Iran establishes itself in Turkmenistan

by John C.K. Daly

For much of the rush to develop the Caspian's hydrocarbon riches, it's been the Moscow and Washington (and Western Europe) show, with China distantly waiting in the wings.
But Iran is establishing itself as a major friend to its oil- and gas-rich neighbours, despite the strength of its more dominant competitors and the international sanctions in place.

Since the death of Turkmenistan's Saparmurat "Turkmenbashi" (President for Life) Niyazov in December 2006, the struggle for the Caspian's last significant post-Soviet natural gas reserves has intensified. The US Energy Information Administration estimates Turkmenistan's natural gas reserves in 2007 as 2.83 tcm. Niyazov's successor, Gurbanguly Berdymukhamedov, is comfortable talking trade with Iran, which could well wind up siphoning off a significant portion of Turkmenistan's future production.
He arrived in Tehran Feb. 13 for a two-day state visit, his third trip to Iran since becoming president. The latest was a showof force for Iran, as Berdymukhamedov was accompanied by his entire Cabinet. The last high-level Iranian-Turkmen meetings were held in summer 2007, but following Berdymukhamedov's visits, last year the two countries signed agreements providing for judicial cooperation and extradition of criminals along with a memorandum on consular, customs and border issues.

The two countries already have close energy ties, hardly surprising as they share a 782-mile border. After Russia, which purchases 50 bn cm of Turkmen gas annually, Iran is the largest buyer of Turkmen gas, with the daily volume of Turkmen gas going to Iran's northern provinces now running at about 23 mm cm.
"Our countries are capable of mutually beneficial cooperation in various spheres," Iran's Supreme Leader Ayatollah Ali Khamenei said following the meeting on Feb. 14 with Berdymukhamedov, which President Mahmoud Ahmadinejad also attended. "Iran has a powerful scientific and industrial potential, which may be used for the benefit of Turkmenistan."

According to the Turkmen Foreign Ministry, since establishing diplomatic relations in 1992, the two countries have signed more than 170 documents. The Ashgabat-based Russian-language newspaper Neitralnyi Turkmenistan reports that bilateral trade between Iran and Turkmenistan in 2008 reached $ 3 bn. Turkmenistan exports fuel and energy, textiles, chemicals, agricultural goods and food products to Iran, receiving in return engineering materials and chemicals, construction materials, electrical goods and food products.
"During the talks some very good proposals were made, which we hope will be implemented in due time," Berdymukhamedov told. He said his government had agreed to cooperate with Iran in the development of new gas fields, as well as increasing the capacity of the two nations' gas pipeline network.

The two presidents also signed a joint statement on bilateral cooperation, while their foreign ministers signed several memoranda of understanding on political and economic cooperation.
Oil patch officials from Washington to Moscow surely noted that that Iranian Minister of Petroleum Gholamhossein Nozari and Turkmen Deputy Prime Minister Tachberdy Tagiyev signed an agreement on natural gas cooperation. Tehran has expressed interest in nearly doubling its imports of Turkmen gas, from 8 bn cm to 14 bn cm annually. Under terms of the document, Iranian companies would develop Turkmenistan's Yoloten natural gas field and be allowed in return to export its gas to Iran.

Iran clearly regards the agreement as a triumph, since the new field's output and attendant pipeline, once online, will more than double the Korpezhe-Kurt Kui pipeline's current 8.4 bn cm annual exports.
"According to this agreement, 10 bn cm of gas will be exported to Iran per year from the Yoloten gas field," Nozari said.

The Yoloten gas field is part of Turkmenistan's southern Yoloten-Osman massive deposit near the Turkmen-Iranian border. Last October an independent audit by the British firm Gaffney, Cline & Associates confirmed that the South Yoloten-Osman gas field ranks among the world's five biggest, with possible reserves of 4 tcm to 14 tcm of gas.
GCA Business Development Manager Jim Gillett noted last autumn, "Production at South Yoloten-Osman can be built up gradually to 70 bn cm a year."

Antipathy toward Russian policies over the past decade brought Turkmenistan increasingly closer to its Caspian southern neighbour. Both before the 1991 dissolution of the Soviet Union and now, the majority of Turkmenistan's natural gas is exported through Gazprom's Central Asia-Centre pipelines to Russia.
Russia's tight-fisted low prices, led Niyazov in March 1997 to halt gas exports and to remind the Kremlin of Ashgabat's other options: Later that year he opened the $ 195 mm, 124-mile, 8.4 bn cm Korpezhe-Kurt Kui pipeline to Iran, Central Asia's first gas export pipeline to bypass Russia.

Further thumbing his neutralist nose at his former Russian masters, Niyazov concluded a 25-year natural gas delivery contract with Tehran. Despite Washington having passed the 1996 Iran and Libya Sanctions Act, threatening sanctions against any entity investing more than $ 20 mm in Iran's hydrocarbon industry, in the case of Turkmenistan there was nothing the United States could do but quietly fume, as it had no pressure points against Niyazov.
The new agreement marks yet another hole that Iran has managed to poke in US sanctions. Given the US and EU interest in entering the Turkmen energy market, Washington is unlikely to threaten Ashgabat with punitive measures.

"My country and the European community on the whole are highly interested in stable supplies of hydrocarbons," Berdymukhamedov told, "which Turkmenistan, pursuing the policy of diversification of energy supplies to global markets, is so rich in."
Ahmadinejad invited Berdymukhamedov to attend as an honoured guest the upcoming Economic Cooperation Organization summit, which will be held in Tehran on March 11, solidifying the energy diplomacy tiesof the two countries.