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Turkmenistan: President Niyazov Lashes Out At U.S.

Turkmenistan President Saparmurat Niyazov has lashed out at the United States for slow progress on the trans-Caspian gas pipeline. But his impatience is a sign of his troubles in the region. RFE/RL correspondent Michael Lelyveld reports.

Washington, 1 March 2000 (RFE/RL) -- A U.S. official says the United States is working on a finance plan for the trans-Caspian gas pipeline to meet the concerns of Turkmenistan President Saparmurat Niyazov, but U.S.-Turkmen relations appear to have taken a turn for the worse.

John Wolf, the Caspian adviser to U.S. President Bill Clinton, told reporters in Istanbul that the project's developers would submit a detailed project plan by the end of March. The aim is apparently to convince Niyazov that Turkmenistan will not lose money on the pipeline to Turkey if it agrees to terms demanded by Azerbaijan.

In an unusual public show of anger toward a U.S. diplomat, Niyazov last week accused Wolf of "deliberately holding up" the $2.5 billion project and of pressuring Ashgabat to accept unfavorable conditions from Baku.

Azerbaijan has demanded half the capacity of the pipeline for its own gas sales to Turkey as a condition of allowing transit on its territory. Niyazov believes the remaining share for Turkmenistan's gas will not be enough to pay for the line across the Caspian.

In comments carried on the Turkmen Press website Tuesday, Niyazov said it will take his country eight years to realize a profit after the pipeline opens in late 2002, if it accepts Azerbaijan's terms. In the meantime, Turkmenistan will be faced with an estimated $3 billion in debt, Niyazov said.

Showing frustration, Niyazov noted that previous attempts to deal with U.S. companies on pipeline projects to Pakistan and Turkey had failed. Turkmenistan recently opened talks with Russia's Gazprom on selling up to 50 billion cubic meters of gas per year. Some analysts believe the sales to Russia could replace the trans-Caspian deal.

The partners for the pipeline will have until March 20 to present new financing figures that will address Niyazov's concerns. He has extended the mandate of the PSG International consortium for one month from February 19, when it was due to expire. U.S.-based Bechtel Corporation and General Electric Capital have been working on the project, along with the British-Dutch firm Royal Dutch/Shell.

But while Niyazov's anger may be directed at the United States, his problems appear to be with other countries in the region.

In a surprise move last year, Azerbaijan suddenly laid claim to half the pipeline's capacity after finding a large gas deposit in its Caspian offshore field, known as Shah Deniz. At the same time, Baku started its own push to sell gas to Turkey, pressing its advantage of shorter transit distance. The move is also thought to be in retaliation for Turkmenistan's claim to a Caspian oilfield on its border with Azerbaijan. Niyazov has refused to give ground on the disputed oilfield.

As originally planned, the trans-Caspian line was designed to carry 30 billion cubic meters of gas per year. Turkmenistan agreed to sell 16 billion cubic meters to Turkey and an additional 14 billion for transit to Europe. But Azerbaijan's demand for 16 billion cubic meters of capacity on the same line would make Turkmenistan's agreement with Turkey impossible to fulfill.

In trying to make the deal work with less gas, the consortium partners may be facing another problem. Niyazov himself has negotiated terms with Turkey that may not be favorable, regardless of what Azerbaijan does.

Turkey has only agreed to pay Turkmenistan a fixed price for its gas in the first six months of deliveries. After that, the price may be renegotiated to reflect market forces. If the price drops, so would Turkmenistan's profits, making it harder to pay pipeline costs.

Because countries including Iran and Russia are also planning to sell large volumes of gas to Turkey, there is a strong chance that prices will decline for supplies that are not already covered by contract. Turkmenistan is unlikely to be in a strong bargaining position, even if the trans-Caspian pipeline is built.

Niyazov has tried to deal with his troubles by threatening to sell huge volumes of gas to Russia. But higher volumes may only bring lower prices, making Turkmenistan's financing troubles worse.

But without the competition from a trans-Caspian deal, Russia could insist on paying even less for Turkmen gas. The options appear to be limited, and Niyazov may be in the process of limiting them even further unless he can compromise with Azerbaijan.