Turkmen Cutoff Of Iran Leaves Dwindling Gas Options For Ashgabat
It looks like Turkmenistan might be left with just one customer for its natural gas.
The National Iranian Gas Company (NIGC) said in a statement on January 1 that Turkmen state company Turkmengaz “suddenly and…in an illogical manner, contrary to the agreement, halted gas deliveries to Iran this morning…”
The blunt NIGC statement came after 11th-hour negotiations between Iranian and Turkmen officials seemed to have at least temporarily settled differences between the two countries over Turkmen gas shipments to Iran.
Iranian representatives were in the Turkmen capital, Ashgabat, on December 30 in an effort to reach an agreement that would prevent Turkmenistan from carrying out a threat to suspend supplies on December 31 unless Iran paid a reported $1.8 billion debt for Turkmen gas supplies in 2007-08.
The winter of 2007-08 was the last time Turkmenistan cut off gas supplies to Iran. Turkmen authorities at the time insisted the suspension was due to repair work, but the cutoff coincided with talks on the price of Turkmen gas. Iran had been paying about $75 per 1,000 cubic (Iran now says it was $40 per 1,000 cubic meters), but Iranian state-media website presstv.ir reported on December 30 that Turkmenistan demanded — and got — $360 per 1,000 cubic meters at that time.
“When freezing winters led to severe shortages across 20 Iranian provinces, forcing the country to raise gas imports from it northeastern neighbor…Turkmenistan pounced on the occasion to demand a…hike, which yanked the price up to $360…” presstv.ir reported.
An Iranian deputy oil minister, Amir Hossein Zamania, said on December 21, shortly after Turkmenistan demanded payment of the debt, that while Iran did owe Turkmenistan money, it was somewhere between $600 million to $1.5 billion.
“We will need to discuss the scope of gas supplies and its form with Turkmen officials,” Zamania said before the latest round of negotiations started at the end of December.
Iranian Oil Minister Bijan Zangeneh said on December 28 that if the Turkmen insisted on halting gas supplies, Iran would stop its energy dealings with Ashgabat. In the last few years, several Iranian officials have spoken against importing Turkmen gas.
Talks in Ashgabat on December 30 apparently reached an impasse, and the Iranian delegation left the bargaining table to return to Iran. According to a December 30 report from Iran’s Mehr news agency, “At the airport, Turkmenistan’s officials persuaded the Iranian delegation to come back to the negotiating table in hopes for reaching an agreement on gas delivery to Iran.”
On December 31, NIGC Managing Director Hamid Reza Araqi said a five-year agreement for Turkmen gas had been worked out. Reports said the issue of the Iranian debt would be discussed over the coming months.
And as recently as early on January 1, Iran’s Fars new agency was reporting a deal had been struck that would avoid any interruption in supplies.
Turkmengaz has not commented on the reason for the surprise halt.
Turkmenistan certainly needs the money. The country is in its worst economic crisis since it became independent in late 1991.
But shutting off supplies to Iran now might signal the end of Turkmen gas exports to Iran.
Tehran has needed Turkmen gas because Iran’s internal gas-pipeline network has not sufficiently connected the gas-rich regions of southern Iran to the northern part of the country. In the late 1990s, Iran largely financed a project to build the gas pipeline that connects the two countries. But Tehran has been working for several years to resolve the problem of supplying domestic gas to its northern provinces and, while sanctions slowed the project, it has gone forward.
Sometime in the near future, Iran will no longer require Turkmen gas.
Turkmenistan, on the other hand, lost Russia as a customer at the start of 2016. Losing Iran would leave China as the only foreign country purchasing Turkmen gas.
When Turkmenistan shut off gas to Iran in 2007-08, Ashgabat’s situation was very different. Turkmenistan was exporting more than 40 billion cubic meters of gas to Russia at that time and construction was well under way on pipelines to connect Turkmenistan to China. So Ashgabat could afford to press Iran on price back then.
When the talks in Ashgabat were foundering at the end of 2016, Iranian news agency IRNA wrote, “According to experts, Ashgabat would be the biggest loser of this dispute.”
That is probably an accurate assessment.
Turkmenistan will inevitably lose Iran as a gas customer in the coming years, but if Ashgabat’s financial desperation leads to irreparable damage in its ties with Tehran, Turkmenistan could also lose an export route through Iran to the Persian Gulf that is just now starting to open up.
Already on January 1, Ardeshir Nourian, a deputy in Iran’s parliament, said, “The foreign minister should take immediate action against Turkmenistan.”
Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036.