Who will win the political gas game?

It is no exaggeration to say that every year, with the arrival of winter, a period that tests the patience of the Uzbekistan people begins.  This is mainly due to the shortage of gas and electricity.  As a result of a decrease in gas pressure, people are forced to live in the cold.

This year, Uzbekistan is not alone in suffering from a winter that started in the same conditions.  This year’s international geopolitical situation has turned the gas problem into a global challenge.  European countries especially are suffering from this.  As a result of Russia’s war in Ukraine, events such as the boycott of Russian gas and the rupture of the Nord Stream gas pipeline has made the gas problem even more serious.  While Russia is forced to look for other ways to deliver gas to Europe, it is understood that the USA is also offering other sources for Europe.  Also, Turkish President Recep Tayyip Erdogan is trying to make Turkey a new “Gas Hub”.

So who ultimately wins in these political gas games?  What are the prospects for the implementation of these projects?  Can Central Asia really become a leader in supplying gas to Europe?  In today’s article, we will try to find answers to such questions.

Russia-Kazakhstan-Uzbekistan gas union

At the end of November, after a meeting between Vladimir Putin and Kasim-Jomart Tokayev, there were reports of a proposal to establish a “Triple gas union” with the participation of Uzbekistan in order to coordinate actions on the transportation of Russian gas through the regions.  This project envisages the creation of a mutual coordination mechanism at the initial stage.  This project was initially understood as a “triple alliance” and it was later revealed that it was about gas.  For this reason, it became the subject of many disputes.

In particular, this news, which appeared at the same time as the shortage of gas and electricity in Uzbekistan, raised questions among people.  It has even been said that a deficit is being deliberately created to join this union.  However, the Minister of Energy of Uzbekistan Jorabek Mirzamahmudov rejected these statements and clearly stated that the cause of power outages is not external factors, but the system.

Dmitry Peskov, the press secretary of the President of Russia, also said that there are no political conditions within this union.  In addition, according to the words of the Minister of Energy of Kazakhstan Bolat Akchulakov, in fact, the issue of the tripartite gas union was not discussed.  According to him, all discussions will be in binary format.  That is, in the format of Russia – Kazakhstan, Kazakhstan – Uzbekistan.  For now, it can be said that no final decision or project has been made in this regard.  Negotiations are ongoing.

Gas in Turkey

In October, Russian President Vladimir Putin, speaking at the “Russian Energy Week-2022” forum, spoke about the establishment of a new gas hub in Turkey instead of “Nord Stream” and “Nord Stream 2.”  The following day, this issue was also discussed at the meeting with the Turkish leader.  In turn, the leader of Turkey announced his support for this project.  It is said that there are plans to distribute gas coming from Russia and other directions to Europe through this hub.  Currently, Turkey imports gas from Russia, Iran and Azerbaijan, and most of the gas also goes to Europe through Turkey.  Russia delivered 26.3 billion cubic meters of gas to Turkey in 2021, accounting for 44.9 percent of Turkey’s gas imports.  Part of this gas goes to Southeast Europe through Turkey.  Iran imports 10 billion cubic meters of gas per year.  This is 16% of total imports.  Also, through the Onadoliorti corridor from Baku, Azerbaijani gas reaches southern Italy.

Any project with the participation of Russia is considered risky due to the risk of sanctions.  According to Rachel Zimba, the founder of consulting company Ziemba Insights, after the gas crisis between Russia and Europe, which arose due to price disagreements, there may not be a large demand for Russian gas from Turkey and the volume may not increase.  In addition, considering that the European Union has replaced Russian gas with other sources, it can be predicted that the future of this device will remain dark.

In addition, the question of who will build new gas pipelines remains open.  Unlike the Nord Stream in the Baltic Sea, the construction of new pipelines in the Black Sea is a more complicated process  because the Black Sea is deeper and bigger.  It is impossible to deliver large volumes of gas through old pipelines.

According to Stanislav Mitrakhovich, an expert of the Russian Finance University, interest in this gas may not be very high in Europe.  As Turkey is located in the south of Europe, the gas passing through Turkey is mainly delivered to the south.  Italy is the only country with large production in southern Europe and the countries next to it do not need large amounts of gas.  Therefore, the question of who will buy this gas is also open.  Infrastructure is needed to transport gas from South to North, for example to Germany.  Even if it is resolved, it will be necessary to take into account that relations between Russia and the West will play a big role.

“Through the new hub in Turkey, Russia hopes to retain customers in half of Europe,” Mitrakhovich believes.  Also, if the events in Ukraine change for the better, the expert believes that it is even possible to see income through this corridor.  What are Turkey’s plans?

According to experts, Turkey has already tried to become an international hub for gas and has sufficient grounds for this: it receives gas from Russia in several directions, from Azerbaijan in two directions – through Iran, and has its own compressed gas terminals.  In addition, President Erdoğan announced that he will visit Turkmenistan in December and discuss the issue of transporting gas from there to Turkey through the Caspian Sea.

Also, over the past two years, Turkey has discovered gas fields in the Black Sea and is starting to extract gas from them.  As mentioned above, there are several gas pipelines in the country.  At the same time, there are other alternatives in the country’s energy balance: coal, renewable energy sources.  Also, in honor of the 100th anniversary of Independence, a new Akkuyu NPP is expected to open in 2023.

Turkey’s transformation into a gas distribution center could allow it to control Eurasian gas carriers and set prices in Turkey.  For this, it will be necessary to import gas not only from Russia, but also from other regions.  It can be said that this is the meaning of the Turkish President’s visit to Turkmenistan.

Can we hope for Turkmen gas?

For a week, golden Turkmenistan became a lifeline for the people of Uzbekistan.  According to the agreement reached with Turkmenistan, a total of 1.5 billion cubic meters of gas will be delivered over the next three months to meet the gas needs of Uzbekistan.  Turkmenistan is one of the countries rich in gas in the region.  Its gas reserves are estimated at 14 trillion cubic meters.  83 billion cubic meters of gas is produced annually.  Compared to Russia, this is a very small number.  Russia produces 700 billion cubic meters of gas per year.

Currently, the USA is making proposals to deliver Turkmen gas to Europe, but building enough infrastructure to do so can be expensive.  In addition, Russia, China and Iran oppose the export of gas from Turkmenistan to the European Union.  However, MSU expert Alexander Kudrin believes that this idea can be implemented.  However, it requires sufficient investment and 3-4 years of time.  In addition, it is necessary to expand gas pipelines from Azerbaijan to transfer Turkmen gas through the Caspian Sea to Azerbaijan, and from there to Turkey, and finally to Europe.  This is a very expensive project.  In addition, as we said above, China, which transports two-thirds of the gas produced by Turkmenistan, Iran and Russia, which want to export their gas, will oppose this.  Therefore, the project of exporting gas from Turkmenistan to the European Union will remain one of the abstract projects.  

In conclusion, let’s return to the title of our article.  So, can the Central Asian countries become a new source of gas for the European Union?  In our opinion, no.  This is because the transportation of gas from Central Asian countries, Turkmenistan and Uzbekistan, located far from Europe, requires very large investment projects.  In addition, two-thirds of Turkmenistan’s gas is exported to China, and Uzbekistan’s gas is exported to Russia under secret agreements.

It is too early to predict the future of the planned gas center in Turkey, although theoretically there are those who believe that it will happen.  In our opinion, everything depends on the future of relations between the West and Russia.