Such as Azerbaijan, which annual consumption of gas is approximately 10 billion m³ per year, till the 2007,she has exported half of this amount from Russia. While in 2005 the price of gas was 55 dollars per thousand m³, within a year Azerbaijan paid to Russia for the same amount of gas 110 dollars. Anticipating the development of such a situation, Azerbaijan has played in advance and increased its own production of natural gas. Thanks to developing of oil projects, financially renewed Azerbaijan national oil company SOCAR, independently developed gas fields on Azerbaijan territory. Parallel to that, at the end of 2006, gas was received from the  Shahdeniz deposit.

When Russia next time increased the price for own gas up to 235 dollars, Azerbaijan has already had an opportunity to fully abandon the supply from that country. In addition, increasing of gas production allowed Azerbaijan to export gas to neighboring Georgia. Azerbaijan was supplying gas to this country on more acceptable price of 120 dollars per thousand m³, which considerably eased economical situation in Georgia.

 In addition after beginning production of gas, Azerbaijan has become a serious exporter of energy commodities. In addition to Georgia, from 2007 Azerbaijan began deliveries of gas to Turkish and Greece markets. In 2008 it is expected that Azerbaijan will export gas to Iran and as early as 2012, deliveries to Italy.

Also Azerbaijan is a key partner in the Nabucco project, and now is considered to be the main alternative to Russia supplier of gas to Europe. Moreover, there is a version that Russia itself is interested in importing gas from Azerbaijan, primarily to ensure that the additional volumes of gas pipeline South Stream, the construction of which is planned in the near future. And even if this version is not confirmed, the probability of this is still there. Back in 2007, Russia has proposed the use of Azeri gas storage facilities to enable them to pump their gas, but in the winter months to deliver them in southern Russia, where there is no available storage necessary. In response to this, Azerbaijan offered to sell its own gas in these areas. Even though both sides will have not reached an agreement on exports of gas from Azerbaijan, the problem with the supply of gas to the Russian region Kuban this winter may compel Russia to revise the proposal in the future.

Russia

Russia holds the largest deposits of natural gas, as well as being a major supplier to the European markets. In addition, this country possesses the only route for natural gas produced in the Central Asian countries to the European markets. Russia using its advantage in the gas sector and from 2005 increased price of this energy source. In doing so, Russia politically maneuvered in determining prices for different states: those which are politically and economically closed to Russia were able to buy it at an affordable price, countries such as Ukraine and Georgia, where pro-Western regimes came to power would have had to pay for the proposed Russia highest price. If Georgia solved this problem by importing cheaper gas from Azerbaijan, Ukraine was partially solved problem by the fact that this country had an agreement for direct supply of cheaper gas from Central Asia. So, while Russia in 2007 offered to Ukraine gas for the price of 235 dollars per thousand m³, the mixed gas imported from Turkmenistan, Uzbekistan and Kazakhstan, Ukraine costing only 130 dollars. Furthermore, in order to balance the increased gas prices, Ukraine, taking advantage of the fact that the main exports of Russian gas transported through its territory, Ukraine has increased its tariffs for transit.

Consequently to reduce dependence on transit countries, Russia started or proposed the construction of new pipelines: North Stream, on the bottom of Baltic Sea directly to Germany and South Stream, implemented jointly with Italy and to be laid along the bottom of Black Sea to the Bulgaria and further to the neighboring countries. Upon completion of these constructions of the gas pipelines transit Ukraine would lose its status. Ukrainian Prime Minister Yulia Tymoshenko clearly understands possible results after realization of these projects and in January 2008, has proposed a new transport corridor for the export of Turkmen gas, named as White Stream. This pipeline would assume as an alternative pipeline to the Russian one and lie at the bottom of the Black Sea up to the territory of Ukraine.

The proposal is motivated by Ukraine by the fact that Russia has agreed to increase the price of imported gas from Turkmenistan and Uzbekistan. As a result, since January 1, the price of gas for Ukraine rose to 130 dollars, and after, in the second half of 2008 the price of Turkmen gas will rise to 150 dollars, the import price for Ukraine will further increase.

Russian general agreement to increase the price of the imported gas from Turkmenistan is not considered as a success of the Turkmen side, but rather subtle tactical action of Russia itself. While agreeing to increase prices, Russia has made in the first instance that the Turkmen gas has become less attractive for the purpose of transporting it through the planned pipeline Nabucco. It knows  that one of the most effective arguments for Nabucco construction was low cost of the Central Asian gas. However, the increase in gas prices reduces the profitability of export gas through the pipeline, and hence can freeze the issue and its construction. Russia needs to supply gas from Central Asia.

In Russia itself, production of gas is continue to diminish, because of the lacking of any effective steps for the development of new deposits and the old ones have become depleted. In this regard, Russia has signed a long-term contract with the countries of the region and began construction of the Caspian pipeline for transit of gas from the Central Asian states.

There is also a political motivation of this move. Russia, agreeing to increase the price of Turkmen gas, in principle, received an additional lever of pressure on the western minded regimes, notably Ukraine. In doing so, Russia is not directly increased the price of gas. With that way Russia will be able to get the effect of which was not achieved in 2006 and may pressed on Ukraine more successfully.

 It is expected that the price of gas in the future will be governed by Russia and could change in the direction of its increase. In addition, Russia has proposed the establishment of a gas-OPEC, and already prepared a meeting with the countries exporting gas.

Summary

Consumption of natural gas is increasing more and more. For many countries gas has become the main source of energy. In this case, the importers states increasingly dependent on a stable supply of this energy resource. As can be seen from new situations where, in accordance with the chain reaction were suspended deliveries of natural gas to a number of countries, the interdependence of countries in the gas issue heavily increased. So suspension gas from Turkmenistan may adversely affect the delivery of gas to the Greece, with the supply of gas, not having anything to do with it. In this case, it is noteworthy possible long-term volatile situation in the production or transportation of gas, could cause the energy crisis in a number of countries that may ultimately have an unexpected consequences.

Rovshan Ibrahimov

rovsen@azerimail.net