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Turkmen Report: November 25, 2000

25 November 2000
Gas Transmission Line Completed (25 November 2000)
Turkmen President Saparmurat Niyazov presided over the commissioning of a 45-kilometer pipeline connecting the Tahtabazar gas field with settlements at Serhetabad and Tahtabazar in the country's south. The pipeline, built by state-owned Turkmenneftegaz, was installed over the period of 1 year. In remarks at the ceremony, Niyazov termed the continuous supply of fuel to settlements in Mary Province "a priority." He also termed Turkmenistan "unique" for supplying domestic natural gas requirements of 7 billion cubic meters per year (676 mmcf/d) without charge. (

Turkmen-Iranian Economic Relations Profiled (23 November 2000)
Trade turnover between Iran and Turkmenistan totaled $214 million in the first 9 months of 2000, suggesting the trade partners will close out the year with better results than obtained in 1999 when annual trade turnover totaled $229 million. These figures were announced in the context of the fifth meeting of the Turkmen-Iranian economic cooperation commission held in Ashgabat. Turkmenistan presently exports gas to northern Iran via the Korpedzhe-Kurt-Kui pipeline. It also exports construction materials and light industry products to Iran. Turkmenistan mainly imports foodstuffs and household goods from Iran. During the meeting, visiting Iranian Minister of Roads and Transport, Mahmoud Hojjati, expressed Tehran's interest in boosting natural gas imports and transit volumes in future. The Tedzhen-Mashad rail link between the two countries, completed in 1996, transported a mere 1.2 million tons through 3Q of 2000. Iran is presently involved in eight construction projects in Turkmenistan, including the rehabilitation of oil refinery in Turkmenbashi. (Itar-Tass)

Dismissals Proceed Apace in Wake of Failed Cotton Crop
Turkmen President Saparmurat Niyazov sacked dozens of officials, blaming them for shortfalls in the cotton crop this year. In Mary province, Niyazov sacked 9 district-level officials and severely upbraided the governor, Chary Kuliev after only 1 of 10 districts delivered on their quota, leaving the province 107,000 tons light. Niyazov also demoted the head of the Lebap province, Orazmyrat Nyyazlyyev, to the post of mayor of Turkmenabat (formerly Chardzhou), replacing him with State Minister and Chairman of the Turkmenneftegaz trading corporation Berdymurad Redzhepov. In Lebap, he also dismissed 7 district-level officials after it harvested 288,000 tons of cotton -- 12,000 tons less than the quota set by the government. In the town of Dashoguz, the president sacked eight local chiefs and the region's unidentified deputy governor responsible for the agrarian sector. Despite a drought that has hit hard the agricultural sector of Central Asian states, Turkmen state television quoted Niyazov as dismissing excuses for the crop failure saying "One can always find reasons for a failure in the cotton campaign: water shortages, cold weather and so on. This is all pure nonsense." This year's harvest of 1.03 million tons was nearly 300,000 tons less than in 1999. (Itar-Tass/Reuters/Interfax)

Niyazov Wants OEC to Assist with Petroleum Exports (21 November 2000)
Turkmen President Sapurmurat Niyazov has asked the Organization for Economic Cooperation to help develop projects allowing countries that, like his own, have a surplus of oil and gas to export to countries that need those resources. His request came during a meeting with visiting OEC Secretary-General Abdulrakhim Gavkhi. (Interfax)

Azerbaijan: Gas Debt Calculations Wrong (20 November 2000)
Commenting on Turkmenistan's possible plans for collecting unpaid debts for gas supplied to Azerbaijan and Kazakstan by selling the debt or going to an arbitration court, Azerbaijani Deputy Foreign Minister Khalaf Khalofov called instead for negotiations and claimed that Ashgabat has unduly inflated the sum owed. Ashgabat contends that Baku owes $58.9 million (see Turkmen Report 18 November) but Khalofov estimated Azerbaijan's natural gas debt at $18.6 million. Khalofov contends that Turkmenistan unduly included transportation costs and fines to the debt, which were to be settled through barter, according to him. (Turan)

Niyazov Raises Bar on Cotton Production for 2001 (17 November 2000)
Turkmenistan is to produce 1.8 million tons of raw cotton in 2001, President Saparmurat Niyazov announced during a tour of the country's northern region of Dashoguz. The biggest producers are slated to be the Dashoguz and Mary regions - 515,000 tons apiece, the Lebap region - 410,000 tons, the Akhalsk - 320,000 tons, and the Balkan region - 40,000 tons. (Interfax)

Turkmenistan's Industrial Output Up
Turkmenistan's industrial production rose 23% year-on-year in constant prices in the first ten months of 2000, exceeding 12.7 trillion manat, according to Turkmenistan's National Institute for Government Statistics and Information. The gas, oil and electric power industries accounted for 95% of this growth. The official exchange rate is 5,200 manat/$1. (Interfax)

Russia: Moscow Moves Closer To Resolving Ukraine's Gas Debt
November 21, 2000

By Michael Lelyveld, RFE/RL

Russia and Ukraine moved again toward resolving their differences over gas debts last week, but the elements of conflict may continue to affect many countries from Central Asia to Western Europe.

On November 17, Russian Prime Minister Mikhail Kasyanov offered Kyiv an eight-year delay in its debt payments for gas. The proposal followed a meeting in Moscow with Ukrainian Prime Minister Viktor Yushchenko to negotiate at least $1.4 billion in overdue fuel bills.

The understanding appears to be similar to one reached between Presidents Vladimir Putin and Leonid Kuchma in the Black Sea resort of Sochi last month. As with the earlier agreement, Kasyanov's terms would require Ukraine to honor the country's gas arrears and any further purchases as state sovereign debts. So far, it is unclear whether Kyiv will accept the deal. Further talks are needed to settle the debt figure, which Russia's Gazprom claims is over $2 billion.

Reports also suggest that Russia could trade the sovereign debt for shares in Ukrainian privatized enterprises. The subject is sensitive, in part, because of proposals to privatize Ukraine's pipelines that carry Russian gas to Western Europe. Moscow has been pursuing plans to build a bypass pipeline around Ukraine through Poland after years of seeking control over the Ukrainian transit lines.

The bypass plan has drawn the interest of Western European countries and their gas companies, which could help Russia with investments in its gas fields and secure transit routes. Ukraine has also reportedly agreed to impose a tariff on its own gas exports to help prevent thefts of Russian gas and re-exports to Europe for illicit profit. The practice has been of special concern to Gazprom, because it undercuts Russian exports to the European market.

But so far, there seems to be no resolution to another simmering conflict. Last week, Russian Deputy Prime Minister Viktor Khristenko reportedly vowed to block deliveries of gas from Turkmenistan to Ukraine, which the country has sought as an alternative to Russian supplies. According to the Russian newspaper Kommersant, Khristenko said that "no parallel supplies of Turkmen and Russian natural gas will be effected to the Ukraine."

The statement appeared to violate Putin's agreement with Kuchma at Sochi to allow the transit of Turkmen gas to Ukraine over Russian territory. The reasons for the conflict seem obvious, however. Turkmen President Saparmurat Niyazov has allowed gas deliveries to Ukraine only on the condition of advance payments each week.

Under those terms, Turkmenistan has been getting paid before Russia. Gazprom's trading partner Itera has been handling both the Turkmen and Russian deliveries to Ukraine. Itera has periodically cut off the Russian supplies due to non-payment. But as long as Turkmen gas gets through, Ukraine has less incentive to pay Russia. Gazprom has also been concerned that it may suffer even more thefts of its transit gas if Ukraine cannot pay for Turkmen supplies.

The issue could tie relations among the three countries in knots at a time when Russia is also negotiating with Turkmenistan for its own gas purchases. Turkmenistan has already pledged to supply both Russia and Ukraine with 30 billion cubic meters of gas next year. While Ukraine has already agreed on a price, Russia is expected to negotiate terms with Turkmenistan next month.

But last week a further complication for the three countries emerged because of developments in Kazakhstan. At a press conference in Almaty, a top energy official disclosed that the country's decaying pipelines are no longer able to carry the promised volumes of gas from Turkmenistan to Russia.

Uzakbai Karabalin, the president of KazTransGaz, told a press conference that the Central Asia-Center gas pipelines can only handle about 35 billion cubic meters of gas per year. He pledged that the company would invest $360 million in the network over the next five years. But it is unclear whether the work will come soon enough to help Russia, Ukraine, and Turkmenistan next year.

It seems unlikely that any significant amount of work can take place this winter in time to meet the demand in these countries for heat and electric power. The pipeline limit may mean that Turkmenistan will only be able to honor its commitment to either Russia or Ukraine, but not both, even if Kyiv proves able to pay for more gas.

The trouble could aggravate an international situation that is already delicate, as shortages of electricity and gas begin to plague many countries in the region. It is unclear whether countries will use the problems to gain political advantage over one another or cooperate on pipeline capacity and resources to get through this winter.