Turkmenistan holds key to EU's grand energy plan

Brussels' grand plan to reduce Europe's over-reliance on Russian gas faces a serious setback if Turkmenistan refuses to channel its huge resources through the Caspian Sea, Francesco Guarascio reports from Baku

Turkmenistan is considered one of the most reclusive countries in the world, but it also happens to control the third biggest natural gas deposits to have been discovered. The Iolotan gas field, in the eastern part of the country near the border with Afghanistan, is estimated to have reserves of up to 21 trillion cubic metres. This staggering amount is sufficient to fulfill the requirements of both Europe and Asia for several decades.

The immediate task is to develop the necessary infrastructure to transport the gas abroad. The central Asian country has already signed several deals with China and is committed to building one of the most ambitious pipelines ever constructed, stretching well over 1,000km through Afghanistan, Pakistan and India. The project is called TAPI from the initial letters of the four countries involved. Russia is another recipient of Turkmen gas, as Moscow tries to control as many reserves as possible in a bid to maintain a dominant position in the market.

Europe is the missing link. The simplest way for Turkmen gas to reach European consumers is through a direct Trans-Caspian pipeline linking Turkmenistan to Azerbaijan through the Caspian Sea. From Azerbaijan, it would need to be channeled into the Trans-Anatolian pipeline, known as TANAP, and then to Europe via Italy or the Balkans. This southern corridor is meant to challenge Russia's control over European gas supplies. The link between Azerbaijan and Europe is still uncertain, but after tortuous negotiations it appears that it will become operational within the next five years. Yet despite these efforts, a question mark still hangs over Europe's access to Turkmen reserves.

The Trans-Caspian pipeline presents few technical challenges. With a length of just 300km, the submarine conduit should be built in a relatively short period of time. However, the geostrategic interests and politics of the Caspian 'great game' have the potential to make everything more complicated than necessary. Firstly, national borders within the Caspian Sea remain undefined. Of the five countries bordering the inland sea, Azerbaijan, Russia and Kazakhstan have settled their maritime frontiers, but Iran and Turkmenistan have not. Experts say that this legal conundrum should not hamper the building of the pipeline between Turkmenistan and Azerbaijan, provided that the two countries agree a bilateral deal on the project. But are they willing to do so?

"I don't think that the Trans-Caspian pipeline will happen any time soon," says Azerbaijan's energy minister Natiq Aliyev in a restricted interview in Baku, the country's capital. "Who will construct the pipeline? Azerbaijan is not interested. It should be Turkmenistan that builds it, or foreign companies. But so far we have seen only small companies working there." Azerbaijan obviously has no immediate interest in enabling a competitor to access the southern corridor. As long as its gas fields produce enough gas to fill the capacity of the existing and planned pipelines to Europe, Baku can do without the new link. This situation could last for decades, but it would offer limited benefits for Europe as Azerbaijan's reserves are a fraction of Turkmenistan's.

The European Union commissioner in charge of energy, Günther Oettinger, is planning a visit to the region in autumn. To proceed with the Trans-Caspian pipeline "we need a legally binding contract which would secure investors in case of legal disputes", says an aide of Oettinger. "We are confident that we will come to an agreement with Azerbaijan and Turkmenistan." But European optimism seems to be misplaced. Turkmenistan ought to be pushing hard for this agreement, but so far there have been no positive signals from the capital Ashgabat. Relations with Azerbaijan are at a historic low. In June, Baku issued an official warning to Turkmenistan to stop gas and oil explorations in the Caspian Sea and currently the two countries show little appetite for reconciliation.

A good relationship with Russia seems to count more in Ashgabat than a lucrative deal with Europe. Easy Russian rubles that grease the wheels have often tempted the flighty authorities in Ashgabat after Turkmenistan gained formal independence from Moscow in 1991. The only minor blip in the recent past for this relationship was a row about gas prices in 2009, but that temporarily clash was not meant to last. The definitive answer on Turkmenistan's positioning will come from the construction of the links to the east-west pipeline, which aims at bringing Iolotan's gas to the Turkmen Caspian coast.

At the moment, it seems likely that the conduit will be connected to a new pipeline bound to Russia alongside the Caspian coast, rather than to the Europe-bound Trans-Caspian route. If this were to happen, it could represent a Russian checkmate in this round of the Caspian great game.