[NGW Magazine] Mr Putin Goes to Ashgabad

This article is featured in NGW Magazine Volume 2, Issue 20

By Dmitri Shlapentokh

Industrially stagnant, Russian demand even for the cheapest gas imports must be weak; but it is important to maintain friendly relations with neighbours.

The rare visit by Russia’s president, Vladimir Putin, to meet his Turkmen counterpart Gurbanguly Berdimukhamedov at the start of October is important for various reasons.

One of them is Ashgabad’s possible decision to find compromise with Russia and abandon the Trans-Caspian gas line project, which was a bone of contention with Russia for a long time. Ashgabad might also have made other concessions to Moscow, whose nature is still not clear. 

After the collapse of the USSR Turkmenistan emerged as an independent state, and one of the most backward republics, even by central Asian standards. Still, Turkmenistan was among the richest republics in regard to natural resources. Saparmurat Niyazov (1940-2006), the first president who acquired the title “Turkmenbashi” – Father of All Turkmens – had pursued a sound policy from the point of view of regime stability.

He immediately established a harsh, authoritarian regime, and made impossible the appearance of any viable opposition. This was not hard to do, for Turkmens were politically passive and the Soviet regime in Turkmenistan was a smooth continuity of the native tradition. While similar to other regimes in central Asia, Niyazov’s was not identical to them.

Niyazov’s model

Similar regimes had emerged in the other central Asian states. But they were hardly stable and peaceful. Nearby Uzbekistan had been ruled from the start by the authoritarian Islam Karimov (1938-2016). Still, terrorist attacks did occur and there was a major uprising in Adijan in 2005, which was quelled with the utmost brutality.

Niyazov’s regime was much more peaceful for a simple reason: the authoritarian control was accompanied by generous social security. Utilities such as water and electricity were free. These arrangements were to be supported by income from Turkmenistan’s natural wealth, mostly gas, of which it has vast reserves.

The problem here, however, was how to deliver the gas to foreign markets. In the very beginning of post-Soviet history, Turkmenistan chose the easy and most natural avenue. As a former Soviet republic, it was connected with the European republics of the former USSR through the Russian gas line.

Ukraine, one of the most industrialised republics, was a voracious consumer and Turkmenistan supplied it with gas throughout the 1990s. Moscow allowed this to happen for a variety of reasons. To start with, Moscow still had a sort of imperial inertia related to vague dreams of unification of the USSR in this or that form.  These feelings had led to the creation of a “union” state with Belarus by the end of Boris Yeltsin’s tenure as president of the Russian federation.

Second, Moscow believed that the market for gas would expand. Therefore, Gazprom did not fear competition. Still, by the beginning of Putin’s presidency, the situation had changed. 

The republics of the former USSR became increasingly seen as just foreign countries and Moscow saw no reason to subsidise them in any way. Still, Moscow folk continued to preserve the old belief that the gas market would continue to expand. Consequently, Moscow believed that it could play the role of middleman and make money

According to a 2003 agreement with Turkmenistan, Russia would buy most of Turkmenistan’s gas and then resell it to the West for a profit. But this plan did not work. The major problem was that gas prices started to decline. In addition, Moscow had enough of its own gas and did not need Turkmen gas. 

Consequently, Moscow scaled back the purchase of Turkmen gas considerably, which hardly helped to improve Moscow’s relationship with Ashgabad. The explosion in the gas line provided the excuse for Turkmenistan to end its relationship with Moscow in 2009. By that time, Ashgabad seemed to have found another customer: China.

In search of non-Russian options 

Indeed, by 2009, the first string of Turkmenistan’s gas line was launched and two more followed. It looked as if Turkmenistan should not have any worries: China is a huge market and the source of an endless stream of cash. As a matter of fact, Turkmenistan received generous Chinese loans for the construction of the gas lines. Still, problems had emerged.

To start with, China, sensing its almost complete monopoly, proposed lower prices. Turkmenistan had another outlet: Iran. Iran was the first state to buy gas directly from Turkmenistan since the 1990s, and the first to buy it without Russia as intermediary.  

But the amount of gas sent to Iran was small. Turkmenistan’s major plans to diversify the gas market was connected with the idea of building the Trans-Caspian gas line. It would have sent gas to Azerbaijan and from there, further to the West. The European Union and the US were both enthusiastic supporters of this plan, as it provided the avenue for a sizeable gas supply independent of Russia.

But serious problems made the execution of the plan extremely unlikely. Both Russia and Iran were strong opponents of the plan, and for obvious reasons – at least where Russia was concerned.

Watching the decline of gas prices, Russia had no interest in competition from Ashgabad. To reinforce its position, Russia increased the size of its Caspian Sea navy. Turkmenistan and other Caspian Sea states also increased the size of their navies. 

Still, its navy alone was not enough to convince Ashgabad that Moscow would not dare to use force. In the early 2000s, Turkmenistan might also have thought about the possibility of US backing, owing to the willingness with which the US, ruled by the ‘neo-cons,’ applied force in various parts of the world.

Finally, there was also a further option: the gas line that would run from fields in Turkmenistan and deliver gas to Afghanistan, Pakistan and India. The Tapi project was officially launched in 2015, when Turkmenistan started to build gas lines on its side. But Ashgabad has suffered serious setbacks that drastically curtailed its ability to send gas to foreign markets.

The new problems

The most important was the apparent abandonment of the Trans-Caspian gas line project. In the past, Turkmenistan believed that EU pressure, and especially the US’s direct military backup, would lead to Russia’s and Iran’s concession: fearful of direct confrontation with what seemed to be an all-powerful US, neither would dare prevent Turkmenistan from building gas lines. 

But with the US’s increasingly visible debacles in the Middle East, military budget cuts and more recently its inability to deal with North Korea, Washington’s appetite for new military adventures declined. 

Consequently, the possibility of direct confrontation with Russia over the Caspian Sea became hardly inspiring for Washington. Further, with the advent of Trump, US plans began to resemble Russia’s: Washington wanted to minimise the amount of gas sent to European markets from non-American sources.

Washington believed that Europeans would buy, if not Russian gas, then at least American LNG. There was also a problem with China, whose demand for gas was overestimated. In addition, China expected to buy large amounts of gas from Russia through the Power of Siberia gas line.[1]  The situation with Russia went from bad to worse. While selling gas to Russia was resumed, it stopped completely by 2016.[2] Finally, the contract conflict with Iran led to that country cutting its gas purchases too.[3]

The situation with Tapi has also become unclear as Afghanistan remains extremely unstable, while relations between India and Pakistan were also tense. All of this put the project in limbo, or at least the project’s completion could be well delayed.[4] It was not surprising that the old Niyazov model became increasingly unsustainable. 

Responding to these challenges, Berdymukhamedov (1957- ) tried to change the socio-economic arrangement. To start with, he announced that instead of sending gas and oil to export markets, it would use them as feedstock for producing a variety of goods which could be exported.[5] But building a strong industrial base takes not only considerable financial resources, but also time and Ashgabad had neither.

Consequently, the strong social security net, which was one of the cornerstones of the “Turkmenistan model” and which made Turkmenistan quite different from Karimov’s Uzbekistan, developed large holes. 

Berdymukhamedov actually announced the end of generous subsidies and freebies. In this situation, Turkmenistan decided to court Russia, which was how Putin came to visit Ashgabad for the first time in many years.

Russia/Turkmenistan dalliance

What will be the outcome of this visit? Of course, both sides exchanged pleasantries and compliments. Berdymukhamedov also gavea rare breed of Turkmen dog as a birthday present to the 65-year-old Putin. There were some agreements for the development of tourism, albeit experts doubt that they could have practical applications. There were some economic implications of the visit, andRussia also was to send 250 Kamaz trucks to Turkmenistan. The most important was, of course, the gas problem. Gazprom, sensing Turkmenistan’s vulnerability, seemed to continue to propose gas purchases from Turkmenistan, but with a heavy discount. It was quite possible that Putin brought these proposals to Ashkhabad. According to other sources, Putin proposed Berdymukhamedov to allow Turkmenistan to build a Caspian Sea gas line. In exchange, Turkmenistan would send considerable amounts of gas via Gazprom gas lines. It is implied here that Gazprom could collect fees and regulate the flow of gas to Europe and Turkmenistan would receive what would be left from the deal.

Image credit: The Kremlin

It is unclear whether or not Turkmenistan will agree to this proposal. Berdymukhamedov might still believe that some alternative projects, such as Tapi, will eventually be finished despite all odds. Still, it is most likely that the old Niyazov model, which implied stability and prosperity from selling natural resources, mainly gas, has become a thing of the past.