VZCZCXRO3818
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ
RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #0007 0031127
ZNR UUUUU ZZH
P 031127Z JAN 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9974
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3181
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0996
RUEHKO/AMEMBASSY TOKYO PRIORITY 0870
RUEHIT/AMCONSUL ISTANBUL PRIORITY 1444
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
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RUEKJCS/SECDEF WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
UNCLAS ASHGABAT 000007
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: N/A
TAGS: PREL ECON EPET IR TX
SUBJECT: TURKMENISTAN PLAYING HARDBALL WITH IRAN OVER GAS
PRICES
1. (U) Sensitive but unclassified. Not for public Internet.
2. (U) Now that Turkmenistan has reached agreement with the
China National Petroleum Company and Gazprom on new prices
for its natural gas, Turkmenistan has turned its focus to
Iran, to which it sells approximately 8 billion cubic meters
of gas per year at a price of $65 per thousand cubic meters
(tcm) of gas. This price is substantially below the price of
$130 per tcm that Gazprom has agreed to pay in the first half
of 2008 and $150 per tcm that it will pay effective July 1.
An Iranian delegation arrived in Ashgabat on December 28 to
begin negotiations, and by January 2 there were press reports
that Turkmenistan stopped transporting gas to northern Iran
via the Korpeje-to-Kurt-Kui pipeline. According to a press
release issued by Turkmenistan's Ministry of Foreign Affairs,
Turkmenistan temporarily halted the flow of gas to Iran in
order to carry out preventive repair work on the pipeline.
The Iranian-based ISNA news agency reported that Iranian
officials are insisting that the price they negotiated last
year should continue to apply in 2008.
3. (SBU) There are no indications as yet that this stoppage
has affected the flow of the approximately 400,000 tons of
liquified petroleum gas (LPG) that Turkmenistan's state firms
sell per year to Iran. These deals, which are made primarily
with Iranian businessmen and which exist in part as repayment
for Iranian construction of LPG terminal and tank farm
facilities in Turkmenistan, are made at prices closely linked
to the Platts price.
4. (SBU) COMMENT: Post believes the pipeline stoppage is a
hardball effort to pressure the Iranian government into
agreeing to a price increase. Turning off pipelines for
"temporary repairs" is a strategy that Turkmenistan has used
in the past -- most recently during its 2006 negotiations
with Gazprom to raise gas payments from $65 to $100 per tcm.
Further strengthening this argument is the fact that the
Korpeje-to-Kurt-Kui pipeline is relatively new (it was only
commissioned in December 1997), making the claims of needed
repairs somewhat suspect. While posturing by both sides
seems to be in full swing at this point, neither can afford a
long-term stoppage. Iranians in the north rely on
Turkmenistani gas for winter heat, and Turkmenistan needs all
the hydrocarbon revenue it can get to fund its ongoing
construction and development programs.
HOAGLAND