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Hopes Reemerge for Trans-Caspian Gas Pipeline, but Critical Obstacles Persist
By Azad Garibov, Jamestown 4/9/19
Sep 5, 2019 - 3:09:15 PM

On August 12, delegations led by the prime ministers of the five Caspian littoral states—Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan—came together at Turkmenistan’s coastal resort of Awaza to hold the first annual Caspian Economic Forum. The heads of government from two other countries, Uzbekistan and Bulgaria, both interested in the transport potential of the Caspian region, were also present at the event, along with representatives of many other states (at the ambassadorial or ministerial levels) and multinational corporations.

As expected, the Forum was dominated by discussions around energy and transportation—extracting, processing and delivering to global markets the major resources of this landlocked region. Speaking at the event, Peter Burian, the European Union’s special representative for Central Asia, stated that the EU “resumed negotiations with Turkmenistan on participation in the financing of a Trans-Caspian [natural] gas pipeline project” but refrained from specifying further details (Vestifinance.ru, August 12). The next day, the government-friendly Turkmenistani news agency Orient reported that representatives of a Euro-Chinese consortium (which includes Germany’s Edison Technologies, MMEC Mannesmann GmbH, Air Liquide Global E&C Solutions, and the Chinese SINOPEC Engineering Group) met with the deputy chairperson of the Cabinet of Ministers of Turkmenistan, Myratgeldi Meredov, and the president’s advisor on oil and gas, Yagshigeldy Kakaev, to discuss building the Trans-Caspian Pipeline (TCP) (Orient.tm, August 13). According to media accounts, the consortium declared its readiness to invest financial resources in the construction of 300 kilometers of undersea pipeline as well as to design and build compressor stations and other essential infrastructure. Furthermore, the consortium asserted that the commercial gas brought to market as a result of its investments would be exported to Europe upon the commissioning of the pipeline (Business.com.tm, August 19).

While the news once more renewed hopes about the future of the TCP, a number of key obstacles that have hindered the realization of this strategic project for decades (see EDM, February 6, 2018) remain firmly in place. First of all, Turkmenistan continues to insist on selling gas at its border without taking on the financial and geopolitical burden of realizing any new transnational projects. Second, concerns persist regarding price competition with Russian exports as well as liquefied natural gas (LNG) deliveries from other countries to the European market (New Europe, June 7, 2019). And, most importantly, Russia and Iran maintain their opposition to the construction of an underwater pipeline in the Caspian Sea. At the Forum, when asked about Russia’s attitude toward the TCP, First Deputy Head of the Russian Government Office Sergei Prikhodko pointedly stressed that all Caspian Sea littoral states have the right to take part in comprehensive environmental assessments of cross-border construction projects, starting from their concept stages. He added, the 2018 Convention on the Legal Status of the Caspian Sea (CLSCS) “confirms the absolute priority of the interests of preserving the unique ecosystem of the Caspian Sea over any hypothetical economic projects” (TASS, August 12). The same “concern” was voiced by Iran: Behrouz Namdari, an executive with the National Iranian Gas Company, was quoted by RIA Novosti as saying in Awaza that the “construction of a gas pipeline from the east to the west of the Caspian Sea might cause severe damage to the region’s environment… Iran opposes its construction” (Hronikatm.com, August 13).

Tehran and Moscow have used environmental claims to halt the construction of the TCP for some two decades. And despite the signing of the CLSCS last year, the document’s wording appears to leave room for continuing this debate around “ecological requirements and standards” (RFE/RL, August 15, 2018). Though Article 14 of the convention states that “the parties can lay underwater pipelines along the Caspian floor,” it also stipulates that such activities hinge on “the condition of the accordance of their projects with ecological demands and standards” (see EDM, September 12, 2018). In fact, just three weeks before the signing of the Convention in Aktau, on August 12, 2018, the environmental ministers of the Caspian states, in an extraordinary meeting in Moscow, signed an additional Protocol to the 2003 Framework Convention for the Protection of the Marine Environment of the Caspian Sea. The protocol, titled “Assessment of Impact on the Environment in the Trans-Border Context,” creates legal ground for a transnational assessment of potential impacts of proposed pipelines (Mid.ru, August 17, 2018). Essentially, this same loophole has long held up the construction of the TCP.

That said, both Russia and Iran have yet to ratify the CLSCS (the other three littoral states have ratified it). It is known that there is serious opposition to the document in the Iranian parliament (Press TV, August 4). Whereas, Russian Prime Minister Dmitry Medvedev said at last month’s Caspian Forum that ratification by Moscow is expected “in the near future” (Government.ru, August 12). Interestingly, Bulgarian Prime Minister Boyko Borissov, the only European leader to attend the forum, also noted that, due to environmental issues, the Trans-Caspian gas route was not a viable option. Later, Bulgarian media confirmed that Sofia was in talks to purchase gas from Turkmenistan through swap transactions involving Russia (Emerging-europe.com, August 14). Given Moscow’s long-standing opposition to the TCP, when Gazprom resumed gas imports from Turkmenistan in April 2019 after three-year break, some even argued that this was done (at least in part) to dissuade Turkmenistan from pursuing the construction of a gas pipeline beneath the Caspian Sea (Hronikatm.com, October 25, 2018; Spglobal.com, April 16, 2019).

Possible Chinese involvement (via SINOPEC) in the talks over the TCP is another noteworthy development that could somewhat increase the odds of the realization of the TCP project. Chinese state-owned corporations have a reputation for successfully completing projects they undertake in the region. However, it is also an open question to what extent the Chinese would actually be committed to the TCP, which would threaten Beijing’s near-monopsony over Turkmenistan’s gas trade. In 2018, Turkmenistan shipped to China 33.3 billion cubic meters (bcm) of natural gas out of its yearly export total of 35.2 bcm (Bp.com, June 2019). The existence of another export outlet would presumably weaken Beijing’s negotiation position with Ashgabat regarding future prices.

The five littoral states agreed to hold next year’s Caspian Economic Forum in Astrakhan, Russia (Orient.tm, August 12). The inaugural event prompted broad discussions around regional transportation and energy projects, including, importantly, the TCP. Still, no commitments were made and no cooperation documents were signed during the proceedings. With critical obstacles—some of them purely economic and others geopolitical in nature—remaining in place, it is hard to imagine the TCP project going forward.



Source: Ocnus.net 2019