Turkmenistan has become a new player in the Russia-Ukrainian gas pricing game.
It is reaching the end of the year and, unsurprisingly, once again Russia (through its subsidiary Gazprom) is using control of the supply of natural gas to exert influence over its neighbors (generally referred to as pipeline politics). Indeed, natural gas is one of the chief tools inherited from the Soviet period and one that was not dismantled amidst the privatizations of the 1990s (where oil was - it has only been recently that the Russian state has once again sought to gain control over the oil industry - the attempt to expand Rosneft and the destruction of Yukos).
This time the deal is with Turkmenistan - an emerging gas power now that Niyazov (who vaingloriously called himself Turkmenbashi) has died. In fact, as I have pointed out in previous posts, Ukraine relies on Turkmen natural gas for many of its needs (much of this gas has been shipped through Ukraine using Rosukrenergo). Anyway, Gazprom has reached a deal with the Turkmen side to increase the price of gas for the Ukrainians.
This deal serves two purposes for the Russians:
1. it is potentially a large blow to Ukrainian industry and will more than likely force a response from the newly elected Timoshenko-Yushchenko "orange" alliance. It will be interesting to watch - will the Ukrainians once again use their control of Russian gas pipelines to Europe to make up the difference?
2. It further cements a Russia-Turmenistan relationship. Since the death of Niyazov, control of Turkmeni gas has become a new prize in the competition (between China, US, and Russia) for influence in Central Asia and this is a powerful statement that Russia is doing well (China has also been successful, leaving the US as the odd man out recently in securing influence and hydrocarbon resources in the area). In particular, the US has been trying to secure a non-Russian pipeline route for gas out of central Asia. This deal has to be seen as a blow to those interests.
Here is an article with more details on this deal. .
5 comments:
Your hawkish take on this development is interesting.
The way the BBC covers the exact same story is a big contrast to yours: see
http://news.bbc.co.uk/2/low/europe/7116218.stm
The main point it seems is the fact that Gazprom is now going to be charged 50% more for Turkmen gas by Turkmenistan. As a result of the upstream price rise it faces, downstream customers of Gazprom (inc Ukraine) can also expect to have their gas tariffs increase.
You somehow failed to mention that. Gazprom doesn't have everything its own way in the gas market nowadays.
Thanks for the comment. No question that Gazprom does not always have its way, but I think my post is consistent with the BBC post. Gazprom is willing to pay more in order to cement a deal with Turkmenistan for the future pipeline that runs through Russia (as the BBC points out). It also gets the added benefits of punishing a neighbor - Ukraine.
"It also gets the added benefits of punishing a neighbor - Ukraine."
Why do you say that? Passing on price rises that reflect your costs - over several years mind you - to neighbours who are also acknowledged as great customers and pipeline equity partners does not = punishing anyone.
Is Saudi Arabia 'punishing' the USA for something when it sells its oil at the current market price for a barrel?
Is Wal-Mart 'punishing' you just because it is refusing to sell you that brand-new big plasma TV for less than retail price?
I find your perspective on this whole issue very very strange indeed.
Cutting off supply completely may qualify as 'punishment' (even when the customer refuses to pay) but gradually moving to market prices shouldn't.
Especially when prices on the Russian domestic market for gas are also timetabled to be going the same way.
Everyone will be 'punished' by higher energy problems then.
I grant you that much of this pricing issue has been overblown by the western press. Moving to market prices is not always a way of punishing a neighbor. However, the selective use of market pricing (when moving from a subsidized market) is a form of punishment: is Belarus facing the same price hikes so that Russia can cement an alliance with Turkmenistan? No. Thus, it can be seen as a form of distorted market punishment. The examples you give are not analagous as the Saudis have never subsidized American oil prices (nor has Wal Mart). The fact is: the subsidies through non-market prices for gas have been removed quickly since Ukraine's move towards the west - thus, they can be seen as a form of punishment.
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