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Turkmenistan: Energy Projects Raise Questions

As Turkmenistan publicizes plans to boost gas exports to Russia and Iran, there are increasing doubts about efforts to create competition among potential buyers. RFE/RL's Michael Lelyveld examines the issues.

Boston, 20 March 2000 (RFE/RL) -- With a flurry of announcements, Turkmen President Saparmurat Niyazov has created a sense of fierce competition for his country's gas exports. But there are still questions about whether any of his reported deals will work out.

Last month, Niyazov created a stir among U.S. investors and officials by announcing talks with Gazprom on selling 50 billion cubic meters of gas to Russia. U.S. backers of the planned trans-Caspian gas pipeline became concerned that the increased sales could leave Turkmenistan without enough gas to carry out their own project.

Last week, Turkmen Foreign Minister Boris Shikhmuradov raised U.S. worries again by telling reporters in Ashgabat that the country had agreed to raise its gas exports to Iran to 13 billion cubic meters by the end of the year.

But in both cases, the reports of agreements appear to be premature. Russia's Gazprom is continuing to negotiate over the price for Turkmen gas, although Niyazov seems to be asking for less and less as the days go by.

In February, Niyazov sought to increase the price that Russia would pay from the $36 per thousand cubic meters that was agreed for supplies last December. Niyazov claimed he had taken a firm stand in his talks with Russia's acting president, Vladimir Putin, saying, "Those who pay $36 per thousand cubic meters, can pay $46 as well. Niyazov said he told Putin that profits must be shared.

Then, last week, Niyazov said Turkmenistan would sell its gas to Gazprom for $42 per thousand cubic meters, although he added that no final agreement had been reached. The Russian side has said that it considers even the price of $36 too high.

Shikhmuradov also tried to influence Russia in announcing the reported deal with Iran, noting that Tehran has been paying Turkmenistan $40 per thousand cubic meters for gas. One detail that he failed to mention, however, is that Iran is now seeking to lower the price to $28 before it accepts additional supplies. As Turkmenistan's bargaining with Russia and Iran goes on, the price seems to be going down rather than up.

Much of this process of negotiation between buyers and sellers is normal before they arrive at a final price. But Niyazov's choice to make public announcements seems to be an obvious attempt to play the Iran option against Russia, and to play both countries against the United States.

The strategy may have already had some limited effect in increasing the interest in Turkmenistan's gas. But it seems unlikely achieve any long-term results as long as U.S., Russian, and Iranian officials can follow the progress of one another's negotiations with Turkmenistan.

A similar sequence of events has taken place with Azerbaijan. Earlier this month, Niyazov made headlines by claiming that he had reached agreement on sharing the trans-Caspian pipeline during a telephone conversation with Azerbaijani President Heidar Aliev. Niyazov said that Aliyev agreed to accept a previously-rejected offer to use 5,000 cubic meters of the line's capacity. But Azerbaijan never confirmed Niyazov's remarks. Last week, Ilham Aliev, the president's son, said that Azerbaijan would seek 8 billion cubic meters, or half of the line's initial capacity, in line with its previous demands. The differing accounts may again point to Niyazov's attempts to stir up competition between the potential buyers of his gas.

The problem is that this game cannot be played forever. The buyers are unlikely to be fooled. And Niyazov may be running the risk that the prices offered for his gas may only go down if none of the three deals is actually signed.

But there are also internal reasons for pursuing Niyazov's strategy. As the country faces increasing economic problems, the government must show that it is pursuing a way out of its difficulties. While it is discussing deals that could total over 90 billion cubic meters annually, Turkmenistan is believed to have exported only about 5 billion cubic meters so far this year.

The trans-Caspian pipeline to Turkey was supposed to have provided some relief in the form of loans in anticipation of future income. But the line has been stalled by Azerbaijan's demands, forcing Niyazov to try other tactics, whether they are transparent or not.

Now that Niyazov has started his game, he may have few choices but to play it to the end and hope for the best deal he can get.