Russia cuts down purchase of Turkmen natural gas

Russia has reduced its natural gas supply contracts with Turkmenistan, days after the two countries resolved a price dispute, official Turkmen media reported Thursday.

Under new contracts signed Wednesday, Russia will buy a total of 11 billion cubic meters (388 billion cubic feet) of Turkmen natural gas in 2005 and 2006, instead of the 17 billion cubic meters (600 billion cubic feet) planned under previous deals, said the Neutral Turkmenistan newspaper.

It did not give a reason for the reduction, which shouldn't affect Turkmenistan's economy much since Russia isn't the country's biggest gas buyer.

Turkmenistan sought in December to raise the price of gas it sells to Russia by about 30 percent, to US$58 (Ђ44.30) per 1,000 cubic meters, citing higher production costs and increases in the price of gas extraction equipment.

But Russia had insisted that they stick to earlier agreements, which stipulated the old price was effective until 2007.

After three months of negotiations, the two countries agreed last Friday that the price would remain unchanged, but Russia would now pay for the gas it buys in cash. Russia had previously paid for half of it in kind, such as by providing gas equipment and consulting services.

Russia buys cheap Turkmen gas to relieve itself of costly investments in natural gas field exploration and development in Siberia.

Turkmenistan is the second-largest natural gas producer in the former Soviet Union after Russia. Its annual exports are expected to reach 100 billion cubic meters (3,531 billion cubic feet) by 2007.