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Russia: Moscow Promoting CIS Integration Through Gas Alliance

Russian officials are pressing for Commonwealth of Independent States integration by promoting a Eurasian natural-gas alliance. So far, Kazakhstan has taken the most significant steps to support the idea by signing a cooperation deal with Russia, but for other countries, the benefits may be harder to define.

Boston, 21 June 2002 (RFE/RL) -- Plans for a Eurasian gas alliance won high praise this week from Russian Prime Minister Mikhail Kasyanov, who cited it as a leading example of Moscow's effort to promote integration within the Commonwealth of Independent States (CIS).

Speaking Wednesday at an economic forum in St. Petersburg, Kasyanov noted the support for the gas-alliance concept that was voiced in March by the presidents of Russia, Kazakhstan, Uzbekistan, and Turkmenistan. Kasyanov said their joint declaration at a CIS summit in Almaty "paves the way for forming a Eurasian gas space, ensuring stability and predictability of the energy market," the RIA-Novosti news agency reported.

The idea for the alliance seems to have originated with Russian President Vladimir Putin, who first aired it during Turkmen President Saparmurat Niyazov's visit to Moscow in January.

Putin said then that, "I think the creation of such an alliance would make it possible to a substantial extent to exercise effective control over the volumes and directions of Central Asian gas exports, and would ensure the creation of a unified balance between the production and consumption of natural gas, and also its export through a unified export channel."

That formulation appeared to offer more benefits to Russia than to Central Asian countries, since Russia already controls all the export pipelines for Central Asian gas. In addition to its command over access to Western markets, Russia is the world's biggest gas producer. Russia accounted for nearly five times as much as gas output as Uzbekistan, Turkmenistan, and Kazakhstan combined last year.

It seemed a natural consequence that an alliance would also favor Russian control over what Putin called "volumes and directions" of gas exports from the region, giving other countries less incentive to agree. But the idea seems to have expanded further this month with Russia's 10-year transit agreement with Ukraine. Ukrainian President Leonid Kuchma recently expressed interest in joining the alliance, although its operation has yet to be defined.

The question is what would the gas alliance change from conditions that already exist now?

Putin gave an indication of the incentives in an agreement with Kazakhstan last month that promised the country access to the European gas market for the first time. The deal has made Kazakh President Nursultan Nazarbaev a strong supporter of the alliance, but it is unclear that similar arrangements will work with other Central Asian countries, particularly Turkmenistan.

The agreement with Kazakhstan includes the establishment of a new joint venture called KazRosGaz, which combines the Kazakh state-owned monopoly KazMunaiGaz with Russia's Gazprom and the state-owned oil company Rosneft. The announcement portrayed the venture's mission in similar terms to that of the alliance, saying it would "develop a joint balance for supplies and transit of Russian and Kazakh gas."

Ideally, that means that Kazakhstan would not run the risk of producing gas that could not be sold or of overproducing gas that would flood the market and cause export prices to drop. Russia would presumably see to that, although the exact mechanism is murky, since Moscow's first interest would still be in exporting its own gas to Europe.

It is also hard to see how all the Central Asian countries could gain access to Europe for exports, given the limits of the pipeline system and Russia's goals for its own gas.

What seems clearer is that Kazakhstan has traded a portion of its growing gas industry for the benefits of cooperation with Russia, which controls its ability to export, in any case. In that sense, it may have had more to gain than to lose. The agreement was part of an even larger deal with Russia that included sharing disputed Caspian oil fields, also concluded last month.

The deep involvement of Russia in Kazakhstan's petroleum sector seems to be a large part of the CIS integration that Kasyanov was talking about. But in the case of Turkmenistan, such integration may be considerably harder. President Niyazov has so far resisted such deals, after complaining for years that Russia has barred European access for his country's gas.

For most of the past decade, Russia has shunted Turkmen gas to risky markets like Ukraine, especially after Kyiv piled up debts for Russian gas supplies. In April, Niyazov said resentfully, "As long as Russia does not allow Turkmenistan into the European market there will be no point for Ashgabat to participate in any alliance," the "Vedomosti" business daily reported.

Many tries at cooperation and long-term gas deals have foundered over Turkmen price demands that Russia considers too high.

For the past decade, Russia has eyed Turkmenistan's huge Dauletebad gas field on the Iranian border, which was developed with Russian capital and engineering in Soviet times. In the past week, Niyazov has invited Russian companies to join in building a pipeline from Dauletebad through Afghanistan to Pakistan and possibly India. Russian enthusiasm for the plan may be doubtful, since it would give Turkmenistan an export outlet outside Russian soil.

But talks on cooperation are continuing. Niyazov spoke with both Putin and Uzbek President Islam Karimov on the subject last week, Interfax reported.

If Putin can convince Niyazov to make a deal like the one with Kazakhstan, it would be a major development in Central Asian energy and CIS affairs. So far, the talk of cooperation with Niyazov has been only talk. But if other countries join in the alliance, Niyazov may see his last chance of exports to Europe slipping away.