Will Saudi Arabia invest in Turkmen energy projects?

With an estimated cost of up to $10 billion, TAPI may be quite the political bargain for Saudi Arabia.
Sunday 09/12/2018
Workers stand near a gas pipe during the launch of construction work on the Afghan section of a gas pipeline that will link Turkmenistan to Pakistan and India, near the town of Serhetabat, last February. (Reuters)
An opportunity with risks. Workers stand near a gas pipe during the launch of construction work on the Afghan section of a gas pipeline that will link Turkmenistan to Pakistan and India, near the town of Serhetabat, last February. (Reuters)

Saudi Arabia is increasingly looking to diversify its portfolio and opportunities might exist in Turkmenistan.

The Turkmen government’s Russian-language newspaper Neitral’nyi Turkmenistan reported in October that Saudi Arabia discussed investing in “joint projects in the fuel and energy sector and a number of other industries.” This was during a meeting in Ashgabat of the intergovernmental Turkmen-Saudi commission on trade and economic cooperation, said Turkmen cabinet Vice-Chairman Myratgeldi Meredov.

The likely projects include the $7.6 billion, 1,814km Turkmenistan-Afghanistan-Pakistan-India transnational gas pipeline (TAPI). Orient, another Turkmen media outlet, reported that Saudi Arabia has allocated significant funds to support pipeline construction and the project is on course to purchase material for the main line.

TAPI would run from Galkynysh, the largest gas field in Turkmenistan, through Afghanistan’s Herat and Kandahar, then Chaman, Quetta and Multan in Pakistan before terminating at Fazilka, India, near the border with Pakistan.

The idea of TAPI goes back more than two decades. Turkmenistan and Pakistan initialled a memorandum of understanding in 1995. In a grandly optimistic gesture, the Turkmen government began construction in December 2015 and announced that the project would be completed in December 2019. The state company TurkmenGas heads the consortium that will design, build, own and operate the pipeline. It’s not hard to see why Ashgabat is so keen on TAPI.

It would be a lifeline for Turkmenistan, whose sole export is natural gas, much of which is exported to China at low prices. In the most optimistic scenario, TAPI would allow Turkmenistan to diversify its gas exports and help to “pacify” Afghanistan even as it helps Pakistan and India meet their rising demands for fuel.

TAPI, however, has been bedevilled by two major problems — security and funding. While Saudi assistance could resolve the latter, money can’t do much about security.

Most of the pipeline’s Afghan portion would run alongside the Kandahar-Herat highway. The Afghan government has said that a special security system will be put in place. In 2010, Afghan Minister of Mines and Industries Wahidullah Shahrani declared the country would “deploy about 7,000 troops to secure a major transnational gas pipeline to run through some of the most dangerous parts of the war-torn country.” The wording said it all.

Turkmenistan had already expressed similar concerns. In 2008, it co-sponsored a resolution on reliable energy transit at the United Nations. It recognised the need for international cooperation to ensure “the reliable transportation of energy to international markets through pipelines and other transportation systems.”

The question remains why Saudi Arabia would be interested in a project so risky it has been unable to secure full funding for more than two decades?

The context of any investment by Riyadh appears to be grounded in finding investment opportunities that would be unaffected by international sanctions. The post-Soviet space is ideal. Furthermore, Saudi Arabia has a good working relationship with Russia, former regional overlord.

A second political benefit is that TAPI is strongly supported by Washington, unlike a rival proposal for an Iran-India pipeline.

The final reason for Saudi Arabia to underwrite the initiative is diversification of its foreign energy holdings. Because Afghanistan, Pakistan and India would all love to see TAPI built, a collateral benefit for Riyadh would be the political gratitude in an increasingly important region.

Accordingly, with an estimated cost of up to $10 billion, TAPI may be quite the political bargain for Saudi Arabia.

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