Turkmenistan Signs GPA for Some TAPI Partners; Weathers Gas Ministers’ Shake-Up

Turkmenistan signed gas purchase and sale agreements separately with Pakistan and India to move forward with the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, the State News Agency of Turkmenistan reported May 28. But only a memorandum of understanding on "further development of cooperation in the gas industry" was signed with Afghanistan, and the issue of pricing was cited by Turkmen Deputy Prime Minister Baimurat Hojamukhamedov, not security, as many analysts anticipate for TAPI.

While there is considerable skepticism about the pipeline’s viability, India’s Oil Minister S. Jaipal Reddy said India's energy demands would quadruple by 2017 with its growing economy, and TAPI was eagerly awaited, AFP reported.

The hopes of the TAPI parties are ambitious: not only will the 1,700-kilometer pipeline ultimately deliver 33 billion cubic meters, but supposedly create jobs, social infrastructure, and political stability. It's not clear if an underground pipeline involving deals with warlords will add to the region's security, but that's part of why the Asian Development Bank (ABD) is backing the project, which it has dubbed "the peace pipeline.” The United States, which expects to withdraw troops from Afghanistan in 2014, is also promoting it, although not with any promise of direct guarding by NATO troops.

Turkmen officials didn't give a start date for construction, which is obviously pending on final agreement with Afghanistan -- and the other parties’ acceptance of that agreement. And the problem of instability has not gone away -- if anything, the route through Pakistan also prompts security concerns as great as those for Afghanistan.

The advancement of the new, ambitious project has also brought the same kind of strains to the Turkmen leadership as other international pipeline projects. Two days after the TAPI deal was signed, President Gurbanguly Berdymukhamedov fired Bayramgeldi Nedirov, Turkmenistan's oil and gas minister since July 2010, citing "poor performance," the state media reported. He was replaced by acting minister Kakageldy Abullaev, former deputy head of Turkmengaz and one of Berdymukhamedov's docile "rivals" in the controlled presidential elections who garnered 0.16 percent of the vote and was appointed to his position at Turkmengaz immediately after the elections, regnum.ru reported May 26.

According to regnum.ru, Nedirov was sacked for refusing to fulfill the president's order not to lower jet fuel prices for international transit flights, and was accused of "harming the economy." There was no word on how this might impact the "gas-and-go" arrangement the US has with Turkmenistan for re-fueling of flights with non-lethal deliveries to Afghanistan.

In any event, these aren't the most important positions on Turkmenistan's energy Olympus. Yagshygeldi Kakayev, head of the Presidential State Agency for Management and Use of Hydrocarbon Resources, continues to hold the most powerful position directly under the president, and has managed to hold on to his job since 2008. He previously served as petroleum minister under Saparmurat Niyazov and was made head of Turkmengaz after Berdymukhamedov came to power. But on May 5, the President reprimanded him for “severe shortcomings” of an unknown nature and also made some unspecified revisions to the Agency’s operations, trend.az reported. The powerful and secretive body has come under criticism from Western human rights groups for appearing to funnel energy revenues directly to the President himself with insufficient outside audits. The Agency issues licenses to foreign oil and gas companies to operate in Turkmenistan and signs the Caspian Sea production-sharing agreements.

Now the president has decreed even more oversight of the few foreign companies with such arrangements. But Kakayev seems to have weathered the shake-up – a common feature of the lives of high officials in Turkmenistan – and was promoted to deputy prime minister May 28.

Turkmenistan's achievements in wrangling TAPI to the GPA stage also sparked a predictable around of negative commentary from Russia, which was once Turkmenistan's main gas buyer but has now fallen to third place among its trading partners, despite more than $4 billion in turnover, edged out by China and Turkey. That development was largely of its own volition, as Moscow refused to pay Ashgabat's higher prices with less demand from Europe.

Even so, Russian analysts have fueled speculation that Turkmenistan does not have enough gas to serve all its customers, based on its knowledge of Turkmenistan's holdings in the Soviet period and features of fields it says are analogous to Russian sites made since then. Innokenty Adyasov, writing for regnum.ru May 24, says documents allegedly “illegally obtained by Western investors” claim the estimates of 6 trillion cubic meters made by Gaffney, Clines & Associates about the South Yolotan reserves – double previous findings  -- were based on flawed technical documentation from Turkmen engineers. GCA has denied these claims, and Turkmengeologia has recently confirmed the findings about the new fields, combined into a “super deposit” renamed Galkynysh. Russian analysts persist in claiming that Turkmen gas will require extra expense for extraction due to the depth of the deposit (more than 4 km) and degree of sulphurization. There’s also the competition from China, which has already built a pipeline out of Turkmenistan and already provided soft loans of an estimated $8 billion, and has pledged to buy up to 65 bcm.

In an article for Kievskiy Telegraf, Igor Shevyrev says TAPI could be divisive rather than pacific and could meet the same fate as Nabucco, which has been forced to sharply curtail its plans. "TAPI is more than a pipeline, it's an instrument for geopolitical divvying up of all of greater Central Asia," he says.  The ABD first backed TAPI in 1995, but it was not until India began to show interest and Berdymukhamedov visited New Delhi in 2010 that the project began to move. America has pressured India to drop out of the competing Iran-Pakistan-India (IPI) pipeline. TAPI is estimated to cost $7.6 billion, but has never suffered from lack of financing, unlike Nabucco.

Shevyrev believes that the Afghan army, even with US training, will not be sufficiently strong enough by 2014 to secure 735 kilometers of the pipeline through Kandahar and Herat, some of the most volatile regions. Even if construction began immediately while ISAF is still present, it would not be completed in time. Even so, the US is the greatest winner if TAPI is completed because it will serve to deter Iran, says Shevyrev.

Central Asian leaders are not necessarily going to go along with US plans to isolate Iran, however. They already involve Iran in a number of other railroad and electricity infrastructure projects and Turkmenistan already sells gas to Iran, a customer that has increased its purchases in recent years. Tajikistan's Foreign Minister Hamrokhon Zarifi recently said at a speech in Washington DC at the Central Asia-Caucasus Institute, "Why should we avoid participation of Iran in gas pipelines? I'm not seeing any obstacles. If Iran would be ready to discuss, we will discuss." Recently, Berdymukhamedov discussed TAPI with the Tajik Prime Minister Akil Akilov during, rosinvest.com reported. Tajikistan would like to buy Turkmen gas, but it would have to pass first through Uzbekistan. Ostensibly, there is a problem with the "separate functioning" of the two pipeline systems but Tashkent's water disputes with Dushanbe are more likely the real issue.

By Catherine A. Fitzpatrick