21-01-02 Russian President Vladimir Putin called for the creation of an alliance of gas producers grouping Russia and the ex-Soviet Central Asian states of Turkmenistan, Kazakhstan and Uzbekistan. "It is time to seriously think about creating a Eurasian alliance of gas producers," Putin said at talks in Moscow with Turkmen President Saparmurad Niyazov.
The Russian president said such a move would allow the four countries to coordinate the volume and destination of their gas exports using a single pipeline distribution system run by Russia's gas giant Gazprom. The gas alliance would ensure stability both for producers and consumer nations, "of course taking into account the interests of all sides involved in this business, Turkmenistan, Russia, Kazakhstan and Uzbekistan," he said.
"Its creation would allow us to conduct effective control over volumes and direction of export and Central Asian gas, and would guarantee a balance between the production and consumption of natural gas, and also its export through a single channel," Putin told Niyazov. Russia's Gazprom, the partly state-owned gas monopoly, is the main supplier of gas in western and eastern Europe.

But producers in Central Asia, particularly Turkmenistan which has a fast-growing gas output, represent a threat to Russia's quasi-monopoly position on the European market, analysts explained. The solution therefore is for Russia and its Central Asian competitors to join forces, giving Moscow's rivals the right to use Gazprom's pipeline network in return for granting it control over the exports.
"Russia is trying for political reasons to make sure that the flow of Central Asian gas continues to go through Russia and is willing to allow these countries to export some of their gas to Europe using Russian infrastructure," said Stephen Dashevsky, analyst from Anton investment house. If no such alliance is formed, there is a risk of a price war because of the massive difference between market prices and production costs: Gas sells in western Europe for $ 125-30 per 1,000 cm (35,000 cf) while extraction costs in Siberia are just $ 3-4 per 1,000 cm.
"There is plenty of room for newcomers on the market to cut prices and try to win market share, if you have that, you would have a fully-fledged price war. This is not in anyone's interests for the gas producers," added Dashevsky.

Russia produces 585 bn cmpy of gas, Uzbekistan 50 bn cm, Turkmenistan 45 bn cm and Kazakhstan 10 bn cm.