Russia, Kazakhstan and Turkmenistan sign Caspian gas pipeline deal

Feb 16, 2008 01:00 AM

Russia, Kazakhstan and Turkmenistan signed an agreement to build a natural gas pipeline along the Caspian Sea coast that would strengthen Moscow's monopoly on energy exports from the resource-rich region.
But the plan also delivers a strong blow to western hopes of securing alternate energy export routes. The deal, which follows a preliminary agreement reached in May, ended months of tense arguments over the price of gas supplies.

"We have just signed an extremely important agreement between Russia, Kazakhstan and Turkmenistan on building the Caspian pipeline," Russian President Vladimir Putin said. "It will become a new, important contribution of our nations into strengthening the European energy security."
The agreement was signed after Putin's talks in the Kremlin with President Nursultan Nazarbayev of Kazakhstan and their conference call with Turkmen President Gurbanguly Berdymukhamedov. Following months of disputes over gas price, Russia's state-controlled monopoly Gazprom gave in to Turkmen price demands in January and agreed to pay $ 130 per 1,000 cm of natural gas in the first half of 2008 and $ 150 in the second half.

The new pipeline deal will likely disappoint the United States and the European Union, which have been lobbying for a rival pipeline to be built under the Caspian Sea, bypassing Russia. Adding to the West's grievances, Nazarbayev also said after the talks that Kazakhstan would increase oil exports to Russia.
Russia has pushed strongly for control over energy exports from the Caspian, while Nazarbayev and Berdymukhamedov have expressed interest in undersea pipelines and voiced support for multiple export routes. However, prospects for pipelines under the Caspian have been clouded by high costs, environmental concerns and disputes over ownership of the sea resources.

The legal status of the Caspian has been in limbo since the 1991 Soviet collapse, leading to tension and conflicting claims to seabed oil deposits and other sea riches. The five Caspian Sea nations -- Iran, Azerbaijan, Kazakhstan, Turkmenistan and Russia -- failed to agree on how to divide the sea's riches at their latest summit in Tehran, in October.
Russia and Iran warned outside powers to stay away from the region, and Putin underlined that all pipeline projects should require approval by all five nations. Moscow has strongly opposed US-backed efforts to build pipelines to deliver Central Asian and Caspian hydrocarbons to the West bypassing Russia, through which all pipelines from the area currently flow. Turkmenistan, which has the largest natural gas reserves in the former Soviet Union after Russia, ships gas to Russia along a pipeline that has an annual capacity of 50 bn cm.

The new pipeline would have an initial annual capacity of 20 bn cm, and it could grow significantly in the future.
Russia's Industry and Energy Minister Viktor Khristenko said the new pipeline would be built by 2010.

Source / The Canadian Press
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