Will Turkmenistan and Russia resume gas trade?

Ashgabat, Turkmenistan, July 31

By Huseyn Hasanov – Trend:

Turkmenistan and Russia may start this autumn the negotiations on the resumption of the gas cooperation, interrupted in January 2016, Russian media quoted Deputy Minister of Energy of the Russian Federation Anatoly Yanovsky as saying.

"I think the talks can be held in the autumn. The pause [in gas purchases from Turkmenistan] until the end of the year is made for commercial reasons," TASS quoted the official as saying.

Russia and Turkmenistan are the main suppliers of natural gas to the world markets among the CIS countries, but this fact did not prevent them from cooperating in fuel and energy for many years, and this was a strategic direction of activity. Russia used to receive the Turkmen gas in order to re-export it via the Central Asia-Center (CAC) gas pipeline passing through Uzbekistan and Kazakhstan, which appeared to be under the monopoly of Russia's Gazprom after the collapse of the USSR.

However, Gazprom Export LLC notified the Turkmengas State Concern of the early termination - starting from January 1, 2016 - of the 25-year contract on the sale of gas, signed in 2003. Gazprom was the largest buyer of the Turkmen natural gas until 2009, buying up to 40-42 billion cubic meters of the natural gas.

Russia was interested in purchasing cheap Turkmen gas at that time, as it received significant dividends by reselling it to the CIS and European countries.

The Turkmen side starting from 2009, gradually came to a decision to sell natural gas at reasonable prices in the world market. Gazprom Export LLC sharply reduced the volume of the received Turkmen natural gas in April of the same year, which led, as noted by Ashgabat, to an explosion on the CAC gas pipeline, and the supply of the Turkmen gas was suspended and resumed only in early 2010, but in much smaller volumes.

Despite the contractual arrangements, the volume was decreased at first to the level of 10-11 billion cubic meters per year for a period of five years, and the annual volume decreased by more than two and a half times in 2015. Russia explained the reduction in purchases by the decrease in demand for the Russian gas in Europe and Ukraine. The price of the Turkmen gas ceased to suit the Russian side due to the fall in gas export prices to Europe, tied to the constantly falling oil prices.

At the same time, Turkmengas noted its readiness to negotiate with Gazprom Export on a wide range of issues related to economic relations in early January 2016 after the termination of gas purchase by Russia.

“The Turkmen enterprises continue to cooperate with foreign companies in the supply of natural gas based on the understanding that mutual interest and mutual benefit are the fundamental principles of partnership, as well as taking into account that these important components of cooperation in the gas sector largely depend on the financial and economic situation in the world," Turkmengas had said in a press release.

It was reported in September 2016 that Gazprom agreed with Turkmengas on a two-year pause in the procurement of the Turkmen gas. At the same time, the gas pipelines of CAC could potentially be used for natural gas supplies from Turkmenistan to Eastern Europe and CIS, the TDH agency wrote in its comments after the Energy Charter Forum, which was held in Ashgabat on May 30-31, 2017.

"The CAC system of main gas pipelines can potentially be used for the supply of natural gas from Turkmenistan to Eastern Europe and the CIS countries in case of applying the fundamental principles of the Energy Charter Treaty and reaching certain agreements with transit countries," the TDH message said.

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