The Geopolitics Of Gas: Turkmenistan's Westward Push
Authored by EurasiaNet's David O'Byrne via OilPrice.com,
Turkmenistan, eyeing to export its vast natural gas reserves, considers Iran as a strategic but complex Plan B for transit to Western markets.
Current Iran-based gas swap arrangements with Azerbaijan and potential new deals with Turkey indicate a growing reliance on Iran as a transit country.
The feasibility of these plans is clouded by concerns over Western sanctions, Iran's reliability as a gas supplier, and geopolitical implications for the region.
For Turkmenistan and its ambitions to export its vast natural gas reserves westward, Iran is a tantalizing but also potentially cheap, and quick, Plan B.
Relying on a partner like Tehran, however, creates potentially profound complications.
The possibility of falling prey to Western sanctions cannot be discounted. And Iran has at times proven an unreliable supplier.
Turkmenistan is already sending gas to Iran, albeit as part of a swap arrangement with Azerbaijan. Two billion cubic meters of gas are piped into remote northeastern areas of Iran that are in need of the fuel. And Iran then sends an equivalent amount to Azerbaijan. The result, if only in purely notional terms, is that Azerbaijan is a buyer of Turkmen gas.
Tehran has been expanding pipeline capacity with a view of increasing annual Azerbaijan-Turkmenistan swap volumes to 5.5 billion cubic meters.
The apparent success of this model has inspired more of the same.
In November, Turkmen and Iraqi officials met in Ashgabat to discuss the prospect of a similar swap, of up to 9 billion cubic meters annually over a period of five years. Again, Iran would act as the go-between.
The dream when contemplating sending gas to Europe has been to build the so-called trans-Caspian pipeline, or TCP, which would bridge Turkmenistan to Azerbaijan. This solution would cost upwards of $20 billion.
And there are the geopolitical headwinds coming from Russia to consider. Moscow has made little secret of its opposition to seeing a TCP completed in any form, despite having signed off on the 2018 Convention on the Legal Status of the Caspian Sea, which would allow the construction of a sub-sea gas pipeline from Turkmenistan to Azerbaijan.
Russia undermined its own positions in this area, however, by embarking on its catastrophic full-blown invasion of Ukraine in early 2022. One key result has been that Europe has radically slashed the amount of gas it buys from Gazprom.
This state of affairs has benefited Azerbaijan. In July 2022, Azerbaijan reached a landmark agreement with the European Union that should see it doubling its exports to Europe to 20 billion cubic meters a year by 2027.
The most recent TCP alternative being explored by Turkmenistan involves Turkey playing a more active role than being just a transit route.
On December 6, conversations took place in Ashgabat at the Intergovernmental Turkmen-Turkish Commission on Economic Cooperation around the possibility of transiting Turkmen gas to Turkey via Iran.
Details are sparse for now. Turkmenistan’s Foreign Ministry, which chaired that exchange, remarked only on the “promise of the project” and that more detailed negotiations at governmental and company levels would start “in the near future.”
Existing infrastructure suggests what might be possible.
There are two pipelines able to carry gas from Turkmenistan to Iran: the 8 billion cubic meter per year capacity Korpeje-Kurtkuyu pipeline; and the 12.5 billion cubic meter capacity Dauletabad-Sarakhs-Khangiran pipeline. Iran and Turkey, meanwhile, are linked by the 14 billion cubic meter Iran-Turkey pipeline.
Turkey already imports 9.6 billion cubic meters a year of Iranian gas via its pipeline link, suggesting up to 4.4 billion cubic meters could be available for export to Turkey - or possibly more if Iran could expand the capacity of its pipeline to the Turkish border.
Turkish officials have declined to be drawn on any of the details - either on how talks with Turkmenistan are proceeding, or on what progress there has been in the parallel negotiations to renew a gas supply with Iran that is set to expire in the coming two years.
The latter talks are rumored to be deadlocked. While Tehran is said to be seeking a straight-down-the-line renewal, it is believed Ankara wants a substantial price reduction and concrete guarantees that Tehran will not arbitrarily suspend supplies as it did in January 2022. That unexpected interruption in deliveries triggered gas and power cuts across Turkey.
Iran is in a difficult position. Years of international sanctions have starved its domestic gas sector of investment. When exceptionally cold winter weather descends, it struggles to meet both high domestic demand and export commitments.
Allowing Turkey access to Turkmen gas via its pipeline grid could alleviate Iran’s troubles while ensuring Ankara’s supply security.
Turkmenistan’s gas could also play a role in Turkey's ambitions to host a gas trading hub.
Currently Ankara's plans appear to be limited to imports of Liquified Natural Gas, or LNG, by ship and gas from Russia.
This has sparked concerns that Ankara could use the hub as cover to re-export Russian gas to European markets that have halted Russian gas imports since Russia's invasion of Ukraine.
Whatever spare gas Turkey is one day able to import could later be re-exported to Europe via Turkey's pipeline connections with Greece and Bulgaria, both of which also have spare capacity.
The fact that any of this is contingent on Iran, though, is a problem.
It is unclear whether Iran would even be open to allowing Turkey to import Turkmen gas through its pipelines. It is not certain that Ankara may not merely be attempting to use possible Turkmen gas imports as a bargaining tool in ongoing negotiations with Tehran.
Equally unclear is whether the transit of Turkmen gas via Iran would fall foul of the international sanctions in place against Tehran since 2018.
Azerbaijan's gas swap deal with Turkmenistan and Iran has not been sanctioned, while Turkey's existing gas import contract with Iran, held by Turkey's state gas importer Botas, has always been exempt from sanctions.
That exemption may not be extended to any new deals, however. In late 2022, Ankara offered private companies the chance to import gas from Iran using the spare pipeline capacity, but quickly abandoned the move, reportedly due to fears it would breach the international sanctions regime.