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TURKMENISTAN


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 6,010 7,672 4,000 110
         
GNI per capita
 US $ 1,120 1,200 950 131
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 321 - (03/10/07)

How things have changed
The Turkmen situation has undergone a profound transformation. In December the crazed dictator of the country died, Saparmurat Niyazov, needless to say the former Communist boss of the former Soviet republic.

It can now at last open out to the wider world. Niyazov was a parochial megalomaniac. The only people prepared to put up with him were the Russians. He was totally unable to establish relations with anyone else. He even kept Turkmenistan out of the Shanghai Cooperation Organisation (SCO), too afraid to leave his country.

Opening up to the world
His successor is changing all that. He attended the Bishkek SCO meeting in August as an observer. It is doubtless only a matter of time before Turkmenistan joins.

Invitations to foreign leaders are legion. In Niyazov's day only the Russians were sure of a welcome. Turkmenistan's new president has declared the gas-rich, but so far isolated, Central Asian state "open to the world ", as it steps up its efforts to deepen relations with the West since the death of its autocratic leader last December. 

Gurbanguly Berdymukhammedov told the UN General Assembly in September that Turkmenistan was "open for broad-scale partnership in all areas of activity." It was a novelty for a Turkmen leader to address the assembly or be in New York at all.

He proceeded to an extended tour of the US, flanked by his top oil and gas officials. It is becoming apparent that the US and the EU are back in the game.

Come in Kazakhstan
Before going to the US, he had an important meeting at home. Kazakhstan is a vital partner for Turkmenistan, with huge gas and oil reserves itself. It would help to coordinate their approach to the world market. Economic issues were at the centre of Kazakh-Turkmen talks in Ashgabat on September 12th. President Berdymukhammedov said economic cooperation with Kazakhstan is a "priority aspect." 

Kazakh President Nursultan Nazarbayev and Berdymukhammedov also discussed the construction of a gas pipeline that would deliver Turkmen gas to Russia via Kazakh territory. Kazakh energy companies have expressed interest in investing in the development of Turkmenistan's oil fields, too.

The two sides also discussed a railroad project going through Uzen-Gyzylgaya-Bereket-Etrek-Gorgan -- stretching from Kazakhstan to Iran via Turkmen territory.

But it is not only officials in Astana who aim to develop economic ties neighbours. Kazakh companies -- state-owned as well as private ones -- have shown the interest and financial capacity to invest in neighbouring countries' energy sectors, construction businesses, and general services. The political will of the authorities has coincided with the companies' pragmatic interests at present. 

Russia, China Also Look To Move In
Kazakhstan is not the only country expanding its economic presence in Central Asia. Russia has had a strong economic position in its former "soft underbelly." The Russian state gas monopoly Gazprom has been the major foreign partner of Turkmenistan and Uzbekistan. 

In recent years, China has also greatly strengthened its economic position in the region. Many Central Asians have even expressed fears of China's "creeping expansion."

Turkmenistan has reached an agreement with Beijing on the construction of a gas pipeline that is expected to start transporting Turkmen gas to China by 2009, while Russia's Gazprom also of course has a long-standing agreement to export Turkmen gas.

Astana versus Moscow and Beijing?
Will these developments produce a clash between the economic interests of Astana and those of Moscow and Beijing in Central Asia? 

Undoubtedly, there are contradictory interests. But Astana, Moscow, and Beijing are bound by dozens and even hundreds of bilateral contracts, agreements, and treaties as well as big institutional projects, like the SCO. The SCO summit in Bishkek in August proved that -- at least in the energy sector -- China, Russia, and Kazakhstan are interested in settling those contradictions on Turkmen gas.

As the gap deepens between the rich and poor in all Central Asian countries, there are also growing discrepancies between Kazakhstan, on the one hand, and poor countries like Kyrgyzstan, Tajikistan, and Turkmenistan on the other. This makes regional stability more vulnerable. Kazakhstan should help its neighbours by investing not only in the gas sector, but also by building hospitals, schools, and roads.

The new Great Game
To understand the full import of what is going on, one needs to go back a bit in time - not so far back as the Great Game between Great Britain and Russia over Central Asia in the nineteenth century, however, which never really amounted to much. It was a pure British paranoia about India that fuelled it - given that the Russians were expanding eastwards to the Pacific, not southwards across the highest and most inhospitable mountains in the world to take on Britain, the world's premier power at the time. Curzon and the rest of them were living in a dream-world. 

But there is a real Great Game across Central Asia these days for very tangible rewards, its carbon resources. The players are Russia and Britain's successor as premier power, the US, plus the EU and China.

The Kremlin strikes back
The Kremlin was immediately alarmed in December at Niyazov's death. Their man was out for the count. That any successor would venture to diversify gas exports away from Russia was obvious.

At first things seemed to goi their way. On May 12th, at the tripartite Central Asia summit in the city of Turkmenbashi, Turkmenistan, Putin, Berdimukhamedov and Kazakh President Nurusultan Nazarbayev announced their intent to upgrade and expand gas-transportation pipelines from Turkmenistan and Kazakhstan along the eastern shore of the Caspian Sea, directly to Russia. Simultaneously, it was announced that the Turkmenistan-Uzbekistan-Kazakhstan-Russia pipeline of the Soviet era would also be modernised. 

The intention was to overhaul the Soviet-era pipeline system known as Central Asia-Centre, ensuring it would have a capacity of 90 billion to 100 billion cubic meters (bcm) at the Russian border by 2010 so that it could handle the production of the vast Turkmen and Uzbek gas fields. Moscow wanted the relevant inter-government agreements to be signed by September 1 so that the corporate agreements could be concluded by the end of the year, and consortia could be formed by early 2008. Moscow expected actual construction to commence by the middle of next year. 

The entire project is predicated on the belief that Russia will have almost exclusive access to Turkmenistan's vast gas reserves and will hold a near-monopoly on Turkmen gas exports. This it did of course in Soviet days, but also under Niyazov.

Watchers of the Great Game concluded that Putin had dealt a death blow to all Western plans to bring Turkmen gas to the European market bypassing Russian territory, which has been the leitmotif of the United States' Central Asia policy over the past 15 years. 

On the one hand, the Russian stratagem to get exclusive hold over Turkmen gas meant that the proposed trans-Caspian pipeline project and Nabucco pipeline project, and the existing Baku-Tbilisi-Ceyhan pipeline and Odessa-Brody-Poland pipeline - westward energy routes to Europe supported by the US - were all doomed. On the other hand, Moscow was poised to tighten its control of the transit and use of Central Asian oil and gas, apart from drawing the region's bulk of future outputs to transit routes under Russian control. 

Without doubt, in their totality, the May 12th agreements meant that Moscow inflicted a strategic defeat on the US's Central Asia policy. To reinforce the success, Putin visited Austria on May 23-24 and signed various agreements under which the Russian gas company Gazprom would enlarge its market share in Austria and gain direct access to the retail trade, and Russia would use Austria as a transit corridor for European markets in Italy, France, Hungary, Germany, Slovenia and Croatia. With this, the Nabucco pipeline project's future, in particular, looked extremely gloomy. 

Everything seemed to work in Moscow's favour when on June 23rd a memorandum was signed in Rome between Gazprom and Italy's ENI on a 900-kilometre pipeline project across the Black Sea from Russia to Bulgaria with an annual capacity of about 30bcm. The undersea pipeline, on reaching Bulgaria, would have two options for the Bulgaria-Italy route. A south-western option would be through Greece and the Adriatic seabed in the Otranto Strait to southern Italy, while a north-western route would run from Bulgaria via Romania, Hungary and Slovenia (and possibly Austria) to northern Italy. Bulgaria and Greece promptly announced their intention to join the project, known as the South Stream project. The Wall Street Journal aptly described it as a "pipeline into the heart of Europe". 

The upstream source for the South Stream project would be largely Central Asian and Siberian gas. Russia's game plan was obvious: maximize its control of the export routes for Central Asian gas. Russia signalled that it was outstripping the US both in regard of the upstream race for Central Asian gas as well as in the race for control of transit and downstream activity. 

But Turkmenistan failed to meet the September 1st deadline to confirm the May 12th agreements, or even an extension to October 1st. Indeed, its president was in the US.
The US Administration goes into action
What had happened was as follows. 

Alarm bells began ringing in Washington after the Kremlin's apparent May 12th triumph. On May 30th, Vice President Dick Cheney's deputy assistant for national security affairs, Joseph Wood, rushed to Baku, Azerbaijan. He had a single message: Washington intended to meet the Russian challenge head-on and would persist with the policy of opening direct access to Central Asian oil and gas through Azerbaijan and Georgia, bypassing Russian territory and Russian pipelines. He stressed the US would push ahead with the Nabucco and Turkey-Greece-Italy gas transport projects. He told the Azerbaijani leadership that it should take the initiative to sort out Azerbaijan's bilateral disputes with Turkmenistan so that the latter could be drawn into the proposed gas projects. 

Simultaneously, on June 1st, Steven Mann, US principal deputy assistant secretary of state, held talks with Berdimukhamedov in Ashgabat. Mann strongly pitched for the trans-Caspian gas pipeline project (Turkmenistan to Azerbaijan to Georgia to Turkey to Europe). He conveyed Washington's keen interest that Turkmenistan should sell its gas to the European market directly, without the Russian intermediary. 

Other senior US officials began fanning out to the Caspian region carrying similar messages that it would be far more advantageous for the Central Asian gas- and oil-producing countries to deal with European buyers directly. Thus US assistant secretary of state Richard Boucher visited Kazakhstan and Deputy Assistant Secretary of State Matthew Bryza visited Azerbaijan in the first week of June. Washington also began pressuring the EU to display a sense of urgency in forestalling the looming Russian monopoly over Central Asia's gas exports. 

Washington's primary intent was to sow seeds of doubt in the Turkmen mind regarding the wisdom of putting all its eggs in the Russian basket. On June 21st, Washington upped the ante when Admiral William Fallon, commander of the US Central Command, arrived in Ashgabat and was received by Berdimukhamedov. Fallon carried a brief on energy cooperation. 

The consultation was evidently productive. On June 27th, when Evan Feigenbaum, US deputy assistant secretary of state for South and Central Asian affairs, arrived in Ashgabat with a delegation of American oil majors, he heard good news. "The president [Berdimukhamedov] stated publicly, very clearly, that Turkmenistan remains interested in the trans-Caspian pipeline," Feigenbaum later told the media. 

He said his message to the Turkmen leader was, "American policy on energy has been very clear for a very long time. Monopoly tends to work to the disadvantage of producers ... The point is, what is good for the United States is good for the global energy supply and global energy security. That has been the basis of our conversation with Turkmenistan and other producers in this part of the world." 

Ten days after Feigenbaum's discussions, Matthew Bryza, deputy assistant secretary of state, arrived in Ashgabat. On the eve of the visit, Bryza said in Washington on July 10th, "There is a large - huge - supply of natural gas in the far-western reaches of Turkmenistan, which, if the market decides, will make its way to Europe via Azerbaijan ... And I'll leave for Turkmenistan tomorrow to see if we can help Azerbaijan and Turkmenistan build on the momentum they've already created in their relations." 

A wrench in the wheel 
Moscow certainly took note of these strange goings on - a stream of senior US diplomats attired in pinstripe suits with top executives of oil majors with suspiciously heavy-looking attache cases in tow, trooping out of Ashgabat hotel rooms almost every week. If there was any doubt about what they were up to, that became clear in late July when US-based energy company Chevron announced its intention to open an office in Ashgabat and participate in the development of Caspian energy resources. 

On July 3rd, at a public ceremony in Ashgabat marking his 50th birthday, Berdimukhamedov said Turkmenistan maintained its "neutral status" and had "equal relationships" with all. He added, "Without joining any kind of political alliances, we will carry on with our efforts to build new gas pipelines to carry our gas to China, and to Pakistan and India via Afghanistan, and to Europe via the Caspian Sea. This means that we will have equal and mutually beneficial relations with Russia and the United States, with European countries, and with our neighbours as well." 

Even if Moscow kept up an air of confidence about Berdimukhamedov, a degree of uneasiness was inevitably creeping in. This became apparent when in an interview with the Russian media on July 6th, Russian First Deputy Foreign Minister Andrei Denisov hit out that the string of Russian successes in the Caspian energy war was "getting on Washington's nerves". He continued, "The US has been lobbying the idea of an East-West energy corridor for a long time. Its aim is to arrange the transportation of hydrocarbons from the Caspian region bypassing the territories of Russia and Iran." 

He warned the "notorious trans-Caspian gas pipeline" would run into obstacles, since the status of the Caspian Sea was yet to be determined, and second, Turkmenistan and Azerbaijan were involved in disputes over the ownership of a number of fields. "In addition, the special nature of the Caspian should be taken into consideration. Here the risks are very high due to the closed nature of the water system, the geology of the sea bed and the presence of strong underwater currents," Denisov pointed out. 

Indeed, Denisov has a point. Moscow is betting on how Washington will be able to cross such formidable hurdles. Russia and Iran are literally in a position to throw a wrench in the wheel if they sense that Washington is getting close to the realization of the trans-Caspian project. Both Moscow and Tehran will be keenly watching Berdimukhamedov's discussions in the US during his current visit. It couldn't have escaped their attention that highly influential US oil majors from Texas, which carry much clout within the George W Bush administration at the highest levels, are sponsoring the visit of the Turkmen delegation to the US. US Secretary of State Condoleezza Rice, who once served on the board of directors of Chevron, is scheduled to meet with Berdimukhamedov. 

The wild Iranian card 
Iran fully shares Russia's antipathy toward US "poaching" in the Caspian region. This was in full display when Berdimukhamedov visited Tehran on June 15th-16th. Iranian President Mahmud Ahmadinejad cautioned his Turkmen counterpart, "Certain powers are in their own interests turning the issue of the Caspian Sea into a challenge among regional countries ... certain bullying powers are after the oil and energy resources of the Caspian Sea, but the environment and security of the sea has a major impact on the life of the littoral states." 

Ahmadinejad made it clear that Iran will strongly oppose the US presence in the Caspian region. The Iranian position is that the establishment of sustainable security within the Caspian region must be the prerogative of the littoral states (Russia, Kazakhstan, Turkmenistan, Azerbaijan and Iran) and no US involvement will be allowed. Russia sees eye-to-eye with the Iranian position. 

However, Tehran also has its own agenda in the energy sphere, separate from Russia's, in opposing the US-sponsored trans-Caspian gas pipeline project. Tehran has consistently canvassed for increased exports of Turkmen gas, oil and petrochemical products through Iran. Given Turkmen-Azeri tensions, Ashgabat also traditionally feels more comfortable about exporting its gas via Iran rather than routing it through Azerbaijan. 

The mutual interest of Tehran and Ashgabat to route gas via Iran to the Western market found its expression when the energy ministers of Turkey and Iran signed a memorandum in Ankara on July 13th on gas deliveries from Turkmenistan and Iran via Turkey to Europe. The idea didn't quite come out of the blue, but it was nonetheless startling in its freshness. To be sure, the proposal was a direct snub to Russia. It in essence aimed at helping to revive the Nabucco gas pipeline project. 

It would open up Iran's gas reserves for Western markets, thereby reducing Europe's dependence on Russian supplies. The proposal involved 20bcm of gas reaching Turkey annually from Iran and 10bcm from Turkmenistan via Iran. The entire volume (30bcm) would be added to the Azerbaijani gas already reaching the Nabucco pipeline heading to Europe, which would assure the project's viability. The Iranians threw in a big carrot for Turkey, offering to the Turkish Petroleum Corp the right to develop the South Pars blocks 22, 23 and 24 without any tendering and on a buy-back arrangement. 

At one stroke, the Turkish-Iranian proposal strove to undercut Putin's gains through May-June in establishing monopoly on Turkmen gas. It underscored how Europe could exploit Iran's ambitions as an energy exporter if only the Iran nuclear issue didn't get in the way. In fact, but for the stand-off with Iran, the Turkish initiative fitted admirably well with Washington's own energy strategy toward the Caspian. 

Not surprisingly, Washington put its foot down on the Turkish initiative. But the jury is still out. Most certainly, Washington will have been quietly pleased that Turkey's memorandum of understanding with Iran is at the very least likely to reinforce misgivings in the Turkmen mind about committing itself to the Russian-Kazakh-Turkmen inter-governmental agreement handing over to Moscow virtual monopoly in the export of Turkmen gas. 

The sequence of dramatic developments has shown that rivalries over the Caspian energy reserves are getting a great deal more rough and ruthless. All means are fair if the end is in sight - as in love or war. It will be interesting to watch how Washington reacts to the Turkish-Iranian tango, as time unfolds. Will it remain adamant that Europe should have no truck with Iranian gas? Or will it coyly step aside and let Iran compete with Russia in the European gas market? 

Ashgabat's China option
Meanwhile, Ashgabat began some manoeuvring of its own. It did its homework and concluded it could bargain better with Moscow if it had a European option (with US backing, of course) and, furthermore, that it could do better still bargaining with Moscow and the Europeans by developing a "China option". At any rate, Berdimukhamedov arrived in Beijing on a two-day visit on July 17th at President Hu Jintao's invitation. 

Before leaving for Beijing, he said his visit marked "not only a new page in the chronicles of Turkmen-Chinese cooperation, but also a milestone in the implementation of Turkmenistan's foreign-policy strategy". He intended to build on an agreement his predecessor Saparmurat Niayzov had signed during his visit to Beijing in April 2006 envisaging the construction of a Turkmenistan-China gas pipeline project capable of delivering 30bcm of Turkmen gas annually for a 30-year period commencing in 2009. 

The joint communique issued after Berdimukhamedov's visit to Beijing said Beijing regarded China-Turkmen relations as an "important component" of China's foreign policy, while Ashgabat viewed relations with China as "one of the priority directions" of its foreign policy. 

But Turkmenistan's dealings with China haven't gone down well in Western capitals. They fear that the West collectively will be the loser if Ashgabat chooses to send its surplus gas to China instead of to Europe via the Nabucco pipeline. Indeed, China's breakthrough in Turkmenistan has been impressive. 

During Berdimukhamedov's visit to Beijing in July, China National Petroleum Corp (CNPC) signed a production-sharing agreement for exploring and developing gas fields on the right bank of Amu Darya River in eastern Turkmenistan with known reserves of 1.7 trillion cubic meters of gas. This was in addition to the CNPC's previously existing US$1.5 billion contract for gas-field exploration in southeastern Turkmenistan during the 2007-10 period. 

But Beijing has reason to be nervous. In the ultimate analysis, will Ashgabat deliver what it promises, or use the China option as a bargaining chip vis-a-vis the Europeans? The Turkmen deal matters a lot to Beijing. The proposed Turkmenistan-China gas pipeline is expected to run to China's Xinjiang Uighur autonomous region and link up with the 6,500km pipeline under construction (to be completed by 2010) connecting Xinjiang to Guangzhou. Even though Berdimukhamedov assured his Chinese hosts in Beijing that the "Turkmen side will do everything it can to implement the agreements ... [and] Turkmenistan has enough surplus gas for export in various directions", doubts persist in the Chinese mind. 

Chinese Premier Wen Jiabao gave vent to Beijing's anxieties when he told the visiting Turkmen president of the need to "implement bilateral agreements, [and] work closely on the gas project". The joint communique also made a pointed reference to "the need to strictly abide by, and conscientiously implement" Chinese-Turkmen energy cooperation agreements. 

Shades of a new cold war
If the Turkmen-Chinese energy deals go through, the West stands to lose heavily. There simply might not be sufficient surplus gas left for export to Europe. In comparison, Russia is better placed to absorb the entry of the Chinese competitor on the Turkmen gas scene. As for Tehran, its overriding priority is that the "Great Satan" (US) is kept away from Turkmen energy reserves at any cost. Iran welcomes China's presence in Central Asia. Besides, a Turkmenistan-China gas pipeline system could easily be connected to Iran at a future date, giving Tehran direct access to the Chinese energy market. 

These cross-currents have found expression in recent weeks. In the middle of August, on the eve of the annual summit meeting of the Shanghai Corporation Organization (SCO) in Bishkek, Kyrgyzstan, the US Trade and Development Agency offered a financial grant to Azerbaijan and Turkmenistan for conducting feasibility studies to build trans-Caspian undersea pipelines. The timing was perfect. Washington wanted to restrain Turkmenistan from drawing too close to the SCO, as that would be a great leap forward in the realization of an Asian energy grid. 

Also, Washington finally succeeded in getting the EU to get its act together for a coordinated energy policy toward Central Asia and Russia. On September 14th-15th, a conference was held in Budapest where the EU resoundingly affirmed its intention to press ahead with the Nabucco project. Andris Piebalgs, the EU's energy commissioner, described Nabucco as an "embodiment of the existence of a common European energy policy". The EU appointed the former foreign minister of the Netherlands, Jozias van Aartsen, coordinator for the Nabucco project. 

The conference clarified the contours of the 3,300-kilometer Nabucco, which will now originate in eastern Turkey and run through Bulgaria, Romania and Hungary to Austria, with a capacity of 30-35bcm annually. European banks, especially the European Investment Bank and the European Bank of Reconstruction and Development, will fund the project, estimated to cost 5 billion euros (US$7.1 billion). 

Parallel to US diplomatic efforts in Ashgabat, the EU has also begun working on the Turkmen leadership. There is a new sense of urgency in Brussels as the EU seems to have concluded that any effort to break dependence on Russian supplies will have to begin with Ashgabat. 

Immediately after the Budapest conference, Austrian Economics Minister Martin Bartenstein visited Ashgabat. (Austria has a pivotal role in the Nabucco project.) Berdimukhamedov told Bartenstein that Turkmenistan has "multiple vectors in its energy policy and in creating alternative energy export routes, including in the southern direction through the Caspian Sea, it is prepared to deliver natural gas to European countries". In other words, he put on record Ashgabat's keenness to export its gas directly to the European market without the Russian intermediary. 

At the same time, British Energy Minister Malcolm Wicks also visited Ashgabat. (Wicks is the first cabinet minister from Britain to visit Turkmenistan in the past nine years.) His visit followed a high-powered BP delegation, which held discussions in the Turkmen capital. Wicks took up the trans-Caspian pipeline project (Azerbaijan-Georgia-Turkey route) with Berdimukhamedov. He said this feeder pipeline for Nabucco would be of "special importance" to the EU, which would fund the project. 

Wicks told the media later that Moscow is butting into Ashgabat's energy policy. He said, "The right to decide on this matter is Turkmenistan's and Azerbaijan's, and nobody else's. Oil and gas issues are not just energy issues; they are national-security issues for many countries. The EU's cooperation with the countries in the [Caspian] region should be seen through the prism of energy security and national security of all the states involved in these projects." 

Most important, Wicks offered to Berdimukhamedov that if Turkmenistan sold its gas directly to the European market, it would be paid at the rate of the prevailing market price rather than the discounted price at which Russia buys Turkmen gas for re-export to Europe. 

At the same time, the EU has also shifted gear in curbing Gazprom's expansion into European markets. On September 19th, the European Commission (EC) adopted a plan that virtually aims at preventing Gazprom from buying pipeline networks in the EU. While the plan has to travel a long way to become fully fledged legislation, and there are question marks about the efficacy of its implementation, it is clear that the EU is deliberately erecting a new barrier between it and Russia. 

This goes beyond a mere energy issue. The Wall Street Journal wrote, "How to handle Russia ... has been one of the bloc's most divisive foreign policy issues in recent years ... [The proposal] reflects an evolution in attitudes that has seen EU countries that once firmly supported Moscow change their tone." 

The daily added, "This is partly the result of changes in EU leadership, which has seen close friends of Russia such as former German chancellor Gerhard Schroeder, Italy's Silvio Berlusconi and France's Jacques Chirac replaced. Russia's actions are also responsible for the change ... [Moscow's] willingness to use energy supply as a weapon of foreign policy spooked and angered European leaders." 

Clearly, a sort of "trans-Atlantic solidarity" is forming in Brussels on energy dialogue with Russia. This has obvious political and strategic overtones. More and more European countries are accepting Washington's demarche that the West must speak with one voice in relations with Russia. 

Brussels is in effect demanding that Moscow choose between controlling transmission networks in Europe and remaining a supplier of energy. But the idea goes beyond that. EC President Jose Manuel Barroso told the media, "We need to place tough conditions on ownerships of assets by non-European companies to make sure we all play by the same rules." In actual terms, Barroso demanded that the Kremlin should give European oil companies the chance to buy assets in Russia if Gazprom wanted to buy in the EU. 

But Moscow sees reciprocity in a different way. The Kremlin asserts that state control over Russia's energy reserves is not something unique to Putin's Russia. It says the situation is the same in France or Norway, for example. The influential chairman of the Russian Duma's (parliament's) international affairs committee, Konstantin Kosachev, warned that Russia would retaliate. "We shall have to restrict our foreign partners' access to the corresponding strategic industries of the Russian economy to the same extent we are denied access to certain branches of the west European free-market economies," he said in Moscow on September 19th. 

He stressed, "Nobody should expect Russia will display endless philanthropy and unremittingly sacrifice its national interests for the sake of preserving an illusion of partnership. This will never happen." 

The blasts of the new cold war have begun blowing across the oil and gas fields of the Caspian region. History is repeating itself. It was over control of the fabulous Baku oilfields that a concerted Western military intervention took place at the time of the Bolshevik Revolution of 1917. The "Baku Commissars" of the Red Army, who resisted, became the stuff of Soviet folklore. And in World War II Adolf Hitler committed his Panzer divisions in a desperate drive to seize control of the Baku fields. 

The blasts beginning to blow across the Caspian region threaten to be every bit as unpredictable as the turbulence triggered by the US missile-defense controversy and the North Atlantic Treaty Organization's continued expansion into the territories of the former Soviet Union. 

Caspian summit in Tehran 
Thus as Caspian leaders assemble in Tehran for their summit in about two weeks' time, a huge East-West divide has appeared, which seemed improbable even six months ago. Putin arrives in Tehran on October 16th on his first visit to Iran. At stake are several tense issues. 

Putin will want to hear from Berdimukhamedov what is going on in the complicated Turkmen mind. He will look forward to hearing from Berdimukhamedov, fresh from his visit to the US, that Ashgabat is still committed to the May agreements on quadripartite energy cooperation involving Russia, Kazakhstan, Uzbekistan and Turkmenistan. 

Certainly, Putin won't be pleased with a legacy that in the closing months of his presidency, middle-level US diplomats and oil executives might have stumped him in Russia's Central Asian backyard. Moscow will pull out all the stops to prevent this. Admittedly, Moscow has much leverage and Ashgabat will be aware of the perils of brazen independence from Russian influence. 

Meanwhile, China too will be closely watching for signs if Berdimukhamedov intends to fulfill the commitments he made in Beijing during his July visit. If Berdimukhamedov decides to opt for the latest Western packages on the trans-Caspian pipeline, Turkmenistan's cooperation with China may suffer. That would raise doubts about the prospects of China receiving 30bcm of Turkmen gas annually for the next 30 years. 

As regards Tehran, it will try to persuade Berdimukhamedov that consorting with the US might not prove to be for his own good in the medium and long terms. Azerbaijani President Ilham Aliyev, on the contrary, will encourage Berdimukhamedov to continue undeterred and instead move along the track of the trans-Caspian pipeline project. 

One thing is certain. Settlement of the Caspian Sea's status will remain postponed, as the present differences among the littoral states preclude the possibility of major trans-Caspian projects of the sort that the EU and the US espouse - and that suits Russia and Iran. 

Of overarching importance will be the impact of all this on Russia-Iran relations. The two countries share common concerns over Ashgabat's energy policy in the coming months as well as on Caspian Sea issues. Russian-Iranian convergence of interests on regional issues has once again surged to the forefront. A question remains: How will this geopolitical reality influence Moscow's policy at a time Washington is hoping to isolate Iran? 

Of course, if Washington succeeds in effecting Turkmenistan's "defection", that will constitute a severe setback for Russia's regional interests. The Central Asian states, especially Kazakhstan, will draw their own conclusions, which in turn could impact on Commonwealth of Independent States integration. 

stealthily approaching the Central Asian steppes, that something was afoot. Are we heading for a sason of unraveling, with the West bracing, no matter what it takes, for a marathon jawing that would somehow punctuate the claustrophobic intensity of the Kremlin's string of success stories in May-June - and create an alternative? In focus is Turkmenistan, the energy-rich gas powerhouse of Central Asia. These have been manic weeks in Ashgabat. The melodrama is acute. But then the inscrutable space between victory and the chimera of victory has always been very narrow in Central Asia. September 1 was the cutoff date that the Kremlin penciled in for the signing of agreements relating to the Russian-Kazakh-Turkmen gas deal that Putin had wrapped up during his sensational Central Asia summit on May 12. But September is drawing to a close, and not only have the agreements not been signed, the main protagonist, Turkmen President Gurbanguly Berdimukhamedov, is unavailable in Ashgabat. He has proceeded on an extended visit to the United States, accompanied by bigwigs in the Turkmen oil and gas industry. It suddenly dawns that in one big throw of the dice, the US and the European Union are desperately playing themselves back into the game, which Moscow thought it had all but secured. The empire strikes back On May 12, at the tripartite Central Asia summit in the city of Turkmenbashi, Turkmenistan, Putin, Berdimukhamedov and Kazakh President Nurusultan Nazarbayev announced their intent to upgrade and expand gas-transportation pipelines from Turkmenistan and Kazakhstan along the eastern shore of the Caspian Sea, directly to Russia. Simultaneously, it was announced that the Turkmenistan-Uzbekistan-Kazakhstan-Russia pipeline of the Soviet era would also be modernized. The intention was to overhaul the Soviet-era pipeline system known as Central Asia-Center, ensuring it would have a capacity of 90 billion to 100 billion cubic meters (bcm) at the Russian border by 2010 so that it could handle the production of the vast Turkmen and Uzbek gas fields. Moscow wanted the relevant inter-government agreements to be signed by September 1 so that the corporate agreements could be concluded by the end of the year, and consortiums could be formed by early 2008. Moscow expected actual construction to commence by the middle of next year. The entire project is predicated on the belief that Russia will have almost exclusive access to Turkmenistan's vast gas reserves and will hold a near-monopoly on Turkmen gas exports. Watchers of the Great Game concluded that Putin had dealt a death blow to all Western plans to bring Turkmen gas to the European market bypassing Russian territory, which has been the leitmotif of the United States' Central Asia policy over the past 15 years. On the one hand, the Russian stratagem to get exclusive hold over Turkmen gas meant that the proposed trans-Caspian pipeline project and Nabucco pipeline project, and the existing Baku-Tbilisi-Ceyhan pipeline and Odessa-Brody-Poland pipeline - westward energy routes to Europe supported by the US - were all doomed. On the other hand, Moscow was poised to tighten its control of the transit and use of Central Asian oil and gas, apart from drawing the region's bulk of future outputs to transit routes under Russian control. Without doubt, in their totality, the May 12 agreements meant that Moscow inflicted a strategic defeat on the United States' Central Asia policy. To reinforce the success, Putin visited Austria on May 23-24 and signed various agreements under which the Russian gas company Gazprom would enlarge its market share in Austria and gain direct access to the retail trade, and Russia would use Austria as a transit corridor for European markets in Italy, France, Hungary, Germany, Slovenia and Croatia. With this, the Nabucco pipeline project's future, in particular, looked extremely gloomy. Everything seemed to work in Moscow's favor when on June 23 a memorandum was signed in Rome between Gazprom and Italy's ENI on a 900-kilometer pipeline project across the Black Sea from Russia to Bulgaria with an annual capacity of about 30bcm. The undersea pipeline, on reaching Bulgaria, would have two options for the Bulgaria-Italy route. A southwestern option would be through Greece and the Adriatic seabed in the Otranto Strait to southern Italy, while a northwestern route would run from Bulgaria via Romania, Hungary and Slovenia (and possibly Austria) to northern Italy. Bulgaria and Greece promptly announced their intention to join the project, known as the South Stream project. The Wall Street Journal aptly described it as a "pipeline into the heart of Europe". The upstream source for the South Stream project would be largely Central Asian and Siberian gas. Russia's game plan was obvious: maximize its control of the export routes for Central Asian gas. Russia signaled that it was outstripping the US both in regard of the upstream race for Central Asian gas as well as in the race for control of transit and downstream activity. Alarm bells began ringing in Washington. On May 30, Vice President Dick Cheney's deputy assistant for national security affairs, Joseph Wood, rushed to Baku, Azerbaijan. He had a single message: Washington intended to meet the Russian challenge head-on and would persist with the policy of opening direct access to Central Asian oil and gas through Azerbaijan and Georgia, bypassing Russian territory and Russian pipelines. He stressed the US would push ahead with the Nabucco and Turkey-Greece-Italy gas transport projects. He told the Azerbaijani leadership that it should take the initiative to sort out Azerbaijan's bilateral disputes with Turkmenistan so that the latter could be drawn into the proposed gas projects. Simultaneously, on June 1, Steven Mann, US principal deputy assistant secretary of state, held talks with Berdimukhamedov in Ashgabat. Mann strongly pitched for the trans-Caspian gas pipeline project (Turkmenistan to Azerbaijan to Georgia to Turkey to Europe). He conveyed Washington's keen interest that Turkmenistan should sell its gas to the European market directly, without the Russian intermediary. Other senior US officials began fanning out to the Caspian region carrying similar messages that it would be far more advantageous for the Central Asian gas- and oil-producing countries to deal with European buyers directly. Thus US assistant secretary of state Richard Boucher visited Kazakhstan and Deputy Assistant Secretary of State Matthew Bryza visited Azerbaijan in the first week of June. Washington also began pressuring the European Union to display a sense of urgency in forestalling the looming Russian monopoly over Central Asia's gas exports. Washington's primary intent was to sow seeds of doubt in the Turkmen mind regarding the wisdom of putting all its eggs in the Russian basket. On June 21, Washington upped the ante when Admiral William Fallon, commander of the US Central Command, arrived in Ashgabat and was received by Berdimukhamedov. Fallon carried a brief on energy cooperation. The consultation was evidently productive. On June 27, when Evan Feigenbaum, US deputy assistant secretary of state for South and Central Asian affairs, arrived in Ashgabat with a delegation of American oil majors, he heard good news. "The president [Berdimukhamedov] stated publicly, very clearly, that Turkmenistan remains interested in the trans-Caspian pipeline," Feigenbaum later told the media. He said his message to the Turkmen leader was, "American policy on energy has been very clear for a very long time. Monopoly tends to work to the disadvantage of producers ... The point is, what is good for the United States is good for the global energy supply and global energy security. That has been the basis of our conversation with Turkmenistan and other producers in this part of the world." Ten days after Feigenbaum's discussions, Matthew Bryza, deputy assistant secretary of state, arrived in Ashgabat. On the eve of the visit, Bryza said in Washington on July 10, "There is a large - huge - supply of natural gas in the far-western reaches of Turkmenistan, which, if the market decides, will make its way to Europe via Azerbaijan ... And I'll leave for Turkmenistan tomorrow to see if we can help Azerbaijan and Turkmenistan build on the momentum they've already created in their relations." A wrench in the wheel Moscow certainly took note of these strange goings on - a stream of senior US diplomats attired in pinstripe suits with top executives of oil majors with suspiciously heavy-looking attache cases in tow, trooping out of Ashgabat hotel rooms almost every week. If there was any doubt about what they were up to, that became clear in late July when US-based energy company Chevron announced its intention to open an office in Ashgabat and participate in the development of Caspian energy resources. On July 3, at a public ceremony in Ashgabat marking his 50th birthday, Berdimukhamedov said Turkmenistan maintained its "neutral status" and had "equal relationships" with all. He added, "Without joining any kind of political alliances, we will carry on with our efforts to build new gas pipelines to carry our gas to China, and to Pakistan and India via Afghanistan, and to Europe via the Caspian Sea. This means that we will have equal and mutually beneficial relations with Russia and the United States, with European countries, and with our neighbors as well." (Emphasis added.) Even if Moscow kept up an air of confidence about Berdimukhamedov, a degree of uneasiness was inevitably 

A massive wrench thrown in Putin's worksBy M K Bhadrakumar It almost seemed since the month of May that in the battles of the Caspian energy war, Russian President Vladimir Putin was destined to glide serenely from victory to victory until next March when he leaves office in the Kremlin. But a backlash was bound to happen. Putin's standing as the ace player in the Great Game of our times had surely become an eyesore for Western capitals. You could tell it from the stillness in the air, as the autumn began.
 

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