Russia increases its pressure on Turkmenistan for its cooperation with Ukraine

In the new work of the Centre for Global Studies "Strategy XXI" "Putin Hybression" we focus on crypto-war (from the Greek - hidden, secret, encrypted) Russia against Ukraine. It was conducted a long time and was preceded by a hybrid type of aggression. The main front of the crypto-war was gas one. Russia fully used hypertrophied high gas dependence of Ukraine’s economy. The main supplier of gas to Ukraine was Turkmenistan, which the country had an appropriate intergovernmental agreement.

Starting point of early stage energy crypto-war was 2003, when Russia interrupted direct gas relations between Ukraine and Turkmenistan. April 10th, 2003 in Moscow President of Turkmenistan was forced under pressure from Putin to sign a 25-year agreement on all contracting amounts of natural gas produced in Turkmenistan for "Gazprom". Saparmurat Niyazov subsequently rejected Leonid Kuchma for prolongation of the intergovernmental agreement on Turkmen gas’ supply to Ukraine, saying, no free volumes and address Russia. Masterfully created a problem for Ukraine, in a year Russia offered its "solution". It was "Rosukrenergo" (RUE) scheme that maximized Ukraine’s gas dependence on Russia and created corrupt mechanisms of Kremlin's influence on country’s political leadership. Gas relations between Ukraine and Turkmenistan have been updated, but the main playmaker for them was the Kremlin, acting through the mechanism of transnational gas corruption - partnership "Gazprom" - RUE.

Kyiv has repeatedly tried to resume direct gas relations with Ashgabat, taking advantage of varying opportunities. Another attempt was made in 2016. Because "Gazprom" announced the early termination of 25-years contract signed in 2003 from the beginning of the year. That was a hypothetical possibility to resume purchasing Turkmen gas, which no longer was necessary for Russia. And not just unnecessary but also one that prevents “Gazprom” in the context of low prices for hydrocarbons. In Russian logic, competitors must be destroyed. Therefore, the refusal of Russia from its obligations for Turkmen’s gas purchase is not just a consequence of unfavorable business conditions in the energy markets, but also action to defeat a competitor who is Turkmenistan for Russia, given its gas potential.

Updating of Turkmen’s gas import by Ukraine would assist Turkmenistan in its rather difficult economic situation. But despite the visit of President of Ukraine to Turkmenistan in October 2015, a breakthrough in relations did not happen. What was the reason? Of course, that Turkmen gas can go to Ukraine so far only through Russia. Russia also does not want to provide freedom of transit for it, even though it is contrary to WTO rules. But the problems are not only for renovation of gas relations between Ukraine and Turkmenistan, they arose across the whole spectrum  of bilateral economic relations. In the mid-90s, Ukraine, buying the bulk of Turkmenistan's natural gas was trading partner №1 for the Central Asian countries. Now Ukraine barely visible in the structure of foreign trade of Turkmenistan - less than 1%.

One of the main causes of significant reduction in the activity of bilateral Ukrainian-Turkmen cooperation, observed in 2016, is increasing pressure on the leadership of Turkmenistan by the Russian Federation, which continues the policy of economic isolation of Ukraine to the breakdown of the country during the protracted aggression hybrid type.

State of Turkmen-Ukrainian trade on the results of the 1st quarter of 2016 demonstrates a serious fall. The main exports to Turkmenistan from Ukraine in the pre-war period (2013) was the production of steel industry, agriculture, engineering, chemical and wood industries. Imports of goods from Turkmenistan to Ukraine in 2013 consisted mainly of wool, cotton, textile and petroleum products. For the 1st quarter of 2016 bilateral trade amounted was $21.5million, whereas in the same period in 2015 it was $52.2million. This means that it can not even achieve a $100 million level later in the year. For comparison - the turnover in prewar 2013 was $495.8 million. Exports of goods in 2013 amounted to $395.3million. Imports - $100.5 million. The balance of trade was positive for Ukraine - $294.8 million. It should be noted that in the mid-90s turnover was approximately $1 billion, and in mid-2000s - nearly $3.5 billion.

The main factor of Russian Federation influence Turkmenistan is speculation on the possibility of recovering the purchase of natural gas. The issue is sensitive for Turkmenistan, because of suspension of Russian gas imports. This has led to a shortage of funds for large-scale projects planned by Turkmen leader Gurbanguly Berdimuhamedow. Turkmenistan would fail to receive about $2 billion in 2016, comparing to 2015. Ashgabat may succumb to Russian pressure. Indirect evidence of this is the removal of Turkmen President’s tacit ban on trade with Russian companies, which was introduced after a sharp decline in purchases of Russian natural gas since January 2015. Removing the ban was conducted after the visit of  delegation from Moscow headed by Deputy Prime Minister Sergey Pryhodko to Turkmenistan in late March this year. During the Russian and Turkmen talks guests from Moscow pointed to political and economic instability in Ukraine and in this regard expediency of Turkmenistan and Russia’s cooperation development. Two Turkmen-Russian business forums that took place in Ashgabat and Yekaterinburg at intervals of several days in late March were indicative.

As a result of these actions of Russian Federation, the state of Ukrainian-Turkmen relations significantly deteriorated by creating artificial obstacles to the activities of Ukrainian companies in Turkmenistan.

"Altcom" that implements Turkmenistan large-scale infrastructure projects worth $1.3 billion has found itself in situations of force to abandon the airport complex construction project in Turkmenabat, which total value is $477,4 million. The main reason is financial debt from Turkmenistan for actually performed works. At the beginning of April debt to the company for performed and accepted works is $24.6 million and $145.9 million. for works actually performed, but "artificially" not accepted – the acts of acceptance were not signed. At the same time the Turkmen side continues to exert pressure on the Ukrainian company trying to reclaim the project to the construction of the airport  in Dasoguz, which is completed by 85%.

"Azovzahalmash" won a tender to supply for the needs of "Turkmenhimiya" 20 rail tankers for transportation of sulfuric acid (contract amount is $1.3 million) in February 2016, and the end of March 2016 the company was reported of a change in the decision allegedly because of  violation of tender’s bidding rules . The Turkmen side gave the contract the Russian company "Uralvagonzavod."

According to previously reached agreements "Eurasian Pipeline Consortium" should have been supplier of large diameter pipe products for pipeline Turkmenistan-Afghanistan-Pakistan-India (TAPI). However, without any explanation the pipeline tubular goods are bought from Russian "Vyksunsk metallurgical plant".

In general, the debt to Ukrainian companies working in Turkmenistan ("EATK", "Altcom", "Interbudmontazh" "Severodonetsk factory of non-chemical equipment", "Fakel", "Sumy Machine Building Research and Production Association", "Universal drilling rigs", " Kompresormash") from the Turkmen government organizations by April 2016 was about $274 million.

Despite the agreements reached on the opening of direct air, the company "Ukraine International Airlines' (UIA) on March 16th, 2016 the sixth time was denied registration offices and permission for direct flights from Ukraine to Turkmenistan.

Also the process of preparing for signing an intergovernmental agreement on the program of the Turkmen-Ukrainian military-technical cooperation for 2016-2017 years is slowing. These processes have led to the postponement of the 5th session of the intergovernmental Ukrainian-Turkmen commission on economic, cultural and humanitarian cooperation. The dates of the meeting are still not certain. The leadership of Turkmenistan intends to postpone indefinitely the visit of President Berdymuhamedov to Ukraine that would take place in late May - early June.

Thus, it can be traced that the deterioration of Ukrainian-Turkmen relations is directly related to the active work of the Russian Federation aimed at harming Ukraine in the sphere of international economic and political cooperation.

Could have it been possible to restore gas supplies from Turkmenistan to Ukraine and to the whole of Europe? Hypothetically, yes. It was the case in the past, besides the technical possibilities of gas transportation system of Central Asia - Center stores. But this requires consolidated international efforts, which is pressure on Russia from the EU. Instead of wondering how to give the "green light" to "North Stream - 2" project, the European Commission would put strict condition: any discussion of this proposal will be possible only after unlocking the transit of Central Asian gas to Europe. But Brussels, which is so concerned about the diversification of sources and routes of gas stay silent. And the Ukrainian side does not seek accomplices in this case. The last thing looks rather strange. Therefore, "Gazprom" and its vassal in Europe feel quite confident as that Turkmen gas will no come to Europe as there is no alternative to the "Nord Stream -2".

Mykhailo Gonchar, President of the Centre for Global Studies "Strategy XXI"