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Analysis: Ukrainian-Turkmen Gas Squabble Intensifies

Naftogaz head Oleksiy Ivchenko (file photo) (epa) The head of Ukraine's state oil and gas company, Oleksiy Ivchenko, has said Ukraine is prepared to turn to the Stockholm Arbitrage Chamber of Commerce in its dispute with Turkmenistan over gas deliveries.

Speaking on 22 February, Naftohaz Ukrayiny chief Ivchenko also suggested that Turkmenistan's refusal to ship gas that was prepaid by Ukraine in January was linked to Turkmen President Saparmurat Niyazov's threat to raise the price of gas from $50 per 1,000 cubic meters for the first six months of 2006 and $60 in the second half, to $100.

The dispute has been rumbling for a while. A Ukrainian government energy delegation, which visited Ashgabat on 17-18 February, received a hostile welcome from Niyazov. By contrast, Gazprom CEO Aleksei Miller visited Turkmenistan with a delegation on 17 February and was welcomed with open arms.

Delivery Disagreements

The latest spat intensified when the Turkmen Foreign Ministry on 18 February issued a harsh account of the disagreements between the two countries over how much Ukraine owed Ashgabat for gas deliveries in 2005-06.

Turkmenistan claims that Ukraine owes $158.9 million, of which $143.3 million is for gas delivered in 2005. According to the Foreign Ministry statement: "The Naftohaz Ukrayiny company expressed no desire to consider some specific problems brought up by the Turkmen side. Instead, attempts were made to cause confusion as to the payment of the debts for the fuel supplied.... Such an unconstructive approach...makes it difficult to hold talks on the prospects for cooperation between Turkmenistan and Ukraine in the gas sphere in 2007 and in the years to come."

Ukrainian Foreign Minister Borys Tarasyuk angrily responded to these charges on 21 February saying that Ukraine's debt was considerably smaller and that Turkmenistan was trying to break the contract it had signed with Ukraine for gas deliveries, because it was unable to fulfill its terms. Tarasyuk pointed out that Turkmenistan had signed contracts both with Gazprom and Ukraine to supply gas and the volumes contracted for were twice as great as Turkmenistan was able to export, Interfax reported.

Addressing this same issue, Vasyl Filipchuk, a Ukrainian Foreign Ministry spokesman, told Interfax that Ukraine owed Turkmenistan $77 million dollars for past gas deliveries. He said the money had yet to be paid because of the constant delays by the Turkmen customs service in processing Ukrainian goods sent to Ashgabat as barter payment for gas. Filipchuk added that, despite an existing contract for 2006 gas deliveries, which Ukraine had prepaid to the sum of $88 million, "not one cubic meter of Turkmen gas contracted for sale to Ukraine has reached the Turkmen-Uzbek border."

Miller in the meantime was shown smiling on Turkmen television as he and Niyazov agreed on a greater role for Gazprom in developing Turkmenistan's gas infrastructure.

One of the reasons for the recent Ukrainian-Turkmen misunderstanding could be the undefined role that RosUkrEnergo plays in the transit of Turkmen gas to Ukraine.

The contracts in force for 2005 and 2006 call on the Ukrainian side to sell the Turkmen gas it purchases to RosUkrEnergo, which then acts as the middleman for its delivery to Ukraine. However, according to a posting on Gazprom's website on 17 February, the Russian energy company claims that it acts as "the operator [middleman] for Turkmen gas transit via Uzbekistan and Kazakhstan" -- a statement that seems to contradict the agreement that RosUkrEnergo is the operator for the same route. Who the real operator is remains unclear, although RosUkrEnergo is to be paid 15 billion cubic meters in gas for its services.

Pipeline Problems

Another major problem facing Turkmen-Ukrainian gas relations involves the Central Asia Center pipeline, which has limited capacity and can only transport some 34 billion cubic meters of gas a year. The pipeline is owned by the countries through which it passes: Turkmenistan, Uzbekistan, Kazakhstan and Russia. In December 2005, Gazprom unexpectedly signed a contract with Turkmenistan to purchase 30 billion cubic meters. At that time, Ukraine already had a signed contract with Niyazov for 40 billion cubic meters. How the Turkmen side will export that amount of gas to Russia and Ukraine remains a mystery.

There are plans to expand the capacity of the pipeline. In 2004, RosUkrEnergo announced that it would spend $2 billion on the pipeline in order to enlarge its throughput capacity by 30 billion cubic meters. However, not one penny has been spent on this project. Some oil industry analysts have speculated that Gazprom -- which controls part of the pipeline -- is not interested in seeing the pipeline expanded at this time so that Turkmenistan would be forced to sell gas only to Russia and leave the Ukrainians at Gazprom's mercy.

Turkmenistan In The Middle

Turkmenistan In The Middle

Turkmen President Saparmurat Niyazov (right) meeting with Ukrainian President Viktor Yushchenko in Ashgabat in March 2005

PLAYING BOTH SIDES: The Russian-Ukrainian gas dispute is testing Turkmenistan's self-declared policy of neutrality. Along with Russia, Turkmenistan is one of Ukraine's two biggest gas suppliers. Throughout the crisis, Ukraine suggested it could turn to Turkmenistan to make up any losses of Russian gas supplies. That puts Turkmenistan in a difficult position as it seeks to balance its relations with two capitals: Moscow and Kyiv...(more)


Ukraine Signs Gas Deal With Turkmenistan

Kyiv Secures Turkmen Gas Supplies For 2006

Ukraine, Russia Spar Over Turkmen Gas


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