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It’s been just over a year since Turkmenistan, a country boasting the world’s fourth or fifth biggest largest natural gas reserves, ended decades of indecision and finally announced it was serious about exporting to Western markets.
For just about any other country, such an announcement would have touched off a frenzy of courtship by countries and companies interested in developing export deals. But with Turkmenistan the process has been slower and more difficult than would normally be expected, as recent events have highlighted.
In March this year, Turkmen President Serdar Berdymukhamedov visited Turkey where he signed what appeared to be a landmark agreement with Turkish President Tayyip Erdogan, opening the way for a “swap deal” enabling Turkmen gas to be supplied to Iran, which would then supply the same volume of its own gas to Turkey.
Turkish officials at that time seemed confident that a commercial agreement would follow swiftly. Turkish Energy Minister Alparslan Bayraktar announced in a TV interview July 26 that he would fly to Ashgabat within days to conclude a deal that would see 1.5-2.0 billion cubic meters (bcm) of gas per year from Turkmenistan exported to Turkey via Iran. Supply could start as soon as early 2025, and the gas could be re-exported to Europe, he indicated. It seemed like a done deal.
But almost two months after Bayraktar’s initial announcement, the commercial agreement is still awaiting signatures.
If concluded, the agreement with Turkmenistan would be a major coup for Ankara, which has been trying since the late 1990s to bring Turkmen gas to Turkey, and which is keen to bring in more gas from anywhere it can to reduce its dependence on Russia and Iran. Legacy contracts with Russia and Iran that account for around half of Turkey’s gas demand are expiring over the next two years, and, as of today, there is no indication either will be renewed.
But it would also be a major step forward for Turkmenistan, giving Ashgabat the chance to prove that it can be a reliable supplier, worthy of the attention of European gas buyers. The deal could also reassure Western investors to a sufficient degree that they would be willing to fund the construction of a dedicated pipeline across the Caspian Sea that Turkmenistan needs if it is to export gas to Europe in large volumes.
But as has been the case throughout the post-Soviet era, getting a firm commitment out of Turkmen officials has proven challenging. Bayraktar announced the pending deal in advance of his visit to Turkmenistan on July 29. His trip had been slated to last only one day, but it was extended for a second day. Ultimately, the minister returned to Turkey apparently with little more than an agreement for the two sides to continue talking.
Deepening the mystery surrounding the trip, reports differed over exactly what meetings had taken place. Bayraktar himself reported meetings with officials from Turkmengaz, Turkmenpetrol, and the Turkmen parliament, along with a meeting with Turkmen Energy Minister Annageldy Saparov.
Neither Bayraktar’s X/Twitter feed nor the Turkish Energy Ministry’s website mentioned any meeting with Turkmen President Berdymukhamedov. The ministry’s website simply posted a single photo of Bayraktar and Saparov shaking hands.
The Turkmenistan government Internet site, however, reported that Berdymukhamedov had indeed met with Bayraktar, although, unusually, there was no photograph published of the two men together. For two countries which set great store on protocol and diplomatic formalities, the reporting discrepancy marked an unusual departure from established norms.
Neither side has revealed any details of why the expected swap agreement for exporting Turkmen gas to Turkey via Iran has not been concluded. However, the recent experience of Azerbaijan, which did manage to conclude an agreement with Turkmenistan to import gas via swaps with Iran may, shed some light on recent developments.
In late 2021, Baku agreed to a swap arrangement under which Turkmenistan would send around 2 bcm a year of gas to northeast Iran, which would send the same volume of its own gas to Azerbaijan.
The swap began in early 2022, and by mid-year was reportedly going so well that the three partners reached an agreement to double trade volume. But for reasons that have never been confirmed, the doubling of volume didn’t happen, and by January this year trading operations appear to have halted: reports circulated that Turkmenistan, buoyed by the operation’s initial “success,” sought to hike the price of gas beyond what Azerbaijan was prepared to pay. Given Baku’s own production having risen to a level where it could meet its domestic and export commitments without resorting to imports, Azeri officials supposedly halted talks.
Although nothing has been said, it very much appears that Ashgabat has attempted to employ a jack-up-the-price tactic with Turkey.
Again, as with the Azerbaijani swap arrangement, Ashgabat may be overreaching in the Turkish negotiations. While Ankara remains outwardly committed to bringing Turkmen gas to Turkey, both via swaps through Iran and a dedicated pipeline, Ankara is not short of other options.
In May, Turkey concluded an LNG purchase agreement with Exxon Mobil, details of which have yet to be announced. And on September 2 Turkey’s state gas importer, Botas, signed a 10-year agreementwithShell for the import of 4 bcm per year of LNG – twice the planned swap imports from Turkmenistan. Two days later, Turkish officials gave notice that they were expecting another major LNG agreement to be signed at the Gastech conference to be held in Houston Sept 17-20.
Turkey also has other options for importing gas by pipeline, with neighboring Iraq also boasting significant reserves that could be transited to Turkey far more easily, cheaply, and reliably, than gas from Turkmenistan.
The real loser in this is Turkmenistan, explains John Roberts, a Caspian energy analyst. “Turkey is still Turkmenistan’s best option for developing a major new export route,” he said, explaining that the nature of energy markets means that for any gas export deal to succeed, reliability is the key.
“The Turkmens need to prove they are reliable partners,” he added, pointing out the number of projects to export Turkmen gas which have been proposed but not progressed. “Their persistent failures to conclude firm sale and purchase agreements casts doubt on whether they can persuade buyers that they can be reliable.”
