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Turkmenistan: Russia May Need More Caspian Gas

As Russia's energy reserves dwindle, it may now see the need for doing business with Caspian countries like Turkmenistan. New motives in Moscow could lead to change in the region, if Russia is serious. Correspondent Michael Lelyveld reports.

Boston, 3 March 2000 (RFE/RL) -- After a hard year for energy exploration, Russia appears to be increasingly motivated to buy more gas from Turkmenistan.

This week, Russian officials said that oil and gas discoveries have lagged far behind the country's rates of production. Fuel Ministry figures for 1999 indicate that Russia is using oil 50 percent faster than it is finding new reserves. Gas production last year was nearly three times greater than discoveries of new gas.

Russia's energy gap has followed a similar pattern since 1994, the ministry said, voicing concern of a crisis for future supplies. Valery Remezov, Gazprom's deputy chief executive, said that Russia's gas monopoly is planning to cut its production by 25 billion cubic meters, or nearly 5 percent, this year.

There appear to be several reasons for Russia's problems. Many of its older petroleum fields have been depleted. Declining investment has also taken its toll. In times of high market prices, Russia has focused on energy exports for cash. In times of economic crisis, it has been unable to afford exploration. And it also delayed legislation on production-sharing agreements for several years because of political concerns, stalling foreign investment in petroleum development.

Whatever the reason, Russia may now be turning toward other countries in the region for energy supplies.

"If we cut production by 25 billion cubic meters, we will need to attract gas from Turkmenistan," Remezov said.

This new motivation appears to be different from earlier reasons for dealing with landlocked Turkmenistan. In the past, for example, Russia has directed Turkmen gas to debtor nations like Ukraine. These failed deals have allowed Russia to pursue political and competitive goals by keeping Turkmenistan's gas from reaching paying markets in Europe.

But Russia's purchases of 20 billion cubic meters of Turkmen gas this year, and talks on buying 50 billion cubic meters in the future, may be driven by necessity. Russia has made numerous commitments for gas exports to Europe. Exports rose 1 percent last year while production suffered a slight decline.

But because the price of natural gas has fallen, Russia earned nearly 16 percent less for its exports last year. Unless prices rise, Gazprom could suffer a larger drop in export earnings, unless it fills the gap with Turkmen gas.

The World Bank has been pressing Russia for over two years to use available resources more efficiently. Gazprom may find it cheaper to buy ready Turkmen gas and deliver it to some domestic Russian markets than to develop new deposits in places like the Yamal Peninsula.

Turkmen gas could also be used to offset Russia's supplies to Turkey, or it could be piped through Russia to fulfill Turkmenistan's agreement to supply Turkey with gas.

These factors suggest that there may be more to Gazprom's talks with Turkmenistan than a simple scheme to block the U.S.-backed trans-Caspian pipeline to Turkey. Reports have also suggested that sales of 50 billion cubic meters of gas to Gazprom would leave Turkmenistan without enough gas for the trans-Caspian project. But not all analysts agree that is the case.

Robert Ebel, director of the energy and national security program at the Center for Strategic and International Studies in Washington, said that Turkmenistan produced nearly 90 billion cubic meters of gas in 1990. The country's ability to supply both Russia and the trans-Caspian line would depend on when Turkmenistan schedules its peak deliveries to Gazprom, Ebel said.

He is also more cautious than some analysts who have already pronounced the trans-Caspian project as dead.

"It's not dead, but it is seriously injured," said Ebel. Much depends on Turkmenistan's ability to agree with Azerbaijan on terms of transit and a financing package for the pipeline, which is due to be presented this month.

But Gazprom may now see a need for more Turkmen gas, whether the trans-Caspian project goes forward or not. Russia's talks with Turkmenistan may show how serious the need is.