Tuesday, January 15, 2008

Ashgabat, Tashkent Play Energy Games; Central Asia Shivers


The leaders of Turkmenistan and Uzbekistan are trying to extract the maximum benefit from their neighbors’ misery. As the people of Central Asia shiver through the harshest winter in generations, Ashgabat and Tashkent are turning the screws, or shutting off the valves altogether, in a bid to obtain a higher price for their natural gas exports.

Temperatures of minus 20 degrees Celsius have prevailed this winter throughout Central Asia. The extreme cold has caught governments unprepared, as officials did not stockpile sufficient energy supplies to provide adequate heating and electricity. This flaw presented an opportunity to the leaders of Turkmenistan and Uzbekistan, two countries who serve as regional suppliers of natural gas. Turkmen leader, Gurbanguly Berdymukhamedov, and his Uzbek counterpart, Islam Karimov, held telephone negotiations on December 18, during which they agreed to coordinate their pricing strategy.

"Having stressed that energy resources were a strategic factor for the stable development of both states, and the increasing well-being of their peoples, the sides confirmed their readiness for close interaction" on pricing and other energy export-related issues, according to an account of the conversation distributed by the Turkmen State News Service. On January 12, Turkmen state television reported that Berdymukhamedov had signed a decree concerning Ashgabat’s participation in a Turkmen-Uzbek inter-governmental commission "for trade, economic, scientific, technological and cultural cooperation."

Within days of the December 18 conversation, Uzbekistan imposed massive increases on Tajikistan and Kyrgyzstan, boosting the gas price from between $100-$115 per thousand cubic meters (tcm) to $145 tcm. As recently as 2006, Kyrgyzstan was paying Tashkent $55/tcm.


While Uzbekistan’s pricing strategy has generally brought Tashkent the expected benefits, some of Turkmenistan’s efforts to secure additional advantages appear to have backfired. In particular, Ashgabat now finds itself in an awkward position after it tried to force Iran to pay a higher gas price by cutting off supplies. Some areas of northern Iran, along the border with Turkmenistan, have now been without energy imports for over two weeks.

Iranian leaders have flatly refused to bow to Turkmenistan’s pricing demand, and have even gone on the counter-offensive by threatening to abandon future purchases of Turkmen energy. On January 15, state radio broadcast comments by Deputy Iranian Oil Minister Akbar Torkan, who said it was "immoral" for Ashgabat to cut supplies during the depths of winter. Other Iranian leaders have said they will not begin to consider renegotiating the existing supply contract until Turkmenistan resumes exports. According to a report distributed by the Iranian Student News Agency, the country’s oil and foreign ministries are preparing to appeal to an "international tribunal" to seek sanctions against Ashgabat.

Meanwhile, the higher energy prices reaped by Turkmenistan and Uzbekistan have yet to translate into improved living standards in either country. Severe shortages of gas and electricity are also plaguing Turkmenistan and Uzbekistan, as their respective governments have continued to emphasize exports, especially to Russia, over domestic needs. As a result, entire villages, according to some media reports, are being stripped of trees, as residents burn whatever they can get their hands on in order to stay warm.

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