TURKMENISTAN: DIFFERENCES WITH RUSSIA BLOCK PROGRESS ON

UNCLAS ASHGABAT 000640

SENSITIVE

SIPDIS

STATE FOR SCA/CEN; EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER

E.O. 12958: N/A
TAGS: EPET PGOV EINV TX
SUBJECT: TURKMENISTAN: DIFFERENCES WITH RUSSIA BLOCK PROGRESS ON
LITTORAL PIPELINE

REF: ASHGABAT 462


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: The Government of Turkmenistan has taken no
actions that would advance the development of the Caspian Littoral
(aka Pre-Caspian) Gas Pipeline project since at least the run-up to
President Berdimuhamedov's visit to Russia two months ago. The
planned Littoral Gas Pipeline is supposed to link Turkmenistan and
Kazakhstan to Russia and transport 30 to 40 bcm of Turkmen and
Kazakh gas annually. Turkmenistan is the only one of the three
participating countries that still has not ratified the Littoral
Pipeline Construction Agreement signed by the Presidents of Russia,
Kazakhstan, and Turkmenistan in December 2007. Russia's and
Gazprom's poorly-received responses to the April 8 pipeline
explosion and Turkmen reluctance to help Gazprom take control of an
even larger portion of Central Asian gas may keep this pipeline from
happening anytime soon. END SUMMARY.

FINANCING AND CAPACITY ARE STICKING POINTS


3. (SBU) Turkmenistan's refusal to ratify the agreement reportedly
is based on the two countries' inability to agree on financial
obligations related to the pipeline's construction and the planned
total export capacity of the pipeline. According to a Turkmenistan
Ministry of Oil and Gas official, the disagreement between the two
countries on the proposed East - West gas pipeline, which is
supposed to link Turkmenistan's eastern gas fields to gas facilities
in the country's west, played a key role in slowing bilateral
negotiations for the Littoral Gas Pipeline project. The Turkmen
Government turned down Gazprom's offer to invest in the construction
of the East - West pipeline because Gazprom wanted guarantees that
its contents would be exclusively dedicated to feeding the Littoral
Pipeline.

NEED TO RESOLVE CURRENT DISPUTE OVER GAS EXPORTS


4. (SBU) The April 8 gas blast on the Turkmen section of the
Central Asia - Center gas pipeline (reftel),and the mutual
accusations between Gazprom and the Government of Turkmenistan that
followed, have further discouraged Turkmenistan from taking any
action to advance the Littoral Gas Pipeline project. This, in turn,
has made it difficult for Gazprom to move the project forward. A
Ministry of Oil and Gas official opined in a meeting with local
staff that there would be no progress on the Littoral Pipeline
Agreement on the Turkmen side until the deliveries of Turkmen gas to
Russia are resumed under terms that totally satisfy Turkmenistan.


5. (SBU) COMMENT: Turkmenistan's reluctance to ratify the Littoral
Pipeline Agreement suggests that the Government is becoming
increasingly concerned that Gazprom would strengthen its control
over Central Asian gas, should the Littoral Pipeline project become
a reality. Even after the current supply dispute is resolved with
Gazprom, the Government of Turkmenistan may rebuff Russian efforts
to persuade Turkmenistan to commit additional volumes of gas to the
Littoral Pipeline project. Since Turkmenistan's policy of
diversification of gas exports is at odds with Russia's ambitions,
the Turkmen Government -- presuming negotiations on development of
the Littoral resume at some point -- will likely impose a limit on
the quantity of Turkmen gas committed to the future Littoral
pipeline, in order to keep open the possibility of alternative gas
routes that will give the country the diversity it wants. END
COMMENT.

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