BY halting Turkmen gas purchases for over half a year, Russia has pushed Turkmenistan towards faster diversification of its exports by connecting to routes such as Nabucco. Central Asia's largest gas producer has already said it was prepared to supply the EU-sponsored pipeline, bypassing Russia, but has not made any formal commitments to the project which has been criticized for lacking of supply sources. Russia's Gazprom stopped importing gas from Turkmenistan after a pipeline explosion in April which Ashgabat blamed on Moscow. It has since sought to renegotiate supply terms but the two sides have failed to strike a new deal. “The shutdown in supplies was a significant blow for Turkmenistan as gas exports to Russia make up the lion's share of the country's revenues,” said Kaan Nazli, an analyst at Medley Global Advisors (MGA). “The episode certainly strengthens Turkmenistan's commitment to pursue Nabucco though we see this as a remote prospect in near term.” The agreement Gazprom has sought to renegotiate was seen as lucrative for Turkmenistan and designed to prevent it from pursuing the Nabucco option, Western energy executives say, but backfired on Gazprom when demand – and prices – plummeted. “They chose to sacrifice their reputation rather than look silly and overpay Turkmenistan,” said a Western pipeline executive who asked not to be named. Carte blanche But this move also gave Turkmenistan, which produces over 70 bilion cubic metres (bcm) of gas a year, freedom to pursue competing pipelines. “I think Russia has stopped being so worked up about it,” said Alexey Malashenko, a Central Asia researcher at the Carnegie Endowment for International Peace. “(Turkmen President) Kurbanguly Berdymukhamedov has long positioned himself as a man looking in different directions.” Shortly after the halt, Turkmenistan struck a deal with Iran to more than double exports to its Caspian neighbour and is preparing to launch a pipeline to China next month along with the Iranian link extension. This will allow Turkmenistan to increase sales to Iran by 12.5 bcm to 20 bcm next year and start pumping 13 bcm a year to China, covering around two thirds of what would have been supplied to Russia in 2010. Western companies involved in Nabucco are also urging Turkmenistan to begin negototiations with the consortium and with transit nation Azerbaijan on laying the physical export infrastructure. “Turkmen gas can be transported to European markets via Nabucco by 2014,” Wolfgang Sporrer, an OMV executive in charge of the Caspian region, told an investment forum in Turkmenistan last month. “Preparations for this should also start (now),” he said. Western companies say Turkmenistan could start Nabucco supplies by linking one of its Caspian offshore fields with an Azeri offshore platform and only later build a fully fledged pipeline across the Caspian. However, Turkmenistan has not yet initiated any formal negotiations on the pipeline construction. Also, there has not been much progress in the proposed domestic pipeline needed to bring gas to the Caspian coast, MGA's Nazli said. “That said, Nabucco will remain to be an attractive long-term prospect for Turkmenistan, especially as the recent reshuffle in the energy sector removed many individuals who had built strong relations with Gazprom in recent years,” he said.
