Turkmenistan has agreed to resume gas exports to Russia, ending an eight-month dispute with Moscow that prompted Ashgabat to seek closer energy ties with China and Iran.  By diversifying its fuel export network, the country is helping break a Russian monopoly on gas supplies in Central Asia.

Senior officials representing the gas companies of Russia and Turkmenistan signed an agreement in Ashgabat to resume Turkmen gas exports to Russia no later than January 10.  The deal involves 30 billion cubic meters per year.

Visiting Russian President Dmitri Medvedev and his Turkmen counterpart, Gurbanguli Berdymukhamedov, witnessed the signing.  Mr. Berdymukhamedov says fuel supplies are one of the key factors in the development of Turkmen-Russian relations.

The Turkmen president says other factors include transportation, communications, electrical energy, the agro-industrial complex as well as plane and ship building.

President Medvedev notes that despite the global economic crisis, Turkmen-Russian trade has increased.

The Kremlin leader says bilateral trade over the first ten months of 2009, not counting gas, amounted to about 900 million dollars.  He says that represents a 20 percent increase over the previous year.

But the new gas agreement covers only two-thirds of the volume Russia imported from Turkmenistan in recent years.  Delivery stopped altogether following a gas pipeline explosion in April, which Turkmenistan blamed on Russia.  Russian Foreign Minister Sergei Lavrov rejected any foul play, saying the blast was a technical incident.  It came amid declining global demand for gas and supply surpluses.  This meant Russia was losing money by importing excessive quantities of Turkmen gas.

The explosion prompted announcements of Turkmen gas export diversification.  Last week, Turkmenistan opened a pipeline to China and is completing one to Iran.  The Turkmen government also posted a message from Turkish president Abdullah Gul congratulating Ashgabad on the China pipeline, which bypasses Russia.  The message quotes Mr. Gul as saying such export diversification will make a significant contribution to gas transit through Turkey to the West. 

Implicit in the Turkish message are plans for the Nabucco pipeline that would deliver Central Asian gas under the Caspian Sea to Europe around Russia.

Russian National Energy Security Fund Director Konstantin Simonov says Moscow wants a pipeline on the Caspian's northern shore, which is on Russian territory.  Simonov adds that Russian reliance on Turkmen gas imports represents a faulty strategy.

The energy analyst says there has been a simple policy:  if Russian production falls short, that is OK because there is always cheap Turkmen gas.  But in the mid-term, he says, that approach is dangerous.  He notes it may be less expensive in the short run, but Russia would do better if it developed its own projects.

Other analysts say Russian domestic gas production has not increased in recent years.  And Simonov cautions Turkmenistan may be unable to meet all of its export commitments if it does not find new sources of gas.  Both countries are counting on a return to higher fuel prices.