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Is Turkmenistan Losing Iran as a Gas Customer?

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Is Turkmenistan Losing Iran as a Gas Customer? by Eurasianet.org

A EurasiaNet Partner Post from: RFE/RL

It appears Turkmenistan is about to lose its second-best customer for natural gas, Iran.

Iranian Oil Minister Bijan Namdar Zanganeh said on August 11 that his country no longer needed gas from Turkmenistan. Zanganeh went so far as to say, “Iran is importing Turkmen gas just because it is important to promote political and economic relations with Turkmenistan.”

The oil minister’s comments could be bargaining tactics, as Iran has frequently sought to convince Turkmenistan to lower the price for its gas, or it could reflect a potential shift in Iran’s role in the international gas market.

Zanganeh said that with Iran about to boost domestic gas production by some 200 million additional cubic meters starting in March next year, the country could “abandon completely gas imports from Turkmenistan.” This contrasts with his statements in May that Iran would continue to import Turkmen gas at existing levels.

It is quite a turn of events for Turkmenistan. In early 2010 a new, second pipeline bringing Turkmen gas to Iran was launched. At that time leaders in the two countries spoke about gas imports to Iran reaching up to 20 billion cubic meters (bcm) annually. A new gas-compressor station started operation in western Turkmenistan in December 2013, built specifically to export more gas to Iran.

The first gas pipeline connecting the two countries — the 200-kilometer Korpedzhe-Kurdkui pipeline — was launched at the end of 1997. It was also the first pipeline that gave Turkmenistan an export route to somewhere outside the former Soviet Union. Iran funded construction of the pipeline to import some 8 bcm of gas a year, mainly to areas of northern Iran that were not well connected to the gas fields of the south.

Russia remained the biggest purchaser of Turkmen gas until a suspicious explosion along the pipeline connecting the two countries occurred in April 2009, amid tense negotiations between the two over the price for Turkmen gas. The ruptured pipeline cut off gas flows entirely for months.

Iran then became for a brief time the main buyer of Turkmen gas, until the new pipeline from Turkmenistan to China started operation at the end of 2009.

Supplies of Turkmen gas to Russia were eventually renewed, but in greatly diminished volumes, leaving Iran the No. 2 customer for Turkmen gas, after China.

International sanctions on Iran have hindered the country from developing its gas sector and from constructing an infrastructure to distribute gas for domestic use. Iran has the second-largest proven gas reserves in the world (Russia has the most) but again, due to sanctions there has been little opportunity to take advantage of that resource.

As talks progress between Tehran and major world powers about Iran’s nuclear program, and sanctions are slowly eased, there are new prospects on the horizon for Iran and gas exports are a big part of that.

The same day Zanganeh spoke of the end of Turkmen gas imports, the deputy oil minister in charge of international affairs, Ali Majedi, told journalists Iran was ready to supply Europe with gas via the Nabucco pipeline project.

Nabucco was recently shelved after more than a decade of shareholders trying to get potential gas suppliers to sign contracts for supplies, which gas suppliers were hesitant to do since it was unclear how soon, or even if, Nabucco would be built.

Nabucco was originally envisioned to bring gas from Caspian Basin countries — Azerbaijan and Turkmenistan, possibly Kazakhstan and Uzbekistan — and also possibly from Iraq to Europe by way of a 3,300-kilometer pipeline.

Nabucco was all but scrapped after Azerbaijan opted last year to use the Trans-Anatolian gas pipeline to feed into the Trans-Adriatic pipeline across Southern Europe.

Majedi claimed two European countries had already shown interest in reviving the Nabucco scheme and that “Iran with its major gas fields could supply gas to Europe via Nabucco.” And Nabucco’s map of its proposed route envisioned the possible inclusion of Iran, so the route is already set.

In such a scenario Turkmenistan changes from Iran’s gas supplier into Iran’s competitor for a space in a pipeline across northern Iran into Turkey and on, eventually, to Austria.

If Oil Minister Zanganeh was sincere in his remarks, this is very bad news for Turkmenistan. It leaves Turkmenistan with two customers for its gas – China and Russia. China is a guaranteed long-term and virtually insatiable customer. Russia has always mixed politics with business in gas dealings with Turkmenistan, an arrangement Ashgabat hoped it was breaking as the Central Asian state showed it was diversifying its export markets.

— Bruce Pannier, with contributions from Toymyrat Bugayev of RFE/RL’s Turkmen Service

Editor’s note:

Copyright (c) 2014. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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