03/19/2008, 00.00
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Gazprom-Central Asia deal to set off price rise

Experts expect that Gazprom’s offer to pay more for three Central Asian nations’ gas will push prices up. Poorer nations like Tajikistan will suffer the consequences; so will Europe and China.

Moscow (AsiaNews/Agencies) – A landmark deal reached this month between Russian gas giant Gazprom and three energy-rich Central Asian states is likely to negatively impact on Asia’s poorer nations. But even China might be in for a squeeze.

Gazprom agreed on 11 March with state-controlled gas companies from Kazakhstan, Uzbekistan and Turkmenistan that the latter will receive "European prices" for their gaz deliveries in 2009.

For years Russia bought cheap Central Asian gas for domestic use and sold its own gas to Europe for twice as much and more.

Gazprom was paying Central Asian states less than US$ 70 per 1,000 cubic meters of natural gas at the start of 2006. Less than 12 months later, Gazprom had agreed to pay US$ 100 per 1,000 cubic metres for 2007; by the end of this year, the figure will rise to US$ 150.

By contrast, the European Union is paying US$ 300 this year for the same amount of gas, which should rise to US$ 350-400 next near.

This way Moscow will likely block a plan by the European Union and the United States to ship gas via the Caspian Sea, going around Russia. By offering the same prices it can retain its monopoly because all current functioning gas pipelines running out of Central Asia go through Russia, all except one modest pipeline between Turkmenistan and Iran and a partially opened pipeline between Kazakhstan and China.

This is expected to raise prices in Europe but also in former Soviet republics that have benefited so far from lower prices. Tajikistan and Kyrgyzstan are especially worried. Both are already hard pressed to pay US$ 145 for Uzbek gas, which just two years ago cost US$ 50. Both are late in paying and have experienced frequent supply cuts. And both do not seem to have the wherewithal to pay US$ 300 per 1,000 cubic metres.

China has signed multi-decade contracts with Kazakhstan and Turkmenistan for huge amounts of gas and has built pipelines to bring the gas from thousands of kilometres.

But experts point out that Central Asian states have previously shown a willingness to renege on their contracts. They expect China to pay up because of its great need for energy.

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