the coast of the Caspian Sea to other pipelines through the Caucasus, Anatolia, and, finally, Eastern Europe. This project, at completion, would allow 40 billion cubic meters of Turkmen gas to reach Europe through that pipeline. Further added to the 10 billion cubic meters from Azerbaijan, it represents 25% of the total Russian exports to Europe in the record year that was 2018.

This pipeline, by itself, will not break European dependence on Russia, but it will inflict a serious wound to its monopoly. Russia’s trade tactics is composed mostly of coercing individual players in Europe instead of the continent as a whole for obvious reasons: While the continent needs this gas to fuel their economies, Russia cannot afford the $12.9B hole in its budget that a complete stop of export of natural gas to Europe would mean. This is why applying pressure on individual governments has proven to be far more effective for the Federation. However, Turkmenistan, as a competitor that has only 7% of its trade with Russia and that can sustain as much as 25% of the European market, is therefore harder to coerce and can cause big problems for Russia.

Despite this, the game is not yet played out for Russia. While Turkmenistan was able to develop alternative partners to Russia for its natural gas, their revenues were still impacted from the loss of such advantageous pricing. This might be the reason why Turkmen officials opened the idea of having Turkmen natural gas running through Russia again. This would be a profitable arrangement for both countries. Russia needs to have the Turkmen gas going through its territory in order to coerce European countries. While it is not proven nor there is any sign that Turkmenistan would side with Russia and stop exports to that country, if Russia simply stops the pipeline and compensate Turkmenistan, there is no reason to think that Turkmenistan would go further than symbolic objections. At the same time, Turkmenistan could have a more stable path to Europe than the pipeline that is supposed to be built through the Caspian. The project is unsure to say the least and has fueled anger from not only Russia but also Iran, Turkmenistan’s neighbour.

Furthermore, the Central Asian state may hold the fourth largest proven reserve of natural gas worldwide, their economy based on this product needs stability after losing not only Russia but also Iran as clients for the official reason of “non-payment of dues”. Whether that reason is true or not, the problem is still present. If the non-payments are real, it means that Turkmenistan has no power to enforce its trading agreements. Meanwhile, if the reason is other, such as structural problems that makes the industry unreliable, it shows that the country needs help to export their resources. Fixing those problems most probably will need investments in the infrastructure of the sector and export of natural gas is the prime source of revenues.

In a region where a struggle for supremacy is being played out between the great powers and that faces what some call the ‘New Great Game’, we is only Russia lending a hand to Ashgabat? This is not an issue of expanding Russia’s sphere of influence. Turkmenistan, by its own credible claims to neutrality, has shown an acute lack of interest in that scenario. What is at play here is the elimination of a competitor’s bargaining power. Either China or the United States helping to develop infrastructure that allow Turkmen gas to cross the Caspian Sea would weaken the Russian hand on the international level. Meanwhile, Moscow needs to secure Turkmen gas transit through its territory, even if it means to built infrastructure in Turkmenistan and Kazakhstan since the transit of that resource through their territory allows them to keep a powerful advantage over Europe.

Frédérick Maranda-Bouchard is a Political Analyst for Central Asia at the Canadian Centre for Strategic Studies. He is currently in the process of getting a Bachelor of Arts, Honours in Political Science from Concordia University. He intends to continue into post-graduate education in Political Sciences, more specifically in International Relations. Ultimately, he hopes to obtain a doctor’s degree in International Relations and start a professorial career.