Gas Spats: Turkmenistan Tangles With Iran

Turkmenistan doesn’t have many gas customers, despite ample supply, and as of January 1 Ashgabat reportedly cut one customer off over a payment dispute.

On January 1, the National Iranian Gas Company (NIGC) posted a press release that claimed Turkmengaz, the Turkmen state gas company, had cut gas supplies to Iran — violating a 20-year-old gas deal.

The cut-off had been presaged by back-and-forth reports in the (predominantly Iranian) press.

In the last days of 2016, Mehr News Agency (an Iranian press agency), posted a series of stories about the unfolding spat. On December 30, Mehr reported that an official from the Petroleum Ministry said a new gas deal had been signed between Turkmenistan and Iran. The report contained this bit of drama:

This morning, due to Turkmens’ persistence on threating [sic] to cut gas exports to Iran over claims of a $2 billion debt, the Iranian delegation left the negotiating table to return home. At the airport, Turkmenistan’s officials persuaded the Iranian delegation to come back to the negotiating table in hopes for reaching an agreement on gas delivery to Iran.

On December 31, Mehr reported that a deal still had not been made but that Iran’s Oil Minister Bijan Zanganeh “stressed that international arbitration on the issue is not on the table for now…”

January 1, according to Mehr, all was settled with a headline declaring, “Iran to import Turkmen gas for 5 years.” Later that day, Mehr reported that gas delivery had been halted and on January 4 that Tehran would take the issue to international arbitration.

NIGC’s January 1 release, and subsequent press releases on January 3 and January 8, make it clear that Turkmenistan has indeed halted gas exports to northern Iran.

Iranian sources paint Turkmenistan as the villain in this dispute. The January 1 NIGC release says that “Iran has fully settled its debts to the Turkmen side” and that talks had begun on settling of delayed debts. The Iranians also claimed there have been “quality and quantity loses [sic] in the deal.”

Because the deal is not public, we can only speculate on what the terms were regarding quantity, quality, and payment; up to January 3, Ashgabat said nothing about the spat.

On January 3, Turkmenistan issued an official comment on the issue. As reported by EurasiaNet:

What the [Turkmen Foreign Ministry] statement does claim is that the National Iranian Gas Company (NIGC) had stopped paying its arrears for gas deliveries since 2013. 

“As a result, Iran’s debts accumulated substantially, creating problems in the routine operations of Turkmen gas transportation infrastructure required to deliver gas to Iran in accordance with the long-term contract,” the statement said.

…

In view of a “lack of positive responses from the National Iranian Gas Company to constructive initiatives proposed by Turkmenistan and its passivity in the search for a mutually acceptable solution, it became necessary to restrict deliveries of Turkmen gas to Iran from January 1, 2017,” the foreign ministry statement said.

Ashgabat’s dramatic cut-off doesn’t seem likely to yield the desired result. Turkmenistan may be starved for cash, but Iran isn’t lacking for gas of its own. Imports from Turkmenistan, as Bruce Pannier pointed out, were necessary in winter months in northern Iran “because Iran’s internal gas-pipeline network has not sufficiently connected the gas-rich regions of southern Iran to the northern part of the country.” Initiatives to address this weakness may have been slowed by sanctions, but “[s]ometime in the near future, Iran will no longer require Turkmen gas.”

A January 8 NIGC press release assures that the company “has altered its strategy in gas supply to northern provinces in order to ensure gas supply to the region now that Turkmenistan has cut off its gas flow to the region.”

The threat of international arbitration may peel back some of the opacity that clouds Turkmenistan’s gas dealings. Then again, previous gas spats — particularly with Russia’s Gazprom — which have entered into arbitration have been seemingly resolved with little additional information seeping out. In 2015 Gazprom filed a suit against Turkmengaz in a Swedish arbitration court, seeking $5 billion in payments, but the case has since been suspended.

With regard to Iran, Turkmenistan reportedly is seeking $2 billion in unpaid debts stemming from the sanction years, though Ashgabat’s official statements have not included numbers.