Stalemate in Turkmenistan-Iran Gas Row

nCa News and Commentary

Ashgabat, 13 January 2008 (nCa) --- A press release issued Saturday by the foreign office of Turkmenistan shows that the deadlock in Turkmen gas supplies to Iran may continue until Iran returns back to the negotiation table and honour its commitments about payments.

Turkmenistan stopped supplying natural gas to Iran at the beginning of this month. At that time the Turkmen government explained that the supplies were halted due to repair and maintenance works in the supply network.

The press release of Saturday sheds some more light on the issue.

“The Turkmen side had reported earlier that gas supplies to Iran were suspended due to technical problems related to the need to conduct preventive repair of the gas pipeline,” says the press release.

It adds, “Such preventive repair is conducted in accordance with recognized technical norms and standards and takes some time. At the same time, the completion of preventive repair also depends on the issue of funding.”

The press release underlines, “In this regard, it is important to emphasize that the Iranian side's failure to honour its obligations related to payment of gas supplied earlier from Turkmenistan holds in the timely completion of preventive repair.”

nCa Commentary

Brinkmanship features prominently in Iranian policies. Usually it pays off but sometimes it backfires, as it did in its gas negotiations with Turkmenistan.

The standard procedure is that under the terms of the supply agreements with its buyers, Turkmenistan starts renegotiating gas prices in the middle of the year for next year’s volumes.

However, Iran is typically reluctant to enter the process till very late.

This time it should have been a fairly simple process: Turkmenistan had already informed that henceforth it would charge equal price from all the buyers.

In 2007, Iran paid US $ 75 per 1000 cubic meters for Turkmen gas. It was a special, one-time concession for Iran.

Turkmenistan proposed that price for 2008 should be around US $ 140 per thousand cubic meters, bringing it at par with what Russia is paying.

For whatever reason, Iran ignored the notice and sent a mid-level delegation that was probably not sufficiently empowered to negotiate.

Two things are at display in Iranian stand: 1. Disunity in official stance; and 2. Lack of foresight.

While the Iranian Oil Minister Gholamhossein Nozari said Sunday that he would not consider further negotiations with Turkmenistan and would even stop buying gas from Turkmenistan altogether unless supplies were resumed immediately, the foreign ministry of Iran said that Iran would be willing to pay US $ 140 per thousand cubic meters if Turkmenistan agreed to increase the export volumes.

This shows absence of coordination among ministries over an issue of vital importance.

The fact that President Ahmedinejad had to make an unscheduled visit to the areas hit by the shortage of gas demonstrates that he was equally unprepared for the way his oil ministry handled the matter.

The lack of foresight that led to the whole mess is enormous:

1. Knowing that failed negotiations may result in termination of gas supplies from Turkmenistan, did the oil ministry make alternate arrangements to meet the winter demands of the consumers, especially when they knew that a long spell of extreme cold was about to grip the region?

2. Was any consideration given to the fact that the absence of Turkmen volumes would cause collapse of Iranian supplies to Turkey? This question is very significant because Iran is trying to market itself as important supplier and transit country for gas supplies to Europe.

Iran stopped supplying gas to Turkey and Turkey was forced to halt supplies to Greece.

Now it would be difficult for Iran to prove that it is a reliable energy partner, both as a supplier and transit country.