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Turkmenistan: Deal With Turkey Beginning Of Energy Trade?

Boston, 18 May 1999 (RFE/RL) -- An agreement allowing Turkmenistan to sell its excess electricity to Turkey may offer relief to the Central Asian nation and open a new phase in regional trade of electric power.

Under a pact signed May 12, Turkey will buy 750 million kilowatt-hours of power a year from distant Turkmenistan, using lines through Iran starting next year. The deal is modest in light of Turkey's energy needs, but it may point the way toward future supplies.

Turkmenistan and Iran have been working to link their power grids this month. Turkey plans to build a new 100-megawatt line to Iran within a year to complete the circuit for electricity imports, which are planned to run for the following six years.

While much of the political focus in the region has been on oil and gas pipelines, trade in electricity has been slowly gaining ground. Pipelines have been stalled by political resistance and doubts about finance. But the delays appear to be promoting progress on electricity schemes as an alternative.

As a practical matter, sales of gas and electricity amount to much the same thing, since Turkey's gas needs are the result of its growing demand for electric power. In the case of Turkmenistan, the motivation also stems from the difficulty of getting gas out of the isolated country. Turkmenistan's gas plans continue to face hurdles on several fronts.

To the east, the country is trying to restart the long-stalled project to build a gas line through Afghanistan to Pakistan. But there is no sign that a major western company will replace U.S.-based Unocal Corp., which withdrew from the pipeline consortium last year.

To the west, a trans-Caspian gas line to Turkey still awaits financing and settlement of a border dispute with Azerbaijan. Competition from a Russian-Italian venture to pipe gas across the Black Sea has raised doubts about whether Turkey needs gas from both sources at the same time.

Turkmenistan has also been disappointed by its gas sales to Ukraine following a lapse of nearly two years. After three months of receiving gas through Russian pipelines, Ukraine moved to curtail the purchases because it was unable to pay. Turkmenistan said last month it would continue deliveries, despite the arrears.

But problems for pipelines and gas may not rule out greater success with electricity. Turkmenistan has been working with Turkish firms on delivering electricity both through Iran to Turkey and through Afghanistan to Pakistan.

Electric generation can give Turkmenistan a way to benefit from the huge gas reserves that it has been unable to export. The country's gas production last year was only about one-seventh of its peak during Soviet days.

Estimates of Turkmenistan's excess generating capacity available for export range from 7 billion to 12 billion kilowatt hours per year. The country has started to upgrade its power plants with new gas turbines to increase output even further. New lines and technology may help reduce the high transmission losses which are common in the region.

The Turkmenistan-Turkey deal is a variation of a failed Iranian plan in 1996 to sell electricity to Turkey instead of gas. Turkey insisted on an agreement to import Iranian gas instead, so that it could generate its own electric power. The substitution of Turkmenistan's electricity in the scheme may now indicate that Ankara has more trust in Ashgabat than in Tehran as a power supplier. But regional swaps of electricity or a pooling arrangement would make more sense to reduce transmission distances and loss.

Another possible interpretation is that the deal is in reality a swap, with Turkmenistan supplying electricity to Iran while Iran delivers power to Turkey. Publicizing the arrangement as one between Turkmenistan and Turkey may raise fewer objections in the United States.

Aside from avoiding many of the problems of building pipelines, electricity links could provide the flexibility to take advantage of short-term and seasonal power needs. Iran announced just such an arrangement with Armenia last month.

As part of the deal, Armenia will supply Iran with electricity for the current six-month period, when Iran's demand is high. Iran will then supply an equal amount of power to Armenia for the following six months, during Armenia's peak consumption period.

Iran is also working on an agreement with neighboring Pakistan to supply electricity to its southern province of Baluchistan.

What appears to be emerging from this flurry of electricity deals is a more rational use of the region's energy resources. So far, the development seems to be less susceptible to the political pressures that have turned oil and gas pipeline development into the region's great game.

It is also notable that U.S. penalties under the Iran-Libya Sanctions Act of 1996 apply only to investment in Iran's petroleum sector and do not affect the transit of electricity.

While Washington may frown on electricity transit through Iran, it is unclear whether it will try to block the new trade. But if electricity swaps develop on a larger scale, they could reduce Ankara's need for a trans-Caspian gas pipeline.