Majlis Podcast: What’s At Stake After Turkmenistan Turns Off The Taps To Iran?

It's halfway through January and Turkmenistan still has not restored its usual supplies of natural gas to Iran. The National Iranian Gas Company said on January 1 that Turkmenistan had stopped sending gas.

Turkmenistan claims Iran has a large unpaid bill for gas. But turning off the taps is painful for both Iran and Turkmenistan, neighbors that have gotten along reasonably well for the past 25 years. The two sides seem far apart in their views on the issue, so it is difficult at present to see how they will reach a compromise.

Why is this suspension happening and how long might it continue? What's at stake for each of the countries? And how much damage could this do to Turkmen-Iranian relations?

Those are the questions we attempted to answer in this week's edition of the Majlis podcast.

Moderating the discussion was RFE/RL Media Relations Manager Muhammad Tahir. From Washington, Brenda Shaffer, a nonresident senior fellow at the Atlantic Council's Global Energy Center, joined us. Also from Washington, Alex Vatanka, a security expert at the Middle East Institute, participated. It was the first Majlis podcast of 2017 so, of course, I was eager to jump into the topic myself.

News there was a problem between Turkmenistan and Iran broke just before the new year. The exact terms of Turkmen-Iranian gas agreements, which go back nearly 20 years, have never been clear to the outside world, so the suddenly public spat between the two parties shed some light on the details of their contract.

"Most Iranian observers, and the media coverage...speak essentially of a commercial arrangement gone wrong," Vatanka said. "They say this is not a political issue."

The exact amount of the debt is unclear, though first reports about the gas dispute cited $1.8 billion as the amount. Some Iranian sources say there is no debt at all, but several Iranian officials have given interviews admitting that Iran does owe money. Their estimates range from hundreds of millions of dollars to more than $1 billion. Turkmenistan has not provided any figures.

That leaves many thinking that, as Vatanka noted, "It's about how much money Turkmenistan [can] get from Iran, and from the Iranian perspective how much money can they avoid giving to Turkmenistan."

While negotiations go on, Iranian authorities are trying to reroute power to areas in northeastern Iran that have been left without gas. Some Iranian officials have claimed that northeastern Iran can do without Turkmen gas, and many Iranian officials are predicting it will not be long until the country's internal gas pipeline network will reach northern Iran and make Turkmen gas unnecessary.

However, with Iran's presidential election approaching, the public statements of officials might not fully reflect the situation on the ground in northern Iran.

In fact, Iran might not be able, currently, to make up for power reductions in the north due to the problems receiving Turkmen gas.

"I think a very important question is where does Iranian gas production actually stand," Shaffer asked, "and if indeed it is able to provide gas to its own population?"

She pointed out that, according to figures from BP and the U.S. Department of Energy, "Iran is actually a net gas importer, meaning that it imports more gas from Azerbaijan and up until recently from Turkmenistan than it exports to its two export markets -- to Armenia and to Turkey."

Reports during the last year have shown Turkmenistan is facing a serious economic downturn due to the drop in world prices for gas, Turkmenistan's major export. Further, Turkmenistan lost Russia as a gas customer at the start of 2016 and now exports only to Iran and China.

There is a feeling among some analysts that Ashgabat's decision to pressure Iran for payment is spurred by Turkmenistan's urgent need for money.

If that is true, it is a strategy with potentially long-term repercussions.

"Look at the map and see where Iran is," Vatanka said. "It's the biggest plot of land in that part of the world, connecting the Middle East to the north, Central Asia, Caucasus, Europe to the west, and obviously East Asia."

Vatanka pointed out that Iran plays a big role in China's One Belt, One Road (OBOR) trade-route project and that Turkmenistan, as a neighbor of Iran, stands to benefit from greater connectivity to the outside world through Iran and the OBOR project.

"The National Iranian Gas Company is all about making Iran into a regional natural-gas hub," Vatanka said. "That means Iran becomes not only a supplier of gas but also a transit point for gas going north, going east, going west."

The current tensions over gas probably won't have a lasting effect on Turkmen-Iranian relations.

During all the years Iran has been under various international sanctions, Turkmenistan has maintained good ties with the Islamic republic -- and that relationship is really based on trade.

"In most places," Shaffer said, "you can have disputes over gas trade and it does not have a reflection on the political relations and vice versa."

And Vatanka explained there are issues that are of common interest to both countries.

"Turkmenistan and Iran are both [Caspian Sea] littoral states," he said, and there are still many questions about the use of the Caspian that require the agreements of all parties that share that sea. Vatanka added that there is also insecurity in northern Afghanistan, in areas that border both Iran and Turkmenistan.

Inevitably, Turkmenistan will lose Iran as a gas customer. But an Iran that is more engaged in international trade might prove more of a boon to Turkmenistan than gas sales -- which never seem to have exceeded some 8 billion cubic meters per year -- ever did.

At the same time, the clock might be running out for Turkmenistan to turn its economy around. Despite Ashgabat's claims that it has widespread domestic popular support, there is ample evidence to suggest that the majority of Turkmenistan's people are not happy with the government and that there is growing discontent over the recent economic decline.

Whatever Iran owes, the money is sorely needed in Turkmenistan right now.

The panel discussed these issues in greater detail and reviewed other facets of the relationship between Turkmenistan and Iran and what this current dispute means for those ties.

Copyright (c) 2015. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036.