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Turkmenistan - Ukraine: gas transit and geopolitics
Material posted: Publication date: 04-03-2013

The restoration of direct Turkmen gas supplies to Ukraine and its further re-export to Europe was the main theme of the state visit of President of Ukraine Viktor Yanukovych to Turkmenistan from 12 to 15 February. The buyer came to the seller to negotiate the purchase of the goods and to build support for mandatory negotiations with the third parties to the transaction, ensuring the delivery of the goods.

Quite ordinary and real scheme, but not today and not for Ukraine. Maybe by year 2020. Since Kiev has obligations to Russia, valid until 2019. This is, firstly, to buy Russian gas annually in the amount of from 53 to 33 billion cubic meters with the condition "take or pay", and, secondly, to provide transportation of up to 110 billion cubic meters of exported Russian gas through its gas transportation system.

After coming to power in 2010 – a year after the drafting of the gas agreement with Russia – Viktor Yanukovych talks about his review, calling the price too high, and the contracts themselves – bondage. Besides, by the end of 2012 was marked disagreement between Kiev and Moscow on the implementation of commitments under the ten-year gas agreement. Thus, according to Ukrtransgas, gas transit from Russia to Europe dropped to 84, 2 billion cubic meters, 19%. in comparison with 2011. In turn, Kiev has reduced the annual volume of purchases to 27 billion cubic meters. Gazprom, without delay, put at the end of the year "Naftogaz" account for $ 7 billion for arrears of fuel.

It added Ukraine is determined to quickly get rid of the obligations to Moscow. With such a mood and arrived in Ashgabat, the head of Ukraine – to negotiate a cheap alternative to more expensive Turkmen gas Russian.


Will Turkmen gas cheap?

"Ukraine is interested in resuming supplies of natural gas from Turkmenistan and is ready to deepen cooperation in this area", – Yanukovych stated on February 14 in the course of negotiations with the Turkmen President. – Our countries have every opportunity to unite efforts to develop alternative routes of natural gas supply for Ukraine's needs and for further exports to Europe."

"Turkmenistan and Ukraine consider cooperation in the energy sector as one of priority directions of development of bilateral relations. During the talks, the two sides agreed to deepen cooperation in this sphere", – stated in the joint statement of presidents on the results of the visit.

Indeed, signed a Memorandum of understanding between the National joint-stock company "Naftogaz of Ukraine" and Public concern "Turkmengaz". "It's basically the application form for participation of Ukrainian companies in the service projects of oil and gas complex of Turkmenistan", – she commented the Vice Prime Minister Yuriy Boyko. More wordy was the Minister of energy and coal industry of Ukraine Eduard Stavytskyi. He hastened to inform reporters that the MOU "provides for the resumption of gas supplies to Ukraine and Europe, as well as exploration of fields in Turkmenistan". In fact, "first, assume the advent of services of Ukrainian technologies and equipment in oil and gas projects, and then talk on gas supplies," commented the interviewer. ITAR-TASS specialists of the Ministry of petroleum and mineral resources of Turkmenistan. They recalled that a similar Memorandum with Ukraine have already taken place in bilateral relations.

Answering the questions of journalists about the problem of Russian transit, stavytsky said: "We agree with our colleagues from Turkmenistan and then we will negotiate further."

Meanwhile, according to Turkmen analysts, representatives of Ukraine need to come to Turkmenistan with a ready solution on the Russian transit. Then, perhaps, not born a Memorandum of intent, and a full-fledged intergovernmental agreement on gas supplies. Unless, of course, Ukraine will suit the Turkmen gas price, which it would be necessary to start the whole negotiation process. Otherwise it may happen the same as today in Ukraine with Russia – the Treaty has been signed, and the price was very heavy. This has happened in the Turkmen - Ukrainian relations is not satisfied with Ukraine in 2005 and then in 2006 the terms of Ashgabat to pay 60 and then $ 100 per thousand cubic meters of gas entirely currency, but not half the goods, as it was in the early 2000s. In 2006, as we know, ended direct deliveries of Turkmen gas to Ukraine. The buyer of Turkmen gas in the Northern direction only Russia's Gazprom via Ukraine to buy he so-called "Central Asian gas" – only slightly cheaper than the Russian.

Currently Russia continues to buy Turkmen gas. For her in connection with the transition in 2009 to the European formula of the price of Turkmen gas was also expensive, what caused a sharp decline in its purchases from 40 to 10-11 billion cubic meters a year. 320 dollars per thousand cubic meters worth today Turkmen gas at COP "Deryalyk", which is on the border with Uzbekistan, where the gas pipeline Middle Asia – Center /SATS/. With regard to Uzbek, Kazakh and Russian transit length of more than 1.5 thousand km, the price of Turkmen gas on the border of Ukraine may be the same as that of Russian gas.

Then what is the interest in Turkmen gas. Maybe a guarantee of occupancy of the gas transportation system of Ukraine – the future jobs on the transit of Turkmen gas to Europe? After all, with the start of the southern and Northern streams, the volume of Russian transit will be greatly reduced.


It's all in the pipe

The resumption of direct supplies of Turkmen gas to Ukraine depends on the decision with Russia of a question about his transit. First in Russia the delivery was carried out in the framework of bilateral Turkmen-Ukrainian agreement /2002-2006/ annual amount to 36 billion cubic meters. Traders of deliveries in different years were ITERA, Gazexport, RosUkrEnergo and Gazprom. So, ten years ago Ukraine occupied the first place among the trade partners of Turkmenistan in foreign trade turnover of 1 billion 643 million dollars, in which gas accounted for 99.7%. According to the Ministry of economy and development of Turkmenistan, in 2012 foreign trade turnover with Ukraine amounted to about 705,4 million dollars.

During the visit, the presidents Yanukovych and Berdymukhamedov agreed "to ensure the continued growth of bilateral trade, diversification of its structure, the development of long-term forms of economic cooperation, deepening investment cooperation between Turkmenistan and Ukraine." The presidents visit to Lebap region, have launched three major infrastructure projects worth over 1 billion US dollars. Two bridges across the Amu Darya – rail and road, as well as the airport in the city of Turkmenabat will be built by 2016, the Ukrainian company "Altcom". Of course, Kiev and Ashgabat cheaper that payment within the framework of these projects was through the supply of natural gas. As, however, and other promising projects for reconstruction of blocks of the Mary hydroelectric power station and the creation of joint agricultural enterprises.

Signing a Memorandum with the state concern "Turkmengaz", Ukraine, as she probably believes, have got a trump card in the negotiations with Moscow on the issue of creating a consortium to manage the Ukrainian gas transportation system /GTS/ and the price of gas. Such indirect trumps her to date football world. This is, primarily, the already existing agreement on reverse gas supplies from the German RWE AG. According to Deputy Chairman of "Naftogaz" Vadim Chuprun, "from November 1, 2012 began the project with a German company; estimated in 2013 to get within 5 billion cubic meters of gas". Negotiations concerning the supply of natural gas from Europe through Hungary and Slovakia.

By the way, RWE AG since 2009 has been working on the terms of production sharing for exploration and production of hydrocarbons in the Caspian shelf of Turkmenistan, and it is possible that by 2020 will have its own gas in the Republic.

Shortly before Yanukovych's visit to Turkmenistan Ukraine made another step towards independence from Russian gas supplies. January 24 Minister of energy and coal industry Eduard stavytsky signed the agreement with oil and gas concern Royal Dutch Shell and company "Nadra Yuzovsky" on production sharing for shale gas on the Yuzivska area in Kharkiv and Donetsk regions. In Kiev plans to receive liquefied gas. This began the construction of the terminal on the black sea shore in Odessa region. The gas suppliers had not yet been determined, but among the potential are called the countries of the Caspian region /Azerbaijan, Turkmenistan/ North and West Africa, Egypt, Algeria, Nigeria/, Persian Gulf /Qatar/ USA or Turkey.

The visit of the President of Ukraine to Turkmenistan – to the main competitor of Russia in the gas market of the CIS – and the application on deliveries of Turkmen gas and its re-export to Europe are regarded today by many as some kind of psychological trick.


Ukraine is in a hurry to get an answer

Preparing for the purchase of Turkmen gas and the tools to open the Russian transit, Ukraine has acceded to the agreement on the free trade Area of the CIS. According to Prime Minister Mykola Azarov, "this agreement gives us the ability to pump Turkmen gas via the Russian pipe, that is, to diversify supplies of gas to Ukraine. Within six months after the entry into force of the FTA /January 1, 2012/ we will sign an agreement on transit by pipeline transport".

This right is defined by article 7 "Freedom of transit" of the agreement on the CIS free trade zone, which stipulates that "the parties concerned will enter into negotiations on an Agreement on transit by pipeline transport and shall complete such negotiations within six months after the entry into force of the instrument".

Working group on the elaboration of an agreement on transit by pipeline transport has already started its work, but the first meeting was held without the participation of the Ukrainian delegation, told ITAR-TASS earlier in the year the government Commissioner of Ukraine for cooperation with Russia, CIS and EurAsEC Valery Muntiyan. "We now understand why it was not our /Ukrainian/ delegations", – he noted.


And it's not that "no" and "Yes"

However, from Turkmenistan, one can hardly expect serious progress in the framework of the CIS once they have happened during its chairmanship last year. Everyone is well aware of the pragmatism of the Turkmen President Berdimuhamedov at which /at the helm since 2007/ Republic brought natural gas to the Chinese market and built an additional gas pipeline to Iran.

Turkmenistan systematically negotiates on construction of gas pipeline TAPI – Turkmenistan – Afghanistan – Pakistan – India under the banner of regional peacekeeping. Already concluded contracts of purchase and sale of gas and process has ever come close to the creation of a pipeline consortium. Ashgabat sometimes allows EU and USA to disturb himself about the prospects of gas supplies to Europe. But the firm position of Ashgabat to sell gas solely on its border periodically cools their ardor.

For the next five years Turkmenistan has contracted China supply 65 billion cubic meters of natural gas per year. Strong desire to add the Ukrainian market to the existing – Iranian and Russian – as Ashgabat does not occur. Yes and no reason to Ashgabat to spoil relations with Moscow. "Let Kiev agrees /with RF/ as, but we are always ready to provide gas," he told ITAR-TASS in "Turkmengaz".

At the talks with Ukrainian counterpart Berdimuhamedov never, according to Turkmen media, not mention the gas supplies to Ukraine. "A particularly urgent priority for the partnership," he called, not energy, and "transport and communication in the context of interregional relations, using the potential of transport-communication networks of the Central Asian, Caspian and black sea regions". This was confirmed and supported by the projects of construction of Ukrainian contractor Altcom bridges across the Amu Darya river and the airport in the city of Turkmenabat.

"A new promising area of cooperation," Berdymukhammedov called the tourist industry, inviting Ukrainian companies to participate in the development of a large-scale project on creation on the Caspian sea of the National tourist zone "Avaza", which have already made large investments. Taking into account the dynamic development in both countries, the private sector and business organizations, the President of Turkmenistan proposed to establish a business cooperation Council, which would "establish direct links between companies and firms of Turkmenistan and Ukraine".

To pipeline the subject of the President of Turkmenistan has addressed only within the framework of the discussion of promoting its long-standing initiative on "create under the UN aegis a new international legal mechanism aimed at formation of system of guarantees for sustainable energy in the world." Berdymukhammedov once again thanked the Ukrainian President for his support of this initiative, embodied in special resolutions of the General Assembly of the UN adopted in December 2008/. Thus, the Turkmen President noted the "commonality of views of the two countries on the issue of energy security and their willingness to work together on this fundamental issue."

Taking into account Ukraine's chairmanship in the OSCE this year, Berdymukhammedov also proposed "to be held in Ashgabat a high-level meeting under the auspices of the OSCE to discuss issues related to energy security". The Turkmen President believes that the initiative on creation of international guarantees of transit of energy resources can get a chance to develop and in the context of Russian–Ukrainian relations with the gas industry.


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