Chronicle of Turkmenistan : TAPI, Afghan section launched, skepticism kept

Article published on Chronicle of Turkmenistan, 28 February 2018

The Afghan section of the TAPI gas pipeline (Turkmenistan-Afghanistan-Pakistan-India) was officially inaugurated on February 23rd. The ceremony aimed among other things to show that despite difficulties the project is still going forward. Nevertheless, big questions remain regarding this crucial project for Turkmenistan’s future

It is by helicopter that the Turkmen President Gurbanguly Berdymuhamedov flew to Herat to attend a very short ceremony to launch Afghanistan’s section of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, on February 23rd. He spent probably not much more than an hour at an event that took place in a simple conference hall. It was out of the question to wield a pickaxe or operate a symbolic welding of pipes outside on the site, as is often the case at such inaugurations. Machine-gun toting and heavily armed soldiers were everywhere in the big city of the West Afghanistan. Also for security reasons, the ceremony was only announced at the last minute, after several dates had been mentioned over the last weeks. “After some hesitation, it was finally decided that the very minimum of people would go on the Afghan side with the President Berdymuhamedov and his foreign guests”, a local source who attented the ceremonies on the Turkmen side, explained, wishing to remain unnamed.

These circumstances give a sense of how risky and thus uncertain the future of the 1,840 km long gas pipe, designed for a capacity after full commissioning up to 33 billion cubic meters of natural gas per year, actually is. The efforts deployed by the Turkmen government say a lot about how hard it is fighting to create new opportunities to sell its gas. Indeed, selling gas has become all the more crucial as the country faces its most severe economic crisis in two decades, despite its sub-soil contains the 4th natural gas reserves of the world. Turkmenistan now depends on a single client to purchase its “blue gold”: China. Indeed, Russia completely ceased to purchase Turkmen gas in early 2016. A year later, Ashgabat decided to not provide Iran with anymore production until Tehran settles its more than 1.5 billion USD debt.

Just before flying to Herat, Mr Berdymuhamedov welcomed around 300 guests in the small city of Serhetabad (or Guşgi), less than five kilometers away from the Afghan Border. Among them: the Afghan President Ashraf Ghani, Pakistani Prime Minister Shahid Khaqan Abbasi and India’s Minister of State for External Affairs M.J. Akbar, as well as almost all diplomatic representatives in Turkmenistan, including the American one. The special guests were served a lavish lunch. “The meal was prepared with so much care in this city far from anywhere, organizers paid so much attention to each tiny detail, that we could feel how important is the TAPI project for the Turkmen leadership”, a diplomat who was in Serhetabad on the day of the inauguration. In a statement broadcast via video link to reporters from Herat, Mr Berdymukhamedov assured that “Galkynysh, the world’s second-biggest gas field [estimated reserves of 13.1 trillion cm of natural gas], will feed the TAPI pipeline”. The same ceremony in Serhetabad that launched the pipeline also served as an official inauguration for three new connections between Turkmenistan and Afghanistan: the establishment of a new railway going from the Turkmen border to the city of Turgundy 13 kilometers away, the laying of both a 500-kilovolt  high-voltage power line and of an 800-kilometer fiber optic cable alongside the TAPI pipes.

However, there have been so many ceremonies and solemn statements for the TAPI since 2010 when the project entered into an active phase at the initiative of Ashgabat after a quadrilateral intergovernmental agreement was signed, that such events resemble ritual invocation to convince everyone, from stakeholders to external investors, that despite amazingly difficult environment, TAPI will be built. For instance, the start of construction of TAPI was given with a big kick-off ceremony in December 2015 in Mary province.

Indeed, given the security situation in Afghanistan, it is hard to believe that this gas pipe will ever exist or function. The clashes between the Afghan government and the Taliban and a number of terrorist attacks have made 2017 one of the most somber years of the country’s already dark history. The optimistic supporters of the project argue that the project has the support of the Taliban who actually control most the territory of the country. The Islamic Emirate of Afghanistan (EIA) also recently released a statement saying that it supports TAPI. The EIA even claimed credit for initiating the TAPI in the 1990s: “The IEA announces its position on the project as follows: in principle, this initiative is in the interest of the Afghan people and its a good news”.

In this general context, Ashgabat “is the locomotive of the promotion of this project”, Muhammetmurad Amanov, the representative of the State Concern Turkmengaz on the board of directors of the company TAPI Pipeline Company Ltd, and CEO of the latter, insisted in an interview last December. The central role of Ashghabat could for example explain why Afghanistan could receive, in addition to 5 bcm of the gas transported by TAPI, transit fees that could reach not to $400 million annually (the sum usually quoted) but one billion, as Turkmen Foreign Minister Rashid Meredov appears to have said in November 2017 during a ministerial meeting of the 7th Conference of Regional Economic Cooperation Conference on Afghanistan (RECCA VII).

This context also explains the efforts made by Ashgabat to convince investors to put money in the project. Indeed, as Turkmengaz holds 85 percent of the TAPI Pipeline Company Ltd’s shares, the financing of the project lays mostly on Turkmen’s shoulders. Each of the three other consortium members, naming the Afghan Gas Corporation, Pakistan’s Inter State Gas Systems and India’s GAIL, hold 5-percent stakes. That means that Turkmengaz, which is the operator of TAPI, must raise some $8.5 billion of the estimated $10 billion it will cost to build TAPI. So far, only the Islamic Development Bank promised a loan, $700 million. For the rest, other countries, like Russia and Saudi Arabia, and companies, China National Petroleum Corporation, have expressed some vague interest.

A source familiar with the TAPI project says that “President Berdymuhamedov is absolutely determined to succeed”, stressing that, for the Turkmen president, “it is his grand project, that is crucial for the future of Turkmenistan.” “This is why he will make Turkmenistan self-finance the country’s share of the pipe if necessary,” the source added, if need be by redesigning the project with for example less compression stations”. The same source believes that TAPI can deliver its first gas cubic meters by 2019 or 2020, asserting that the laying of pipes of the 214-kilometer Turkmen section “is almost completed and should be fully completed by the end of the year”. In the meantime, some feasibility studies and environmental and social impact assessments are still underway. But some observers express their skepticism on the work progress. As Radio Free Europe wrote few days ago in an article, “strangely, state media in Turkmenistan, which is obsessed with showing pictures and footage of the country’s major projects, has not shown much proof of TAPI’s construction.”

Indeed, it is very difficult to assess if TAPI really has a future. Ashgabat is caught in its own trap: because it has no free press and a completely opaque management, no one knows whether to believe Turkmen officials And the opacity surrounding the project hardly  encourages potential investors and interested external players to contribute to this so crucial project for Turkmenistan’s future.

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