Russia enters pipeline accord with Central Asian countries

U.S. hopes of direct natural gas export to Europe dashed

May 13, 2007|By New York Times News Service

ALMATY, Kazakhstan -- President Vladimir V. Putin of Russia brokered an agreement yesterday with two Central Asian countries to build a new gas pipeline to Russia, delivering a major setback to continuing American efforts to send Central Asian natural gas exports directly to Europe.

The presidents of Russia, Turkmenistan and Kazakhstan agreed to build a new pipeline around the Caspian Sea, giving Russia significantly more control over much of Central Asia's massive natural gas reserves.

Russia has its own bounty of natural gas, but the country's gas monopoly, Gazprom, has preferred to distribute subsidized domestic gas internally while reselling Central Asian gas to Europe at prices that are typically more than double what it is charged.

U.S. lobby

U.S. officials have aggressively courted the rulers of Central Asia, which hangs like a balloon under Russia's southern rim. In a visit to Kazakhstan last summer, Vice President Dick Cheney lobbied for new energy routes that bypass Russia, calling Russia's wielding of its energy supplies "tools for intimidation and blackmail."

With yesterday's agreement to build a new natural gas pipeline, "technological, legal and ecological risks are so big that it will be impossible to find an investor" for a U.S.-promoted trans-Caspian pipeline "unless it is a political investor who does not care how much gas there is to pump through," said Viktor Khristenko, Russia's energy minister, at a news conference in Turkmenbasy, Turkmenistan.

Turkmenbasy, on the Caspian coast, is playing host to the summit meeting on energy issues among Russia, Turkmenistan and Kazakhstan.

The presidents agreed to sign a formal treaty in September to build the pipeline, which is expected to run along the Caspian shore from Turkmenistan through Kazakhstan, with a goal of delivering 10 billion cubic feet of natural gas per year to Russia's existing gas delivery grid within three years.

Russia pays Turkmenistan $100 per cubic meter of gas and subsequently resells it to European customers for $250 per cubic meter. Planned improvements to existing gas pipelines and expanded natural gas exports from Kazakhstan are expected to enable Russia to substantially increase its total delivery of Central Asian gas to more than 90 billion cubic meters per year.

Also speaking at the summit, the newly installed president of Turkmenistan, Gurbanguly Berdymukhammedov, left open the possibility that a U.S.-supported pipeline might still get constructed, along with potential pipeline projects to Iran, China, Afghanistan, India and Pakistan.

However, few gas industry analysts say they predict the construction of alternative pipelines of any significant capacity in the near future.

Pipeline politics

The politics of pipelines in Central Asia are often hotly contested, a digestion of complicated and competing national interests from powerful countries like China, Russia and the United States.

This pipeline deal, while not viewed as preordained, had been anticipated for some time.

"It was expected that some deal would be reached," said Per Einar Rettedal, the Kazakhstan manager for Statoil, the Norwegian oil company.

"I do not think this is a big surprise to anybody that Russia's Gazprom is getting what it wants, to be the one to sell Turkmen gas to Europe."

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