Russian state-run energy giant Gazprom is seeking $5 billion in reimbursements from Turkmenistan for gas supplied from 2010 to 2015, news agency Interfax reported on July 5.
Interfax reported that Gazprom is demanding a retroactive revision to the prices it paid for Turkmen gas as part of a legal suit going through the motions at the Arbitration Institute of the Stockholm Chamber of Commerce.
The aggressive move represents a remarkable disruption to the apparent recent outbreak of bonhomie between Moscow and Ashgabat. A delegation of high-ranking Russian military officials traveled to Turkmenistan last month with pledges to offer assistance in bolstering the Central Asian nation’s defense capabilities. And in May, Gazprom surprised many by hinting that it could resume buying Turkmen gas, which it formally stopped doing earlier in the year.
Deliveries of Turkmen gas to Russia reached a post-Soviet peak of 45 billion cubic meters in 2008, but that was when the trouble began. With a global economic crisis then gripping western economies, European demand for Russia’s gas began to flag and prices to fall. Since Moscow’s rationale for buying gas from Turkmenistan was to allow for additional export capacity, the arrangement stopped making sense.
An unexplained blast in April 2009 at the Davletbat-Dariyalyk pipeline, also known as the CAC-4, at a spot near the Turkmen-Uzbek border, led to a sudden disruption to supplies to Russia. Officials in Moscow blamed Turkmenistan for causing the blast — the accusations were duly flung back at Russia. Regardless of who was to blame, the supplies never regained previous heights.
In 2010, Moscow reduced the amount of Turkmen gas it bought to 10 billion cubic meters. Last year, Gazprom bought only 4 billion cubic meters of Turkmen gas.
At the start of July 2015, Gazprom Export initiated arbitration proceedings against Turkmengaz in Stockholm with the aim of forcing a revision to the cost of the gas it bought. Turkmengaz had earlier that year accused Gazprom of failing to pay its bills.
In January, Gazprom finally announced it was formally suspending purchases of natural gas from Turkmenistan altogether. Just to add insult to injury, the Russian company then reached a deal for Uzbekistan to supply it with 4 billion cubic meters of gas in 2016.
Gazprom deputy chairman Alexander Medvedev was circumspect about the cause for his company’s actions at a press conference in May.
“If there was no basis for revoking the contract, then it could not have been revoked. The reason for which it was revoked is not something that we can reveal today,” Medvedev said, all sphinx-like, while contradictorily raising the possibility to a resumption in supplies.
The terms of Russian-Turkmen gas contracts have always been closely guarded secrets and since arbitration proceedings are kept away from prying eyes, the process reveals little. The leak about the size of the reimbursement being sought by Gazprom looks decidedly like a public relations shot across Turkmengaz’s bow.
These are desperate times for Turkmenistan. Its only current gas customers are China and Iran — the only two countries with the necessary existing transportation infrastructure. Negotiating with either of those countries in the current climate must be no fun for Turkmen officials.
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