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Turkmenistan: U.S.-Backed Consortium Halts Spending On Trans-Caspian Project

A U.S.-backed consortium has halted spending on its trans-Caspian pipeline project, citing long delays by Turkmenistan. Our correspondent Michael Lelyveld reports that for the United States, the move could lead to a shift in regional policy. For Turkmenistan, it may mean increasing dependence on Russia.

Boston, 24 May 2000 (RFE/RL) -- A decision to cut spending for a project to build a trans-Caspian gas pipeline could mark the end of a chapter in U.S. policy for the region.

On Monday, an official of the consortium to build the trans-Caspian line said it will reduce spending and staff because of slow progress in reaching agreement with Turkmenistan, the Reuters news agency reported.

John Upperton, a spokesman for the consortium of U.S.-based General Electric Company and Bechtel Corporation, as well as Royal Dutch/Shell, said Turkmenistan has failed to respond to the group's latest offer more than two months ago.

Platt's Oilgram, an industry newsletter, reported Upperton's comments in even stronger terms, saying the consortium has stopped all spending on the project until Turkmenistan renews its mandate. The group will close its offices in Istanbul, Tbilisi and Baku, the report said.

Unnamed Turkish officials have also said the project to pipe gas to Turkey with a 2,000-kilometer line is "all but dead," according to Platt's. The comments followed last week's visit to Turkmenistan by Russian President Vladimir Putin to promote a gas deal that is seen as competing with the trans-Caspian line.

Turkmenistan President Saparmurat Niyazov has made several discouraging comments about the project in recent months. Last week, Niyazov said on state television that construction could be delayed until all disagreements over the terms are resolved.

Robert Ebel, director of the energy and national security program at the Center for Strategic and International Studies in Washington, told RFE/RL that the trans-Caspian group's decision to halt activities is the right one, under the circumstances.

Ebel said, "I don't think they really had much of a choice until they see what's going to happen between Russia and Turkmenistan."

Ebel added: "This is in part about saving money, and in part it's a message to Niyazov that they're prepared to walk away."

So far, U.S. government officials have not given up on the project, which suffered a setback last year after Azerbaijan found gas in its sector of the Caspian, closer to the Turkish market.

At a conference in Washington last Friday, John Wolf, the U.S. government adviser on the Caspian, predicted that Turkmenistan and Azerbaijan would reach an agreement on the trans-Caspian pipeline in the economic interest of both countries.

But the loss of the line could mark a major change in U.S. policy for the Caspian region. The administration of President Bill Clinton has pursued the idea of linking Central Asia to an energy corridor through the Caucasus for nearly five years.

Without a pipeline to Turkmenistan, the United States is likely to have little in common with the Niyazov government, which has shown no sign of embracing the democratic values that Washington has tried to promote.

The U.S. concept of an energy corridor may still go forward, but with Azerbaijani rather than Turkmen gas. As a result, strong U.S. ties might go only as far east as Baku. U.S. officials now speak increasingly of the Baku-Ceyhan oil pipeline project as extending to Kazakhstan's port of Aktau. But Ebel said there are no signs of plans to build an oil line across the Caspian. Kazakh oil is intended to reach the corridor only by barge.

The fading of hopes for the trans-Caspian gas project coincides with Russia's resurgence in the region under Putin. So far, Putin's visit to Ashgabat has not led to an agreement on gas prices or the long-term export deal that Niyazov sought. But it may still leave him with few alternatives.

Earlier this month, Iran cut its gas imports from Turkmenistan by half because of a feud over prices. Tehran is also apparently angry that Moscow may capture Turkmenistan's gas from its giant Dauletabad field on the Iranian border.

Analysts are also skeptical about Turkmenistan's latest bid to supply Pakistan through Afghanistan by transporting liquid natural gas over the roads. On Monday, a Kremlin official said Russia may launch air strikes on Afghanistan unless the Taliban stop aiding Chechnya's rebels. Growing Turkmen ties to Russia are unlikely to be compatible with any Afghan export route.

If the trans-Caspian option fails, it could change U.S. policy, but it may leave Niyazov without alternatives other than Russia, which could effectively dictate the price for Turkmen gas.

Washington analyst Ebel said, "It could be a dangerous game that he's playing. He could wind up with nothing."