A new agreement brings Azerbaijan and Turkmenistan closer than ever since the collapse of the Soviet Union. It also brings a Trans-Caspian Pipeline, which could transport Turkmen gas to Europe, within reach.

This article was originally published on Novastan’s German website on 16 February 2021.

After decades of disagreement over the use of oil and gas reserves in the Caspian Sea, the presidents of Azerbaijan and Turkmenistan signed a memorandum of understanding (MoU) via video conference on 21 January 2021, Eurasianet reports. This temporarily ends a conflict between the two states that has been smouldering since the 1990s.

The main point of contention was an oil and gas field in the maritime border area between the two countries. The field, formerly known as “Kapaz” in Azerbaijan and “Serdar” in Turkmenistan, has now symbolically been renamed “Dostlug” or “Dostluk”, meaning “friendship”.

Want more Central Asia in your inbox? Subscribe to our newsletter here.

The field is located about 184 km east of Azerbaijan and 104 km west of Turkmenistan under the Caspian Sea and was discovered by Soviet scientists in 1986. Since then, as Eurasianet notes, it has been the cause of tensions between the two states. Azerbaijan drilled the first test well and subsequently declared its claim to the fossil fuels.

Turkmenistan, in return, insisted on the geographical location of the field with a closer proximity to the Turkmen mainland. The foundation for the new MoU was laid between the five littoral states Russia, Kazakhstan, Turkmenistan, Iran and Azerbaijan in 2018 during a summit on the legal status of the Caspian Sea. At that time, the parties agreed on the course of the sea’s borders and the rights of use.

Towards a Trans-Caspian pipeline

Details of the joint deal, such as the division of profits from the exploitation or logistical details, are not yet known. The exact size of the reserves of “Dostlug” is also unknown, but they are estimated at around 50 to 100 million tonnes of oil and 30 billion cubic metres of gas. Compared to other Turkmen and Azerbaijani reserves, the field is thus not of great economic significance, as Eurasianet notes. Azerbaijan, for example, has proven gas reserves of about 1.3 trillion cubic metres and Turkmenistan of 19.5 trillion cubic metres.

Much more significant are the political implications of the agreement. After a long period of political blockades, it opens up the possibility for a Trans-Caspian pipeline between Turkmenistan and Azerbaijan.

The long-planned pipeline through the Caspian Sea would provide a direct link between the Turkmen port city of Türkmenbaşy and the Azerbaijani oil terminal of Sanqaçal. This step would make it possible for Turkmenistan to export its extensive gas reserves to the European market via Azerbaijan for the first time.

Azerbaijan, in turn, could benefit from transit tariffs through the use of its pipeline systems and infrastructure. “The project will promote the improvement of energy security of our countries, as well as our neighbours” Azerbaijan’s president Ilham Aliyev said in reference to the 21 January agreement. 

Connecting Turkmenistan to the European market

The planned Trans-Caspian route would connect Turkmenistan to the existing Baku-Tbilisi-Ceyhan (BTC) and South Caucasus pipelines. These transport oil and gas from the Caspian Sea via Georgia to Erzurum in central Anatolia and to the Turkish port of Ceyhan.

Azerbaijan has so far led the Southern Gas Corridor project, which delivers Caspian gas via Turkey, Greece, Albania and through the Adriatic Sea to Italy. The EU wants to bolster its energy security in this way in order to become less dependent on Russia, which has been its main supplier up until now. The first gas from this connection reached the European market on 31 December 2020.

Read more: Uzbekistan: towards greater cooperation with Iran?

Turkmenistan has so far exported its natural resources mainly to China and Russia. These export capacities have recently suffered from sharply falling oil prices and a drop in demand for gas during the Covid-19 pandemic.

With the new Trans-Caspian link, Turkmenistan could significantly expand its market and become less dependent on its current partners. The existing pipeline systems in the direction of Europe could easily be expanded to accommodate Turkmen gas in the future.

Questionable profitability under difficult conditions

After almost thirty years of dispute and a changed situation on the European gas market, however, it is questionable how large the EU’s demand for Turkmen gas still is today. Stanislav Pritchin, senior fellow at the Centre for Post-Soviet Researches at the Russian Academy of Sciences, said of the new connection: “Today, the competition on the European market makes it very difficult for the Trans-Caspian pipeline with new producing capacities in Turkmenistan to pay off reliably.”

There are also environmental concerns such as the European Green Deal, which intends to shape the EU into a CO2-free zone over the next thirty years. In the future, the European Development Bank will no longer support projects promoting fossil fuels, which puts public funding out of question, the researcher Marco Giuli noted. He added that European demand for gas will stabilise over the next decade and then decline sharply if the EU puts its climate neutrality goals into practice. It‘s “not a good context for a pipeline with 50 plus years life cycle,” he explained.

Last but not least, Turkmenistan’s attitude towards private financing faces criticism. According to the Institute for War and Peace Reporting, some Western countries often warn their companies that Turkmen legislation does not do enough to protect foreign investments.

Darius Regenhardt
Novastan.org writer

For more news and analysis from Central Asia, follow us on Twitter, Facebook, Telegram, Linkedin or Instagram.

The post Agreement between Azerbaijan and Turkmenistan paves the way for Trans-Caspian Pipeline appeared first on Novastan English.

The Uzbek government, in cooperation with international consultancies, has published a sustainability report for the first time. The document, written in English, assesses the country’s progress in several key areas.

This article was originally published on Novastan’s German website on 6 February 2021.

The Uzbek government has published a report outlining the country’s progress in managing environmental and social governance (ESG) for the first time. As the platform Accesswire reports, the document, published on 1st February 2021, aims to make Uzbekistan’s progress within the framework of the United Nations’ sustainable development goals visible to national and international stakeholders. The move is part of the reform programme initiated by the Uzbek president, Shavkat Mirziyoyev, since 2017.

Want more Central Asia in your inbox? Subscribe to our newsletter here.

While ESG reports are common practice in the corporate world, Uzbekistan is the first country to publish one. The document reflects the significant changes in Uzbekistan’s policies towards good governance, sustainability and a strengthened civil society since 2017.

A reference framework for investors

The report was commissioned by the Uzbek Export Promotion Agency under the Ministry of Investments and Foreign Trade. It was produced in cooperation with two international consulting firms, the German cometis AG and the US-based Xenophon Strategies. It is also publicly available on a website created by the Uzbek Ministry of Foreign Trade and Investment under the title “Journey of Change”.

“The sovereign ESG report provides a snapshot in time using verifiable data and statistics from across the government as well as from third-party observers. We are proud of the successes that can be seen here, and we are committed to continue improving across all measures for the future,” commented Sardor Umurzakov, the deputy prime minister and minister of investments and foreign trade.

Read more: Central Asia in 2020: the year in review

The document acts as a reference for national and international investors as well as global companies looking for partners in Central Asia. Published in English, it is based on international reporting standards, namely the UN’s 20 30 Sustainability Agenda and the World Bank’s Sovereign ESG Data Framework.

Progress in infrastructure development, governance and sustainable livelihoods

The business news media bne IntelliNews sees the report as a reflection of Uzbekistan’s transformation towards an open society. Since 2017, the country is slowly moving up in independent world rankings and indexes reflecting good governance, civil liberty, economic activity and development. It nevertheless still ranks low in Freedom House’s Freedom in the World report, which points out improvements but “little movement towards democratisation”.

Most notably, the new ESG report tracks key changes in social and governance issues, including forced labour, enforcement of civil rights, human rights, transparency, and electoral and judicial reforms. It includes third-party assessments in a bid for objectivity.

Read more: Uzbekistan’s energy sector struggling as temperatures dip

The report specifically outlines steps taken to end the decades-long use of forced labour and child labour in cotton fields that had sparked the boycott of Uzbek cotton by international companies. This could prove crucial to reposition Uzbekistan as a reliable cotton supplier as this crop contributes substantially to the country’s economy.

New infrastructure as well as more attractive economic conditions have also increased business activity in Uzbekistan, including a sharp rise in foreign direct investment. Cooperation with leading international organisations has led to greater transparency and better compliance with existing laws, and new laws have been adopted in accordance with recognised legal standards.

However, four years into Mirziyoyev’s presidency, the country’s remains an authoritarian state. As Human Rights Watch points out in its latest report on Uzbekistan, many reform promises continue to be unfulfilled. Forced labour has yet to be fully eradicated and the persecution of journalists and activists continues, with for example the anti-corruption blogger Otabek Sattoriy jailed in January on extortion charges.

Darius Regenhardt
Novastan.org

For more news and analysis from Central Asia, follow us on Twitter, Facebook, Telegram, Linkedin or Instagram.

The post Uzbekistan publishes first sovereign ESG report appeared first on Novastan English.