After sharp criticism by Turkmen President Saparmurat Niyazov over Ukraine’s unpaid bills for natural gas, Kiev reached an agreement with Ashgabat on October 13. According to Turkmen media, a Ukrainian delegation headed by fuel and energy minister Ivan Plachkov was received by President Saparmurat Niyazov on October 12. Niyazov criticized them harshly over continual delays of payments for gas Ukraine has purchased.
Turkmen official sources say the current deadlock was broken when the Ukrainian side agreed to pay US$484 million of its debt, which dates back to the years when Turkmenistan shipped its natural gas to Ukraine at US $58 per 1000 cubic meter, paying half of it in goods and half in cash. According to the new understanding between the two parties, Kiev will pay this amount by the end of this year in hard currency, goods or services. If Ukraine fails to do so, then Kiev will be given 30 days to pay this amount in cash. It is unclear what would happen if Ukraine couldn’t fulfill these commitments and what Turkmenistan’s the next step would be.
Judging by the strong language the Turkmen president used in his 12 October meeting with the Ukrainian official, due note was taken. Turkmenistan could suspend its gas supplies to Ukraine, which would be the second time this year that occurred. On January 1, 2005, Ashgabat cut supplies for the same reasons. That dispute was solved with a pledge by Ukraine to clear its debts. Yet according Turkmen officials, only US$8.7 million of that amount has been received by Ashgabat so far.
It was the third bilateral high-level meeting over gas payments since President Viktor Yushchenko came to power following the “orange revolution” in Ukraine. But so far no permanent solution has been found, which from time to time causes hot discussions between officials of the two countries.
The latest example was the October 12 meeting in which Turkmen President used the strongest language ever against his Ukrainian counterparts. “Bring money, don’t give us empty promises … I can’t understand you people, if you don’t have a solution, why do you repeatedly come to Turkmenistan? Why don’t you give up?” The Ukrainian side reacted calmly to Niyazov’s criticism. Reuters quoted one Ukrainian official as saying “President Niyazov is often too emotional when speaking on television, so let’s wait and see.” According to Turkish expert on the Caspian Region Mehmet Halaci, “Ukrainians cannot afford to offend Niyazov, since President Viktor Yushchenko is trying to take Ukraine out of the Russian influence. Russia enjoys monopolies in several sectors of the former Soviet Republics, including the gas sector, and Ukraine is exerting tremendous efforts to change this since it is one of the largest gas consumer in the world.”
Dr. Halaci also said that despite the financial disputes between Turkmenistan and Ukraine, Ashgabat cannot afford to cut down its gas supplies to Ukraine for long since gas exports are the main source of income upon which the entire Turkmen economy depends. Ukraine is one of the major destinations of Turkmen gas exports, accounting for up to 49 percent of Turkmenistan’s total exports. But Turkmenistan also faces a difficult situation, not finding alternative routes for gas exports. Little progress has been made in the so-called TAP “Turkmenistan Afghanistan Pakistan” gas pipeline project, which is the great hope for exporting Turkmen gas to Pakistan and possibly Indian markets.
If both countries need each other, why do these problems keep occurring since Yushchenko took over the Presidency? Dr. Jamshid of the Central Asian Strategic Studies Center in Islamabad believes that “since Yushchenko took office, a huge number of corruption cases have been in Ukraine’s oil and gas company, which was responsible for dealing with Turkmenistan. And the Turkmen president himself was involved in this corruption at some level. When the new leadership in Ukraine started to reform the gas sector, the Turkmen leadership understood that these arrangements might no longer work. So Niyazov took two measures to clean up his past dealings. First, he put the former oil and gas bosses of the country in prison [who actually were playing key roles for the Turkmen president in his corrupt business]. Second, he demanded a new agreement with Ukraine for gas exports, which pushed the Ukrainian side to agree in July 2005 on a price of US $44 per 1000 cubic meters of gas in cash. This new deal put a tremendous burden on the Ukrainian economy since it was already in crisis. This action made Ukraine refrain from investigating corruption further.”
Another explanation suggested by Dr. Halaci is that it could be a political trick played by Russia, which also has interests in Turkmenistan. Both countries could be playing to counter the new Ukrainian leadership’s orientation toward the West.” Niyazov’s comments at the meeting of October 12 corroborate this: he clearly rejected Ukraine’s proposal for a long term gas agreement by arguing it is not a realistic approach without the participation of Russia.
Niyazov’s strong language seems to have "solved the problem" at least on a temporary basis, but the ability of the Ukrainian side to pay off outstanding debts remains questionable. As Turkish Expert Mehmet Arslan argues, such disputes will continue in the future since Turkmenistan cannot cut off its gas supplies for long due to financial reasons but also because cutting gas for a long time may technically not be possible. If Turkmenistan suspends gas supplies to Ukraine, to whom could it sell its gas?

"Central Asia and Caucasus institute"