Russia, Kazakhstan, Turkmenistan sign Caspian pipeline accord

Russian President Vladimir Putin and Kazakh counterpart Nursultan Nazarbayev oversaw a major new deal on Thursday to build a natural gas pipeline from Turkmenistan to Russia via Kazakhstan.

The agreement "on cooperation in building the Caspian pipeline" was signed by ministers from Russia, Kazakhstan and Turkmenistan. It is aimed at ensuring Russian gas supplies to energy-hungry countries in the European Union.

"The creation of this new energy artery allows us to ensure long-term, large-scale deliveries of gas to our partners and represents a new, serious contribution to strengthening the energy security of Europe," Putin said.

The planned pipeline is expected to come on line in 2010 and to have a capacity of 20 billion cubic metres annually, a level that could rise, Russian Energy Minister Viktor Khristenko said earlier.

It will skirt the northeast shore of the Caspian Sea from Turkmenistan to southern Russia.

Russian television showed Putin and Nazarbayev in the Kremlin holding a phone conversation with their Turkmen counterpart President Gurbanguly Berdymukhamedov.

Russia needs the pipeline from Central Asia to help meet its commitments to European consumers.

The European Union relies on Russia for about a quarter of its gas consumption. But while Russia boasts by far the largest gas reserves in the world, its investment in developing its own reserves has fallen short of demand.

When the pipeline plan was first presented in May during a visit by Putin to Turkmenistan, US Energy Secretary Samuel Bodman voiced worries about European dependence on Russian energy and said the proposed pipeline was "not good for Europe."

The pipeline is partly intended by Russia to ensure that Moscow keeps a lock on the vast gas reserves to be found in energy-rich Central Asia.

Turkmenistan exports virtually all its gas via Russian territory but the current pipeline infrastructure is ageing and its routing was originally designed to supply other Soviet republics rather than Western countries.

Other competing powers are also seeking access to Turkmenistan`s energy wealth.

Work has begun on another gas pipeline from Turkmenistan to China. The United States is leading Western efforts to persuade Turkmenistan to build a pipeline across the Caspian Sea direct to Western markets.

Few details were revealed of Thursday`s agreement, but the Russian newspaper Kommersant reported that Russia and Kazakhstan would hold equal stakes in a new company to develop the pipeline, with Turkmenistan as a minority shareholder.

Turkmenistan and other Central Asian countries were being increasingly tough in their bargaining with Russia, Kommersant said, noting that Moscow last month agreed a big increase in the price it pays Turkmenistan for gas.

Under the Russian-Turkmen deal Moscow will pay 130 dollars per 1,000 cubic metres in the first half of next year and 150 dollars from the second half of the year.

The paper said Moscow was "very displeased" by Kazakh efforts to develop new oil routes that bypassed Russia, notably by a memorandum Kazakhstan signed with Azerbaijan in August on developing oil transit infrastructure.

"All experts we questioned believe construction of this pipeline is unlikely to remove from the agenda construction of alternative gas pipelines because demand in the European Union for gas imports will rise by 2030 to 600 billion cubic metres," the paper said.

sections: Economics, World News