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EURASIA INSIGHT

WESTERN DIPLOMATIC OFFENSIVE IN CENTRAL ASIA THROWS RUSSIA ON THE DEFENSIVE
6/06/08

As the CIS summit opened in St. Petersburg on June 6, Russia found itself in an unusual position -- on the defensive in the Caspian Basin energy contest. But Russian leader Dmitry Medvedev appears to have assuaged Central Asian leaders, thereby ensuring that Moscow will continue to act as the funnel through which the bulk of the region’s oil and gas flows -- if only for the time being.

All participants remained tight-lipped about the substance of their energy-related discussions in St. Petersburg, but judging from the upbeat rhetoric following the meetings, it would seem that Russia and its Central Asian suppliers -- Kazakhstan, Turkmenistan and Uzbekistan -- struck some kind of bargain concerning export volume and prices. [For background see the Eurasia Insight archive].

"Uzbekistan wholeheartedly endorses Russia’s foreign policy course," Uzbek leader Islam Karimov said in St. Petersburg. "On all key questions, we have converging positions."

Turkmen leader Gurbanguly Berdymukhamedov was similarly enthusiastic about Turkmen-Russian relations. The official Russian RIA-Novosti news agency reported that Medvedev would be visiting Ashgabat in early July. "With great pleasure, Turkmenistan is awaiting the distinguished guest," Berdymukhamedov said, referring to the Medvedev visit.

Just a few days ago, it appeared that Russia was in danger of losing its stranglehold over Caspian Basin exports, as aggressive lobbying by the United States seemed on the verge of bearing fruit, specifically in getting Turkmenistan to join a long-planned trans-Caspian pipeline (TCP) project. [For background see the Eurasia Insight archive].

The source of great expectations for the United States was a regional tour made by Richard Boucher, US assistant secretary of state for South and Central Asia. Boucher made no secret of the fact that the goal of his Caspian Basin visit -- which lasted from May 28-June 3, and included stops in Azerbaijan, Turkmenistan and Uzbekistan -- was to undermine Russia’s influence in the region. In all regional capitals, Boucher repeated his massage: "the more choices any nation has the more independence it has."

In Baku and Asghabat, Boucher aggressively lobbied for construction of both TCP and Nabucco, and he sought Azerbaijani and Turkmen support for ongoing military and democratization operations in Afghanistan. During a four-day stay in Tashkent, Boucher reportedly raised the possibility of Uzbekistan’s exporting its hydrocarbons to Europe via TCP and Nabucco. During his press conference, he emphasized Uzbekistan’s intensifying security cooperation with the United States and European Union, and even strongly inferred that the transit of non-lethal cargos for the coalition’s forces in Afghanistan through Uzbekistan has already started. [For background see the Eurasia Insight archive]. In all three capitals, Boucher downplayed human rights-related issues. In Ashgabat, he praised the Turkmen government for "opening up."

US and European Union leaders have aggressively courted Turkmenistan’s Berdymukhamedov since his rise to power in late 2006, hoping to secure a Turkmen commitment to ship a large share of its energy reserves westward via TCP. Russia, meanwhile, has aggressively lobbied against both TCP and Nabucco, which, if constructed, would break Russia’s near-monopoly on energy export routes linking Central Asia and Western European markets. Russia is touting its own project, dubbed South Stream, as a more viable transit system. [For background see the Eurasia Insight archive].

Apparently spooked by Boucher’s Caspian Basin tour, top executives from the Russian energy giant Gazprom visited Caspian Basin states in late May and in early June. That foray proved more unsettling than reassuring, however. In Tashkent, Karimov reportedly declined to meet with the top-level Gazprom delegation, comprising board chair, Alexei Miller, deputy board chair, Valery Golubev, as well as Valery Gulev, general director of Gazprom’s subsidiary, Zarubezhneftegaz, which is in charge of all Gazprom’s overseas operations. Company representatives succeeded in meeting only two deputy premiers and the finance minister. Moreover, such a high-profile visit was completely ignored by the Uzbek press. "Karimov probably didn’t want to meeting with Gazprom’s officials until he talked to Boucher and other Western officials, and hears what they have to say, or offer, to be specific," suggested a Tashkent-based analyst on conditions of anonymity.

Several days later, on June 2, in an apparent attempt to undermine the TCP and Nabucco initiatives, Gazprom’s Miller offered Azerbaijan "a market price" for its gas. The offer did not only fail to improve Gazprom’s position -- Baku was obviously uninterested -- but also created an impression that the Russian energy monopoly was feeling insecure, even desperate. [For background see the Eurasia Insight archive].

A day later, on June 3, the Gazprom delegation tried its luck in Ashgabat, but it was in for yet another fiasco. For the first time in many years, company executives were not granted a meeting with Berdymukhamedov. Yet again, Miller had to settle for purely ceremonial talks with a deputy premier.

On the eve of the St. Petersburg summit, the Tashkent analyst said that the United States was making a strong comeback in the Caspian Basin energy contest. "The United States and the European Union are advancing their interests in both the economic and military fields -- from closing new energy contracts to securing Central Asian states’ cooperation on Afghanistan," the expert said. "But no less important, they force Russia to retreat, to keep making concessions -- from giving Central Asian leaders much higher prices for their energy � to swallowing such insults as Miller facing local presidents’ closed doors."

"All these �acts of disobedience’ toward Russia seem to suspiciously coincide with Putin’s leaving the center stage," continued the analyst. "Of course, the Kremlin rotation is not the key reason -- Western governments have long been working to make it happen, providing all possible support to help Central Asian governments form a united front to negotiate their interests with Russia. The Putin-Medvedev rotation just presented a good opportunity for renegotiations."

Medvedev’s discussions with Berdymukhamedov and Karimov may have bought Russia time, but many experts believe that Kazakhstan, Turkmenistan and Uzbekistan are not about to ease up in pressing their new-found energy-export advantage.

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