Other reasons for Gazprom not paying debts to Turkmenistan, expert says

Oil&Gas Materials 14 July 2015 12:28 (UTC +04:00)
Russia's Gazprom has yet to pay its gas debts to Turkmenistan, which have been left since early 2015.
Other reasons for Gazprom not paying debts to Turkmenistan, expert says

Baku, Azerbaijan, July 14

By Aygun Badalova - Trend:

Russia's Gazprom has yet to pay its gas debts to Turkmenistan, which have been left since early 2015.

While Turkmen side says Gazprom has become insolvent on its contracts for sale and purchase of natural gas due to the ongoing world economic crisis and the economic sanctions imposed on Russia by the West, an expert on Central Asia, Bruce Pannier believes the problem is somewhere else.

"Gazprom announced late last year it would only purchase some 4 billion cubic meters (bcm) of gas from Turkmenistan. Some Russian media reported Gazprom might owe some $400 million for Turkmen gas so far this year but Gazprom surely has that much money," Pannier told Trend.

Gazprom JSC hasn't paid its debts to Turkmengaz state concern for the supplied gas since early 2015, according to Turkmenistan 's Ministry of Oil and Gas Industry and Mineral Resources.

Pannier agrees that the sanctions and economic situation in Russia are definitely having an effect on Gazprom, and of course the reduced price of oil, and following that the reduction in the price of gas, is what is hurting Gazprom the most.

Just a little more than one year ago Gazprom was figuring prices at somewhere around $400 per 1,000 cubic meters but now it nearly half that, he added.

"The insolvency claim came from Turkmenistan's Oil and Gas Ministry on July 8 and was based on what the ministry said was Gazprom's failure to pay any of its bill to Turkmenistan for gas supplies shipped so far in 2015," Pannier said. "Turkmenistan altered its statement on July 11 to say Gazprom had not paid "all of its bill." But in both cases Turkmenistan did not mention how much Gazprom owed or how much gas Turkmenistan had shipped to Russia."

He also stressed that Russian-Turkmen gas ties have been bad since 2009.

"In 2008, Russia promised to pay "European prices" for Central Asian gas (from Turkmenistan, Uzbekistan and Kazakhstan) but shortly after that a dispute broke out between Russia and Turkmenistan about how much "European prices" amounted to. In the midst of negotiations over price there was an explosion along the gas pipeline connecting Turkmenistan to Russia in April 2009, which the Turkmen government blamed on Russian sabotage," Pannier said.

The result, he said, was that Turkmenistan was not selling any gas to Russia until the pipeline was repaired and after it was repaired Russia started to decrease the amount of gas it purchased from Turkmenistan.

That amount had already dropped to some 11 bcm before the announcement last year that Gazprom would only purchase some 4 bcm in 2015.

"Turkmenistan naturally feels Russia has broken several contracts since 2009, so this latest claim of unpaid bills and insolvency is likely, to some extent, revenge on the part of the Turkmenistan," Pannier added.

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.

The annual volumes dropped by 2.5 times in 2015 and stood at 4 billion cubic meters.