Identifier
Created
Classification
Origin
08ASHGABAT568
2008-05-05 12:55:00
CONFIDENTIAL
Embassy Ashgabat
Cable title:
TURKMENISTAN/IRAN: NATURAL GAS "AGREEMENT" LEAVES
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C O N F I D E N T I A L ASHGABAT 000568
SIPDIS
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: DECL: 05/05/2018
TAGS: PREL EPET IR TX
SUBJECT: TURKMENISTAN/IRAN: NATURAL GAS "AGREEMENT" LEAVES
PRICE AND VOLUME UNDECIDED
Classified By: Charge d'Affaires Sylvia Reed Curran for reasons 1.4(B)
and (D).
C O N F I D E N T I A L ASHGABAT 000568
SIPDIS
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: DECL: 05/05/2018
TAGS: PREL EPET IR TX
SUBJECT: TURKMENISTAN/IRAN: NATURAL GAS "AGREEMENT" LEAVES
PRICE AND VOLUME UNDECIDED
Classified By: Charge d'Affaires Sylvia Reed Curran for reasons 1.4(B)
and (D).
1. (C) Although Iran and Turkmenistan agreed April 25 to
resume delivery of Turkmenistan's natural gas to Iran, they
are still negotiating both the price and volume of natural
gas deliveries, the Iranian ambassador told Poland's
Ambassador Marciej Lang during a May 5 diplomatic event. The
two sides have agreed to use Euros as the currency for their
transactions. While Iran has agreed to pay "world prices,"
however, it remains unclear exactly what the amount will be.
The Iranian ambassador also told Lang that his country would
like to increase the overall volume of Turkmenistan's natural
gas exports to Iran, and wants the two sides to construct a
second pipeline that would supplement the exports via the
Korpeje-to-Kurt-Kui pipeline.
2. (C) COMMENT: From the beginning, the argument between
the two was about price. Iran was importing natural gas from
Turkmenistan for $65 per thousand cubic meters and exporting
similar amounts to Turkey for at least $250 per thousand
cubic meters. With Turkmenistan looking to get much higher
prices for its gas from Gazprom and China in the coming
years, it no longer wanted to accept an arrangement where
Iran was profiting off Turkmenistan's product. We believe
that the price remains undetermined because Gazprom, which
promised in late March to begin purchasing Turkmenistan's gas
for "western prices," has yet to unveil its new price.
Turkmenistan is likely holding out until it sees what it can
get from Gazprom -- and what Europe will be paying.
3. (C) COMMENT CONTINUED: By contrast, increasing the
volume remains a tough problem. Although the
Korpeje-to-Kurt-Kui pipeline was built to carry a maximum of
13 billion cubic meters (bcm) of gas, Turkmenistan has been
delivering only around 8 bcm of gas to Iran in recent years.
One of the main reasons for this is Turkmenistan's natural
gas production, which has always been limited and which has
slowly begun to decrease. President Berdimuhamedov called on
Turkmenistan's gas sector to produce 81.5 bcm of gas in 2008
(an increase of about 9 bcm over 2007 production),but we are
already beginning to see signs that natural gas production
this year is behind target. Unless Turkmenistan can figure
out a way of increasing overall natural gas production, it
will be unable to fulfill any new delivery contract with Iran
without making sharp cutbacks on deliveries to other partners
(primarily Russia/Gazprom). END COMMENT.
CURRAN
SIPDIS
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: DECL: 05/05/2018
TAGS: PREL EPET IR TX
SUBJECT: TURKMENISTAN/IRAN: NATURAL GAS "AGREEMENT" LEAVES
PRICE AND VOLUME UNDECIDED
Classified By: Charge d'Affaires Sylvia Reed Curran for reasons 1.4(B)
and (D).
1. (C) Although Iran and Turkmenistan agreed April 25 to
resume delivery of Turkmenistan's natural gas to Iran, they
are still negotiating both the price and volume of natural
gas deliveries, the Iranian ambassador told Poland's
Ambassador Marciej Lang during a May 5 diplomatic event. The
two sides have agreed to use Euros as the currency for their
transactions. While Iran has agreed to pay "world prices,"
however, it remains unclear exactly what the amount will be.
The Iranian ambassador also told Lang that his country would
like to increase the overall volume of Turkmenistan's natural
gas exports to Iran, and wants the two sides to construct a
second pipeline that would supplement the exports via the
Korpeje-to-Kurt-Kui pipeline.
2. (C) COMMENT: From the beginning, the argument between
the two was about price. Iran was importing natural gas from
Turkmenistan for $65 per thousand cubic meters and exporting
similar amounts to Turkey for at least $250 per thousand
cubic meters. With Turkmenistan looking to get much higher
prices for its gas from Gazprom and China in the coming
years, it no longer wanted to accept an arrangement where
Iran was profiting off Turkmenistan's product. We believe
that the price remains undetermined because Gazprom, which
promised in late March to begin purchasing Turkmenistan's gas
for "western prices," has yet to unveil its new price.
Turkmenistan is likely holding out until it sees what it can
get from Gazprom -- and what Europe will be paying.
3. (C) COMMENT CONTINUED: By contrast, increasing the
volume remains a tough problem. Although the
Korpeje-to-Kurt-Kui pipeline was built to carry a maximum of
13 billion cubic meters (bcm) of gas, Turkmenistan has been
delivering only around 8 bcm of gas to Iran in recent years.
One of the main reasons for this is Turkmenistan's natural
gas production, which has always been limited and which has
slowly begun to decrease. President Berdimuhamedov called on
Turkmenistan's gas sector to produce 81.5 bcm of gas in 2008
(an increase of about 9 bcm over 2007 production),but we are
already beginning to see signs that natural gas production
this year is behind target. Unless Turkmenistan can figure
out a way of increasing overall natural gas production, it
will be unable to fulfill any new delivery contract with Iran
without making sharp cutbacks on deliveries to other partners
(primarily Russia/Gazprom). END COMMENT.
CURRAN