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Turkmenistan Energy Reserve Controversy

By Michael Sullivan, Ashkhabad, and Bob Edwards, Washington DC, NPR Transcript #98090811-210, 8 September 1998

HIGHLIGHT:

NPR's Michael Sullivan reports that last December a smal stretch of pipeline opened up between Turkmenistan and Iran, giving the former Soviet republic a new way to export its huge reserves of natural gas. The pipeline is one of a series of Iranian moves to increase influence in the republics of Central Asia. It has upset both the United States and Russia.

BODY

BOB EDWARDS, HOST: The Central Asian republic of Turkmenistan gained its independence when the Soviet Union broke apart. It also gained control over the enormous gas and oil reserves that Moscow used to exploit.

With only four million people and the world's 11th-largest proven reserves of natural gas, Turkmenistan seemed poised to become the next Kuwait, but seven years later that expectation has yet to be fulfilled.

From Ashkhabad, NPR's Michael Sullivan prepared this report.

SOUNDBITE OF BAND PLAYING

MICHAEL SULLIVAN, NPR REPORTER: The first few years of independence were intoxicating times for the Turkmen. Natural gas flowed out through the Russian pipeline to the north and nearly a billion dollars in revenues flowed back in.

Construction firms did a brisk business, erecting gleaming new government buildings and dozens of five-star hotels in anticipation of the hordes of foreign investors who would come here and help transform this former Soviet backwater into a major player on the world energy stage.

But the hotels today are largely empty, the hired bands playing for just a few foreign guests. The boom is on hold. Turkmenistan can't get its gas to market.

JULIA NANAY, DIRECTOR, PETROLEUM FINANCE COMPANY: Russia cut off gas exports from Turkmenistan in March of 1997. And so over the last more than one year, Turkmenistan has been unable to export gas supplies to the north, which was its major export route.

SULLIVAN: The sticking point, says Julia Nanay, director of the Petroleum Finance Company, an industry consulting group, is money. The Turkmen say the Russians won't give them a fair price for their gas as the Russians may turn around and sell to other countries for a lot more.

NANAY: I think for Russia what's very difficult is that these gas fields and oil fields in Central Asia were essentially discovered by the Russians, and of course by the Central Asian countries when they were part of Russia, but Russia still feels that these gas resources and oil resources in some way belong to them.

SULLIVAN: Diuketepe (ph) about 20 miles from the Turkmen capital, framed by the Karakum Desert to the north, and the Kopetdag Mountains, the natural border with Iran to the south. It was here that the Turkmen made their last stand against Russian expansion in 1881 and the ruins of the Turkmen fortifications are just across the street from the railway station.

After the Turkmen were finally broken, the Russians displayed their prisoners for visitors to photograph when the visitors' train stopped here for fuel and water. It was a humiliating experience for the Turkmen. Now that they've broken free of Moscow, they are determined not to be dependent on or subjugated by Russia again.

Three hundred miles to the west, near the Caspian Sea, is the brand new gas pipeline at Korpeje (ph). Built for the Turkmen by the Iranians, the pipeline carries Turkmenistan's gas 110 miles to the south to Iran. It is the only gas the Turkmen are getting out of the country today. And while the amount carried so far is modest, the symbolic importance of this line is enormous. It is the first pipeline in all of Central Asia that doesn't go through Russia.

Rejepbay Arazov is Turkmenistan's minister of oil and gas.

REJEPBAY ARAZOV, TURKMENISTAN MINISTER OF OIL AND GAS (through interpreter): We feel that this pipeline is a demonstration of our independence, the demonstration of independence of a young state. And this declaration is addressed not only to our uncle to the north, but to the world community as well.

SULLIVAN: By the world community, Arazov might well be referring to the United States, which has steadfastly opposed any solution to Turkmenistan's problem that involves Iran. While the Korpeje line delivers small quantities of gas for Iranian domestic consumption, the U.S. is worried Turkmenistan and other Central Asian nations may decide that a bigger pipeline through Iran to Turkey may be the best way to get their oil and gas to world markets. y Royal Dutch Shell is now completing a feasibility study for a pipeline that would do just that. Michael Cotter, outgoing U.S. ambassador to Turkmenistan, says that would be a mistake for the Turkmen.

MICHAEL COTTER, OUTGOING U.S. AMBASSADOR TO TURKMENISTAN: It makes no sense for Turkmenistan to exchange a dependence for gas exports on Russia with what effect we now see for similar dependence on Iran.

SULLIVAN: The U.S. government has financed a feasibility study for its preferred option, a so-called trans-Caspian pipeline under the Caspian Sea to Azerbaijan, and from there to Turkey, bypassing Iran entirely.

Again, outgoing U.S. Ambassador to Turkmenistan Michael Cotter.

COTTER: We're confident that study will prove that a trans-Caspian, trans-Caucasus route is economically and commercially viable and that the U.S. government will step up with necessary guarantees and political risk insurance to ensure that banks invest in it. SULLIVAN: Many oil and gas industry analysts dispute the notion that a trans-Caspian pipeline makes economic sense. They say the cheapest route, by far, is overland through Iran. And, says analyst Julia Nanay, neither Russia nor Iran want to see a trans-Caspian pipeline built, and both will do all they can to prevent it from happening.

Finally, she says, the U.S.-backed pipeline makes little sense from a security standpoint, given the political instability in the countries the pipeline would have to transit.

NANAY: You're saying you're going to trade Russia and Iran for a route through Azerbaijan, Georgia, Turkeyall of these pose enormous political complexities on their own. I think the fighting over Nagorno-Karabakh, you've got to reach some sort of solution. In Georgia you have the Opkoz (ph) problem. You have Ajaria (ph), you have Russian military bases. You have Armenians. You have you know, pipelines crossing into Turkey through Kurdish territory. And therefore for the U.S. to argue that that is the safest route and let's go for it just doesn't make any sense.

SULLIVAN: Analysts such as Nanay take issue with U.S. sanctions against firms dealing with Iran. They argue that the U.S. pipeline policy of anybody but Iran is shortsighted and unfair to both the Turkmen and U.S. firms that want a piece of the enormous Caspian energy pie.

Meanwhile, the Turkmen sit on their gas and plan alternative routes to market. A pipeline through Uzbekistan to China. A pipeline through war-torn Afghanistan to reach the nearly one billion people in India and Pakistan.

Turkmenistan's president has spoken of his country becoming the next Kuwait. And his oil minister, Rejepbay Arazov, says the government will be patient in working to achieve that goal.

ARAZOV (through interpreter): For us a long-term strategy is important. You see how long we've held out without selling gas? And the country is doing pretty well. The most important trait for a Turkman is perseverance and the ability to steadfastly weather any difficulties. The most important strategy is not to make mistakes.

SULLIVAN: Both Shell's feasibility study of the Iranian route and the U.S.-sponsored study of the trans-Caspian route are due by December. Arozov says a decision will be made shortly after, and the gas should begin flowing out of Turkmenistan somewhere within a year.

Michael Sullivan, NPR News, Ashkhabad, Turkmenistan.

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