Turkmenistan to cut off gas supplies to Russia

Turkmenistan said on Thursday it would cut off natural gas supplies to Russia from September after the two failed to reach a new price deal, raising the possibility that shipments to Europe might be disrupted.
Imports of Turkmen gas are vital for Russian gas monopoly Gazprom as its own output stagnates and it needs more to cover growing demand at home and in Europe. Gazprom ships most Turkmen volumes to Ukraine and any disruption could potentially lead to lower supplies to Europe via Ukraine's transit pipelines.
"The existing contract for the first half of 2006 ... with Gazprom will be fulfilled by September," the Central Asian state's Foreign Ministry said in a statement.
"After that, due a lack of contract for the second half of this year and for 2007, shipments to Russia will be terminated." Landlocked Turkmenistan, run by President-for-life Saparmurat Niyazov, relies on Gazprom's Soviet-era pipeline network to get almost all of its gas to market, so carrying out the threat would starve it of its main source of income.
Turkmenistan produces about 60 billion cubic metres of natural gas a year and exports two-thirds of that, with a small amount going to neighbouring Iran.
The country has forged a foreign policy of what it calls "neutrality" since independence that has seen it snub both Russian and Western influence in Central Asia. Gazprom said talks were suspended after Ashgabat asked the Russian company to pay $100 per 1,000 cubic metres, up from the current $65.
Turkmenistan said it would still respect the existing deal and sell Gazprom 30 billion cubic metres at old prices in the first half of the year. Gazprom's control of pipelines allows it to dominate pricing discussions. European Union politicians want Russia to ratify a treaty which would allow buyers to negotiate gas prices directly with Central Asian states, but Russia has so far refused.
Fitch ratings agency said this week that Europe could face another gas crisis soon following disruptions in January after Gazprom cut gas to Ukraine following a pricing dispute.
It said the key elements were calls by Ukraine's prime minister designate to re-visit the gas deal with Moscow, Turkmen demands for higher prices, and Gazprom's intention to raise prices for Ukraine from July.