2.4.8. Price Demands and Discontinued Supply in 2005

In April of 2003, Russia and Turkmenistan signed a long-term agreement for 2003– 2028 [35,46,47]. Gazprom would purchase 4–6 bcm in 2004, –7 bcm in 2005 and 10 bcm in 2006 at \$44/1000 m3, with 50% in barter. The volumes would increase to 60–70 bcm in 2007, 63–73 bcm in 2008, and 70–80 bcm for 2009–2028. No prices were set for the post-2006 period. The significant increase in the volumes after 2006 would require most of the gas left after local consumption to be exported to Russia. This implies that Russia was taking over the supply of Turkmen gas to Ukraine once the contract between Turkmenistan and Ukraine was due to expire. Possibly, this was Gazprom's way of ending direct gas deliveries from Turkmenistan to Ukraine, due to increased European gas prices.

On 31 December 2004, Turkmenistan cut the supply of gas to Russia (and to Ukraine) and requested a higher price of \$60/1000 m3. Exports to Russia were resumed in May of 2005. Turkmenistan and Gazprom agreed that the price would stay at \$44/1000 m3 in 2005–2006 but that the payment would be 100% cash. Turkmenistan justified the higher price demand and the supply interruptions on (1) a weaker US dollar, (2) higher prices of steel products received in barter in exchange for gas, (3) higher European gas prices.
