Gazprom's debt to Turkmenistan for gas supplies undermines image of Russia's monopoly

Gazprom's debt to Turkmenistan for gas supplies undermines image of Russia's monopoly

Ashgabat, Turkmenistan, July 9

By Huseyn Hasanov- Trend:

The relations of old strategic partners in the gas sector - Russia and Turkmenistan are going through hard times.

Gazprom OJSC has not paid Turkmenistan for the gas supplies since early 2015. This greatly undermines the image of the Russian gas monopolist, especially, if we take into account that the Gazprom's top managers refuse to make any comments.

At the same time, the Ministry of Petroleum and Mineral Resources of Turkmenistan has recently stated that the Russian Gazprom company has become insolvent on natural gas sale and purchase contracts in connection with the ongoing global economic crisis and Western countries' economic sanctions against Russia.

According to the information obtained from Ashgabat, Gazprom has not paid off its debts to the Turkmengaz State Corporation for the delivered natural gas volumes since early 2015. It should be recalled that earlier Ashgabat called Gazprom's decision to reduce the volumes of Turkmen gas purchased in 2015 from 11 to 4 billion cubic meters a year as "unreasonable" because this greatly affected the revenues of the budget approved by the Central Asian country.

Turkmenistan is one of the key players on the energy market of the Caspian region and Central Asia. At this stage, it is trying to make up the current loss of the state treasury by increasing gas supplies to neighboring Iran and China. One way or another, the data on the ongoing negotiations are scarce.

The fact that Turkmenistan has chosen a policy to diversify its economy by expanding its oil and gas industry by increasing production of deep processing of natural gas at the expense of foreign credits also deserves attention.

Russia has the opportunity to receive Turkmen gas via pipeline Central Asia-Center (CAC- which runs through Uzbekistan and Kazakhstan). This pipeline was commissioned in the late sixties with a capacity of up to 80 billion cubic meters per year. Over time, the capacity of the pipeline has decreased, estimated to 40-50 billion cubic meters per year, the reconstruction is required.

Russia gets Turkmen gas via the Central Asia - Center pipeline, transited through Uzbekistan and Kazakhstan. Gazprom acts as a buyer. It signed an agreement on gas supplies with Turkmenistan for 25 years in 2003. At this stage, the Central Asia - Center pipeline does not fully operate. Russia temporarily stopped importing Turkmen gas because of the breakdown in April 2009. The technical issues were resolved. Under the influence of the global recession, Russia has reduced purchases to 10-11 billion cubic meters of gas since 2010, which is four times less than earlier.

Gazprom said in September 2013 that it expected reconsideration of terms, as the Turkmen gas purchase price was determined at the peak of the rise in European prices. Then the price on Gazprom gas sale to Europe was changed.

In 2012, the opportunity to supply Russia with raw materials not only from the eastern fields of Turkmenistan, but also from the western ones emerged - with the construction of a connecting line from the coast of the Caspian Sea, where the Malaysian Petronas is able to start the industrial production of gas at the offshore block of the Turkmen part of the Caspian Sea.

Edited by CN

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