While all participants agreed to expand oil and natural gas production and build new pipelines for export, there also emerged significant differences about the direction the new transit corridors will take, with Iran and Russia favoring a north-south route, while Kazakhstan, Turkmenistan and Azerbaijan expressed interest in alternative East-West undersea Caspian export pipelines. The final decisions on transport corridors will have important ramifications far beyond the Caspian. Uzbekistan is watching the discussions with particular interest, as it sees deepening its relationship with Turkmenistan as essential in developing access to the global energy market.
Since the death last December of Turkmen President Saparmurat Niyazov, suitors eager to exploit Turkmenistan's vast natural gas reserves have been lining up to visit Ashgabat, including 16 high-level U.S. delegations. Niyazov's successor, Gurbanguly Berdymukhammedov, has been considering all possible options. An East-West-transit corridor would attract significant Western investment but would be a direct threat to Russian monopoly pipeline interests, as well as sustaining Iran's economic isolation, a consistent policy of Washington's since Iran's 1979 Islamic revolution. In the past, however, Russian hardball tactics and exorbitant transit fees for the use of Transneft monopoly pipelines transiting Russian territory have caused deep resentment in Baku, Almaty and Ashgabat. While most analyses concentrated on the transit issues involving the five Caspian countries, decisions on the transit corridors will have a significant impact further east, and it is for this reason that Uzbek President Islam Karimov is visiting Ashgabat.
While Western interest in East-West trans-Caspian underwater pipelines has been around since the mid-1990s, it remains to be seen if the two pipelines envisaged in the Trans Caspian Energy Project, one transporting Turkmen gas and the other Kazakh oil to Europe via the Caucasus and Turkey, will be built or Russian and Iranian opposition will finally kill the proposals. Whatever the final decision, Karimov is moving to ensure that the infrastructure will be beneficial to Uzbekistan.
Karimov's Oct. 18-19 state visit comes at the personal invitation of Berdymukhammedov. The opportunity certainly exists for expanding Turkmen-Uzbek bilateral trade; during the period January-July, the total volume of bilateral trade was a modest $50.8 million; the figure, however, represented a 64.3-percent increase over the same period in 2006.
The Turkmen government's news service reported, "The meeting between the two leaders will expand the framework of fruitful cooperation between Turkmenistan and Uzbekistan and make significant changes to a program of bilateral cooperation, marking the start of a new era in Turkmen-Uzbek partnership."
The meetings resulted in the issuing of a joint communique and the conclusion of eight protocols. Berdymukhammedov told journalists during a joint news conference, "These documents signify a wholly new level of our dialogue and partnership. Pooling the economic potentials and using geopolitical position, partnership between Turkmenistan and Uzbekistan serves as a bona fide factor of a stable development of the whole Central Asian region. Going far beyond the limits of traditional areas of bilateral cooperation, these documents are to govern both economic and humanitarian interaction. Plans and programs that they enshrine are a powerful stimulus for the intensification of partnership in all areas of this interaction."
Karimov emphasized the previous economic cooperation had been far too modest, saying, "We've appraised the existing level of economic cooperation as something wholly unsatisfactory and outlined ways of ensuring a dynamic growth of the trade turnover."
While the agreements included the obligatory cultural exchanges, the highest priority on Karimov's agenda was the upgrading and expansion of railroad transport links to the Caspian shore, allowing for a possible export route for Uzbekistan's products, along with the possible development of pipeline routes for the export of Uzbek natural gas. Other agreements covered resolving outstanding border issues and an equitable division of the Amu Darya's water reserves.
Both Uzbekistan and Turkmenistan share a common dissatisfaction with the Russian export pipeline policies. Shortly before his death last December, Niyazov negotiated a price increase with Gazprom from $65 to $200 per thousand cubic meters. Niyazov was well aware, however, that that same gas was sold in Western European markets for $260 per thousand cubic meters, with Gazprom pocketing the difference. Uzbekistan is similarly forced to rely exclusively on the Russian monopoly Transneft's aging network of Soviet-era pipelines for export.
In stark contrast to Karimov's often rocky relations with Niyazov, the two leaders seem to have established a genuine rapport, with Berdymukhammedov bestowing the title of "honorary Turkmen Elder" on Karimov, who in turn awarded Berdymukhammedov Uzbekistan's "Buyuk Hizmatlary Uchun" ("For outstanding services") decoration.
For the moment, both Karimov and Berdymukhammedov are paying lip service to the agreement signed on May 12 among Berdymukhammedov, Russian President Vladimir Putin and Kazakh President Nursultan Nazarbayev providing for Turkmen gas to be transported to Europe via Kazakhstan and Russia. As the agreement also provided for the construction of new Caspian gas pipeline and reconstruction of existing oil and gas pipelines from Central Asia to Russia, its seems likely that both presidents will initially favor this scheme but use it as a bargaining chip in negotiations with Western energy companies.
While Moscow retains an initial advantage on the export of Turkmen and Uzbek hydrocarbons, the West also has options, including tapping into lingering Central Asian resentment of Russia's exploitation and offering potentially better financial terms. With oil now trading on NYMEX at $90 a barrel, the stakes are high on all sides. If Western energy companies see opportunity in liberating Turkmenistan from Russia's orbit, they now also have the potential access to Uzbekistan's rich resources as added value. In the most optimistic scenario, however, remains one certain fact -- that Russia will not willingly relinquish its control over access to Central Asia's energy reserves, a fact that will test to the very limit the diplomatic skills of both Karimov and Berdymukhammedov.