Hopes were running high in Turkmenistan after the much-anticipated Caspian Summit meeting produced an accord that, broadly speaking, defined the water surface as free for common usage while declaring that the seabed and its resources will be divided through agreements that have yet to be negotiated. Crucially, it ostensibly opens up the possibility of building the Trans-Caspian Pipeline to Azerbaijan, with Turkmen gas quickly reaching Europe through the Southern Gas Corridor, via Georgia and Turkey and thus creating a vitally needed diversification away from increasingly worrying dependency of Turkmenistan on Beijing.

Despite the success from the Caspian Summit, there are some problems to overcome.

First, there appears to be some lack of consensus among the signatories about whether the five Caspian littoral countries have a veto power over economic problems that could affect the environment.

Secondly, Azerbaijan would have to be paid transit fees because Baku has a clear incentive to fill as much as possible of the Southern Gas Corridor with its own gas. This is particularly true after resources and payoffs to the Azeri elite have been in such short supply when gas prices crashed almost five years ago.

Finally, Russia could offer a deal that was too sweet for Ashgabat to refuse. Moscow could simply offer to transfer Turkmen gas to Europe or return to buying Turkmen gas at a higher price itself, because of its fear of more regional competitors and the growing dependency of  Turkmenistan on Europe and China. With the infrastructure already in place, this would resolve many of the most pressing problems of the cash-starved Central Asian state but at a cost of much more direct political and economic control from Russia. Ominously, President Gurbanguly Berdymukhamedov and Russia’s Vladimir Putin discussed a ‘possible energy dialogue’ when the two met recently in Sochi in August. In any case, more movement and intensive diplomacy on the energy front can be expected in the coming months.

This analysis is taken from our regional Caspian Focus report, which provides political, economic and sector specific intelligence on the Caspian states. If you would like to receive the rest of the report, or would like to discuss its contents with us, then please contact one of our consultants here.