Will Moscow obstruct Azerbaijani-Turkish-Turkmen gas project?
Expert views on Caliber.Az

INTERVIEWS  20 December 2022 - 16:17

During the recent summit of heads of states of Türkiye, Azerbaijan and Turkmenistan held in the Turkmen “Avaz” resort, the issue of forming a trans-Caspian infrastructure that would allow for the transfer of Turkmen gas directly to Azerbaijan (bypassing the Iranian swap) and further west was discussed. Certainly, the agreements reached at the trilateral summit strengthen the comprehensive cooperation between the states of the Turkic world, especially in the field of energy. The prospects here are huge - the supply of Turkmen gas through Azerbaijan and Türkiye to Europe can significantly change the global geo-energy situation and the principles of the existing gas partnership, where Türkiye and Azerbaijan could become the main suppliers of gas to Europe.

The parties signed the “Interdepartmental Memorandum of Understanding on the Development of Energy Cooperation”. As Turkish Foreign Minister Mevlut Cavusoglu said after the summit, a working group for the cooperation on the supply of Turkmen natural gas supply will also be formed.

The idea of transiting Turkmen gas to Europe is not a new topic and has been, in fact, discussed on various international economic platforms over the years. One of the major stumbling blocks of the project until recently was Russia, which opposed the construction of the Trans-Caspian Pipeline seemingly for environmental reasons, which was to become the main link of transit of Turkmen gas to the other side of the Caspian Sea by the most optimal route. The fears of our northern neighbor are understandable - it does not want competitors, but Europe’s unwillingness to cooperate with Russia as its major gas supplier and the imposed sanctions against the backdrop of the military action in Ukraine are leaving their mark on the economic agenda. Nevertheless, frustrated voices could be, once again, heard in Russia immediately after the summit in Turkmenistan.

Aleksandr Bashkin, a member of Russia’s Federation Council said that Russia will not allow the construction of the “Trans-Caspian Gas Pipeline” from Turkmenistan to Azerbaijan. The senator published an article in the Astrakhan edition of Ast-News.

"The prospects for the construction of the 'Trans-Caspian Gas Pipeline' from Turkmenistan to Baku have again been discussed due to the deterioration of the energy situation in Europe caused by the Western anti-Russian sanctions, with “some Western experts joyfully rubbing their hands, saying that this is the key to freeing Europe from the so-called dependence on Russian gas”, Bashkin wrote.

“I think these specialists are, in vain, wasting energy, which is so scarce in European countries, on such assurances”, the senator basically joked.

According to him, all “Caspian Five” states have to give their consent to the implementation of projects that are sensitive to the Sea’s environmental safety, as written in the document on the status of the Caspian Sea.

“Due to the possible threat to the ecological safety of the Caspian Sea represented by the underwater part of the gas pipeline, Russia will not be able to consent to its construction”, Pashkin categorically said, further adding, that changes to the gas flow pattern in the Eurasian continent could add to potentially bring the entire gas market and, above all, the pricing mechanism out of balance.

What are the prospects of a gas breakthrough for the three Turkic states? Can Russia prevent the gas cooperation between Azerbaijan, Türkiye and Turkmenistan today? Caliber.Az asked Russian energy experts.

According to Stanislav Tkachenko, a professor at Saint Petersburg State University, the main question that remains unanswered is the real reserves of Turkmen gas and the prospects of its delivery to foreign markets. Turkmenistan, having the world’s fourth largest gas reserves (19.5 trillion m³), is increasing its production very slowly (83 billion m³ in 2021). Today, Turkmen gas helps solve local problems for the world economy, and supplies western regions of China and partially - neighbouring states in Central Asia.

In order to influence the world gas market as a whole, gas from Turkmenistan must be directed to other regions, especially Europe and South Asia. But for a variety of reasons, both technological and geoeconomic, this is not happening.

“I have not heard open negative assessments of Moscow’s position on the issue of counteracting the transit of Turkmen gas through other routes, neither from authoritative experts nor from Russian officials. Indeed, relations between Russia and Turkmenistan suffered many tests at the turn of two centuries, when Turkmenistan actively tried to use the Russian pipeline system to export its gas to Ukraine and further to Europe. The Russian Gazprom, for the sake of maintaining its de-facto monopoly positions in these two markets through all means, opposed Turkmenistan, and eventually managed to close the markets for Ashgabat. Therefore, any attempts to violate the status-quo favourable for Moscow causes some discontent”, the expert said.

But, in his view, Russia has a surplus of gas on the domestic market today due to EU sanctions, and Russian companies are using every opportunity to maintain export volumes. Therefore, Moscow willingly expands cooperation in some areas (production and export of LNG, participation in the construction of the Turkish gas hub) and withdraws from others (gas exports via pipelines to Europe).

“I think that many people in Moscow are calming themselves with the fact that in the next decade, it will not be possible to implement plans to supply Turkmen gas to Europe via the bottom of the Caspian Sea and through countries of the South Caucasus or through the territory of Iran. Cooperation between Russia and Turkmenistan on the supply of Turkmen gas to the Central Asian states (Uzbekistan, Kazakhstan), as well as to the border regions of the Russian South, is the most promising in this situation. As for cooperation with Azerbaijan and Türkiye, the gas hub project in the west of Türkiye will provide the governments and energy companies of the three states with work for many years”, said Tkachenko.

At the same time, Stanislav Mitrakhovich, the leading expert of the National Energy Security Fund and the Financial University under the Russian government, said that the trans-Caspian pipeline was announced long ago and there were times when it was said that its construction was about to begin.

According to the expert, Russia was truly opposed to the supply of Turkmen gas to Europe which is obvious, and then China voiced its opposition to such cooperation, which was not liking the idea of Turkmenistan finding another buyer. This gives the Turkmens the opportunity to raise the price ceiling and more maneuvers in selling their gas to the Chinese. But times are changing.

“There was an initiative of the Turkish hub, which suggests that the Russian gas will be sold to Europe anonymously as “gas from a hub”. Perhaps, European buyers would be more willing to accept such an option, where the gas would not be branded at all seeing as it is not known from where the molecules came - molecules from Azerbaijan’s, Israel’s, Egypt’s or Turkmen’s “blue fuel”, the expert said.

Therefore, in his opinion, Russia’s position and attitude to the transportation of Turkmen gas to the Turkish hub may become softer than before, because the Russian side itself is interested in the Turkish hub in the current situation.

“In addition to the trans-Caspian gas pipeline, there are other options, for example, through swap operations, which are, simply put, gas exchange operations: the transportation of Turkmen gas to Iran, and from there to Azerbaijan and further to Türkiye and Europe. Azerbaijan already has such experience - Turkmenistan now supplies 1.5-2 billion m³ of gas to Iran, and it transfers the same volumes to Azerbaijan. And this structure can be developed without building a pipeline on the bottom of the Caspian Sea”, the Russian expert said.

According to Mitrakhovich, Russia-Azerbaijan relations are now multifaceted.

“On the one hand, the Russian foreign ministry recently expressed its doubt that Azerbaijan should send electric power equipment to Ukraine, on the other hand, Gazprom” supplies its gas to Azerbaijan for domestic consumption and thus Baku has new opportunities to export its own gas. That is, there is particular cooperation and understanding. And thus, Russia can for example also deliver its gas by swap systems to Azerbaijan, and Azerbaijan - to Türkiye, well, and further on the TANAP-TAP system to Europe” the expert said.

This scenario is feasible given that there are plans to increase the capacity of the TANAP-TAP system with the help of new compresses or the construction of a new pipe altogether. Then Russia will be able to supply even more of its gas to the Turkish hub, taking into account, of course, one condition - if Europe agrees to buy Russian gas under the provisional “gas from the hub” name.

“In this sense, I see the dynamics of Russia with regard to projects such as the trans-Caspian as a subject of Turkmen gas. It - this attitude - will be much softer or even positive”, Mitrakhovich concluded.

Caliber.Az