Turkmenistan's Image as Gas Supplier Takes Hit in Iran Row

As Turkmenistan and Iran continue to trade accusations in their unfolding dispute over natural gas debts, Turkmenistan has suffered a dismal defeat in the information war.

In the middle of December, some media outlets began reporting that Turkmenistan was officially demanding $2 billion for unpaid gas bills accruing since Iran was slapped with sanctions in 2012. Outlets predominantly cited Radio Free Europe’s Turkmen service, which in turn, in a report on December 20, quoted what appeared to be official sources. That same $2 billion figure also cropped up in an English-language analytical piece on Baku-based Trend news agency on December 19 prophetically titled “Odd gas debt dispute between Iran, Turkmenistan.”

The problem with all this is that the Turkmen government never has made any public statement about the size of the alleged debt and has, until recently, avoided mentioning the disagreement at all. 

Indeed, all public pronouncements in Turkmenistan about the state of ties with Iran has been cast in highly effusive and optimistic terms. When Iranian President Hassan Rouhani visited Ashgabat in March 2015, Turkmen state media declared an imminent surge of economic activity among the two nations.

“If last year [2014], trade turnover between our countries was $3.7 billion, then today we have declared our goal of taking this figure to $60 billion within the next 10 years,” the government website stated at the time.

Considering Iran had by this stage failed to make payments to Turkmenistan for best part of three years, this was a generous prediction to say the least.

While the issue of outstanding debts has recurrently cropped up in Iranian and other regional media, Turkmenistan has preserved complete silence, allowing the narrative to slip away from its control.

Things came to a head two days before the New Year, as Iranian media cited stories suggesting that the Turkmen government was panicking to secure an extension to the rolling gas supply deal. Mehr news agency depicted the situation in particularly farcical shades, citing Iranian officials as saying that the Turkmens pleaded with them to return to the negotiating table from the airport.

Those talks sparked a series of what subsequently were proven to be prematurely optimistic stories — again in Iranian media — about a last-minute, five-year supply deal being struck.

So when the gas stopped flowing on January 1, it appeared to all intents and purposes that Turkmenistan had unwarrantedly cut off supplies in defiance of a crisis-averting deal.

The story rolled on for more than 48 hours before Turkmenistan’s Foreign Ministry was finally moved, on January 3, to issue a statement high on indignation and low on information.

What the statement does claim is that the National Iranian Gas Company (NIGC) had stopped paying its arrears for gas deliveries since 2013.  

“As a result, Iran’s debts accumulated substantially, creating problems in the routine operations of Turkmen gas transportation infrastructure required to deliver gas to Iran in accordance with the long-term contract,” the statement said.

Turkmenistan insists that its state-owned energy Turkmengaz operates on a principle of strict self-sufficiency and self-financing and that hold-ups in payments from Iran were destined to lead to a halt in operations at gas wells, compressor stations, treatment plants and other infrastructure.

In view of a “lack of positive responses from the National Iranian Gas Company to constructive initiatives proposed by Turkmenistan and its passivity in the search for a mutually acceptable solution, it became necessary to restrict deliveries of Turkmen gas to Iran from January 1, 2017,” the foreign ministry statement said.

The note explains neither when the debts were accrued or the exact amount. Not even the slight cursory details are provided about the nature of the original agreement  reached between Turkmenistan and Iran, or how the latter violated the terms of the deal.

The NIGC quickly responded with its own statement to say that Turkmengaz was not entitled to cut off gas supplies even in the eventuality of mounting dues.

“Such acts would be outright violation of the initial gas deal between the two companies and an indication that Turkmengaz is not a reliable partner in international transactions,” the NIGC said.

The NGIC said that it was, in any event, unable to make payments due to international sanctions restricting its ability to make transfers to foreign banks.

“However, settlement of some debts was made under the sanctions by exporting goods and services to the Turkmen side besides issuance of guarantees by NIGC for the export of hundreds of millions of dollars worth of goods and services for exporters to Turkmenistan,” the company said in a statement translated into English by the Shana news agency.

Remarkably, Iran has even been able to take the high moral ground, condemning Turkmenistan’s foreign ministry for interfering in a purely commercial dispute and censuring Iranian media for their reports on the episode.

“With regard to the freedom of speech for the media in the Islamic Republic of Iran, NIGC shall not be held responsible for the veracity of what Iranian media outlets have released regarding the issue,” the Iranian company said.

Turkmenistan’s sluggish reaction to this diplomatic spat is par for the course and symptomatic of a closed system incapable and unwilling to engage in clear terms with the outside world. Given the country’s determinedly isolationist policies, this might not appear at first glance to matter, but Turkmenistan’s reputation as a reliable supplier of energy — be it in the form of gas, oil or electricity — is intensely important, especially as the country struggles to battle its way through a period of deep economic malaise.

Unless some emergency diplomacy is undertaken or Russia suddenly revises its 2016 decision to stop buying Turkmen gas altogether, Turkmenistan will be left with just China as a customer for its core commodity. 

What is worse, souring ties with Iran may also foreclose other avenues of export for Turkmenistan. 

Even as this dispute was beginning to heat up in December, Iran’s President Hassan Rouhani floated the idea of a gas swap deal involving Turkmenistan and Armenia. There is a remote scenario whereby Iran could serve as a transit market for Turkmen gas going not just to Armenia but further afield, to Western Europe, but prospects for that kind of cooperation may now be even more distant.

This article first appeared on EurasiaNet.org, a Natural Gas Europe Media Partner