Russia Signs Deal for Gas Pipeline Along Caspian Sea
By JUDY DEMPSEY

New York Times
December 21, 2007

Desperate to meet growing domestic and European demand, Russia signed
a deal Thursday with the Central Asian republics of Kazakhstan and
Turkmenistan to build a natural gas pipeline along the Caspian Sea, a
move that analysts said could strengthen Russia’s monopoly on energy
exports from the region.

The deal was signed in the Kremlin by President Vladimir V. Putin of
Russia and President Nursultan A. Nazarbayev of Kazakhstan during a
conference call with President Gurbanguly Berdymukhammedov of
Turkmenistan.

Mr. Putin, who visited both countries several times over the last two
years to clinch this deal, said on Russian national television that
the agreement would contribute to `strengthening the European energy
security.’

Russia supplies more than a quarter of Europe’s gas needs; several
Eastern European countries are almost completely dependent on Russia
for natural gas.

Gazprom, Russia’s state-owned energy monopoly, has had to seek new and
expensive suppliers, mostly in Central Asia, to fulfill its export
contracts in Europe while also supplying its domestic market, which
has rapidly expanded because of the surge in consumer spending and
economic growth.

`The reality is that Russia is not investing enough in its own gas
infrastructure and has not enough of its own gas to supply Europe and
its domestic market,’ said Andrew Monaghan, director of the Russian
Research Network at the Defense Academy of the United Kingdom.

Kazakhstan and Turkmenistan have also been wooed by the United States
and the European Union, seeking access to the region’s gas fields.

The United States has been trying to persuade Central Asian nations to
build a pipeline under the Caspian Sea, bypassing Russia and Iran. But
that proposal has been held up by a dispute over the status of the
Caspian Sea among the countries that border it, including
Turkmenistan, Kazakhstan, Azerbaijan, Iran and Russia.

The European Union, too, has been trying to diversify its suppliers
and its routes, mainly via the Caspian Sea, by building the Nabucco
gas pipeline, the union’s most ambitious infrastructure project.

That project envisions a pipeline stretching about 2,000 miles from
Turkey through the Balkans and Central Europe into
Austria. Turkmenistan, Azerbaijan and Iran, which hold the largest
reserves, would feed gas into the pipeline.

European officials played down the Russian accord Thursday, saying
there was still enough gas in Azerbaijan and Kazakhstan to fill the
Nabucco pipeline.

Still, some analysts said the new deal could undermine Europe’s
ambitions.

`Russia has always been trying to block Nabucco,’ said Peter Kaderjak,
director of the Regional Center for Energy Policy Research in
Budapest. `But what is interesting about this deal is that it took so
long, and it needed Putin to push it through. It just shows how much
Russia needs extra gas supplies, and it is willing to pay for it.’

Aleksei Miller, chief executive of Gazprom, spent many months
negotiating for Turkmen gas. He signed an agreement last month, but
only after agreeing to the demands of Mr. Berdymukhammedov for a
higher price. Analysts said this was a clear signal that Turkmenistan
was independent enough from Russia to set its own terms and confident
enough to use its energy resources as leverage.

Starting in January, Russia will pay $130 for 1,000 cubic meters, or
35,000 cubic feet, of gas from Turkmenistan; this year it paid
$100. In the second half of 2008, the price will rise to $150 for
1,000 cubic meters.

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From: Emil Lazarian | Ararat NewsPress