Jacopo Dettoni in Almaty -
Iranian president Hassan Rouhani and his Turkmen counterpart Gurbanguly Berdymukhammedov unveiled an ambitious plan to strengthen commercial ties when they met in Ashgabat on March 11. However, there seems to be little chance of Iran becoming the key partner Turkmenistan badly needs to open new markets for its abundant natural gas.
“Last year the trade turnover between our countries totalled $3.7bn, but today we have expressed the intention in 10 years to bring this figure to $60bn,” Rouhani said in a joint press conference with Berdimuhamedov, as reported by Turkmenistan's state-run TDH news agency.
"Our countries are among the [world’s] largest oil and gas producers, and [our] partnership in this field will significantly expand in the future,” Rouhani added.
Iran and Turkmenistan share vast natural gas resources – they boast the world’s first and fourth largest gas reserves, respectively. At the same time, they also share a common struggle to find markets for their gas. Iran’s access to the international gas market has been crippled by US sanctions, which prevent any American company from dealing with blacklisted Iranian groups. For its part, landlocked Turkmenistan only recently managed to open a new pipeline export route to China after exclusively relying on exports to Russia for decades.
But despite the two presidents’ renewed commitment to boost trade, it is not clear how exactly they can synchronise their respective goals.
“Iran and Turkmenistan have competing projects in the sphere of selling natural gas to Europe,” Andrei Kazantsev, a native of Turkmenistan who is director of the Analytical Center of the Moscow State Institute of International Relations, tells bne IntelliNews. “From this point of view, they are more rivals than potential partners.”
European countries are actively backing Ashgabat’s plans to build a trans-Caspian gas pipeline carrying Turkmen gas to Azerbaijan, on to Turkey through Georgia, and eventually to Southeastern Europe. Yet Russia has always used its status as a Caspian littoral country to veto the plan, which would challenge its gas supply monopoly in Europe. Iran, also a Caspian littoral country, has also always opposed the trans-Caspian pipeline project, as it directly competes with its own project of building a Persian gas pipeline to Turkey, and then on to Europe.
At the same time, both countries are striving to open their respective way to tap the massive energy markets in Pakistan and India. Iran shares a border with Pakistan and has tried to lay a gas pipeline between the two countries for years, but international sanctions have stalled the project. For its part, Turkmenistan is reviving the dream of the Turkmenistan-Afghanistan-Pakistan-India (Tapi) pipeline, but the risks related to the Afghan stretch are still too high to make any financial investment feasible.
Iran could still leverage its better geographic location to establish itself as an intermediary for Turkmen gas. Yet again sanctions make any such plan unrealistic, at least today.
Even if Tehran eventually strikes a deal with the US over its nuclear programme and sanctions are gradually lifted, Turkmenistan may be hesitant to sell gas through infrastructure controlled by third countries. Back in the 1990s and early 2000s, when Russia was the largest buyer of Turkmen gas, it used to increase or decrease imports at will. China has replaced Russia as the largest importer of Turkmen gas today.
The lack of current LNG facilities on the Iranian Gulf coast takes swap agreements off the table – where Turkmenistan would swap gas delivered at the border with liquified gas stored in an LNG terminal on the Gulf. One LNG terminal has been under construction for years at the Tombak port.
“Only if Iran offers a good price or even gives Turkmenistan some transport capacity in any future pipeline going to Turkey, that may increase the cooperation between the two countries,” Kazantsev says.
Iran itself has been a market for Turkmen gas for years, as it uses it for the needs of its northern provinces, which lie hundreds of kilometres away from the country’s abundant gas fields in the south, but Tehran is cutting down on imports to boost local production. The Iranian government also failed to pay off its $1bn debt to Turkmenistan in 2013, prompting Turkmenistan to reduce gas deliveries to Iran.
Overall Iranian imports of Turkmen natural gas decreased to 4.7bn cubic metres (cm) in 2013, down from 9bn cm in 2012 and 10.2bn in 2011, according to figures from the BP’s 2014 Statistical Review of World Energy. Today, they represent slightly more than 10% of total exports of Turkmen gas.
The room for boosting trade appears limited also beyond the energy sector. Iran and Turkmenistan’s non-oil trade turnover stood at $1.1bn in 2014, news website Azernews reported, quoting figures from the Iranian customs administration. “They both need an industrial partner, right now they don’t have many items to exchange,” Kazantsev adds.
Turkmenistan has historically had a narrow industrial base. For its part, Iran’s 77mn population offers big opportunities for local manufacturers, but years of sanctions have hit their competiveness badly.
New opportunities may arise from the railway link connecting Iran to Turkmenistan, Kazakhstan and eventually China, but that may turn Turkmenistan into a simple transit country for Chinese goods.
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