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Caspian Cooperation as a Way to Solve Economic Problems of Turkmenistan

Turkmenistan is now in vital need of extra resources, but according to experts it will be hard to get them. 

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In the last 2-3 years, independent media write regularly about the inflation in Turkmenistan, incessant queues, shortage of basic goods, and strengthened punitive measures against those who are disgruntled. The authorities of the country never comment these statements and still claim Turkmenistan lives in the age of “power and happiness.”

However, certain official measures still show that the country experiences hard times: since early 2019, Turkmenistan totally cancelled all public utilities privileges for the people that existed since 1993 and qualified the country as the “social paradise.” According to the official version, the welfare of people has improved during the independence years and they need no privileges anymore. In fact, it was done to get a new source of income to replenish the empty public treasury.

There is no question of any increase in external income in this situation for Turkmenistan. The country’s main export product is gas, but after Russian Gazprom and Iran failed to reach a compromise with the Turkmen authorities on price, and then significantly reduced and in 2016 and 2017, respectively, stopped buying it at all, the only importer of Turkmen gas is China.

At the same time, China pays hard cash only for a part of supplies, the rest is used to pay for Turkmenistan debts for Chinese investments, while the position of a monopoly buyer allows it to dictate its terms. In order to bring its gas to other markets, at the end of 2015, Turkmenistan even started the construction of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline on its territory. However, most experts agree that given the current security situation in Afghanistan, the pipeline will not be completed, and gas export along this route is unfeasible.

Sebastien Peyrouse. Photo: events.stanford.edu

According to Sebastien Peyrouse, professor at the Elliot School of International Affairs of the George Washington University (USA), who specialises in the Central Asian region, cooperation with Central Asian states will not give Turkmenistan a priority in this situation.

“They will not buy Turkmen gas or cotton. And the prospects for the development of trade in another area are small and, of course, insufficient for at least partial response to the current economic recession. On the other hand, if there is a military threat to the country’s security, as sometimes reported on its border with Afghanistan, it’s not Central Asian countries but Russia will contribute to solving this problem. Therefore, Turkmenistan is much more interested in the Caspian countries,” Peyrouse said.

Cooperation with the Caspian countries, he said, opens up certain opportunities for Turkmenistan to diversify gas supply routes. Improvements in Ashgabat’s relations with Tehran may open up discussion of the resumption of gas supplies to Iran.

As for Russia, in 2019 it again began purchasing Turkmen gas, but in much smaller volumes than in the 2000s, and Berdymukhamedov can hope for more. And establishing contacts with Azerbaijan can be seen as the first step towards possible exchange with more distant markets such as the European Union. But it will not be easy for Turkmenistan to achieve its goals.

“Because of his unpredictable behaviour, Berdymukhamedov has lost at least part of his authority, especially in the eyes of Iran. Moreover, the economic and social crisis jeopardises the reliability and even the future of the very country. Finally, the prospects for cooperation with Europe remain weak partly for the reasons mentioned above, such as Berdymukhamedov’s unpredictability and inconsistency, as well as the tough human rights situation. Even if several European companies supported by some European deputies lobby for the development of trade relations with Turkmenistan, such projects will still be strongly opposed to in Europe,” Peyrouse said.

Jos Boonstra. Photo: voicesoncentralasia.org

The coordinator of the EU-Central Asia Monitoring project of the Centre for European Security Studies (CESS), Jos Boonstra, also believes the current desire for cooperation with the Caspian Sea littoral countries is related to Turkmenistan’s energy policy and its desire to export gas other than to China. But now Europe’s interest in Turkmen gas has somewhat faded because of the pressure related to climate change and the transition to renewable energy sources.

“Although the EU opens its representative offices in Turkmenistan, we’ll see the focus of its activities in the years to come: energy, development of education, or something else,” Boonstra said.

A change of rhetoric

Late this year, Turkmenistan is celebrating the 24th anniversary of international recognition of its continuous neutrality. For many years, neutrality was the basis of the country’s foreign policy, which, according to the authorities, guaranteed it comprehensive development and prosperity. Thus, in September 2019, the president of the country Gurbanguly Berdymukhamedov in the congratulatory message to the people on the occasion of the Independence Day emphasised that “independence and neutrality of Turkmenistan” were the “basis of world-recognised” successes of the country.

In fact, “neutrality” means closed nature and isolation from the rest of the world. Turkmenistan has one of the strictest visa regimes, but even a visa doesn’t give a right to free movement to foreigners in the country. As a result, for example, in 2011, according to official statistics, Turkmenistan was visited by as few as 8,697 foreign tourists.

For comparison, the number of foreign travellers in the same year in neighbouring Uzbekistan was 463 thousand.

Turkmenistan creates obstacles for investors, as well. For example, the website of the UK government writes about Turkmenistan:

There is an institutional mistrust of investment on terms which would attract foreign companies. The law does not adequately protect contracts, and can be changed by decree or ignored with impunity by vested interests.

For many years Ashgabat has not paid any special interest to its neighbours and regional projects and initiatives. Thus, in 2018, the president of the country Gurbanguly Berdymukhamedov was the only leader among other regional countries who did not visit the Central Asian summit, the first one in the last 13 years.

However, the government of Turkmenistan has apparently decided to review its relations with the outer world lately. In particular, it is striving more to establish economic cooperation with the Caspian Sea littoral countries. In 2019, the country even initiated and held the first Caspian Economic Forum, where the leader of Turkmenistan declared his concern in the long-term joint work with neighbours in the Caspian Sea region, especially in the area of energy.

“The energy of the Caspian Sea must become the basis for the dynamic economic development of the country. In turn, favourable social consequences have been caused by the same reason: creation of new jobs, improvement of quality and standard of living, construction of social infrastructure – schools, kindergartens, hospitals,” Berdymukhamedov said when opening the Forum.

According to many experts, Turkmenistan had to change its traditional rhetoric due to the severe economic recession in the country, and, as a result, the increasing tensions among people.

Ashgabat, Turkmenistan, 2009. Photo: Aleksandr Zemlyanichenko / АР

Unjustified hopes

During a critical period of financial shortages, Turkmenistan is not interested in neighbours in Central Asia, as it has nothing to offer to them. Kazakhstan and Uzbekistan are not interested in importing gas as they produce it themselves, said Azhdar Kurtov, political analyst and editor-in-chief of journal “Problems of National Strategy” of the Russian Institute for Strategic Studies. According to him, theoretically, Turkmen gas may be needed by Kyrgyzstan and Tajikistan, but there’s Uzbekistan that is interested in its gas export between Turkmenistan and these two countries.

Azhdar Kurtov. Photo from personal Facebook account

The agricultural products of Turkmenistan are not the area of interest for its neighbours as they grow the same. While the export of any other products, for example, petrochemicals, won’t fill in the gaps in the national budget of Turkmenistan.

“For Turkmenistan, it is vital to get additional resources because tensions in the country are increasing and cannot be relieved only by police brutality methods. Therefore, it is rather interested in developing gas export to the east – via the Trans-Caspian gas pipeline along the bottom of the Caspian Sea, through Azerbaijan, Turkey and further to Europe, wherefore it is trying to establish relations with the Caspian Sea littoral countries. And here, to a certain extent, Turkmenistan’s adoption of the Convention on the legal status of the Caspian Sea last year plays into the hands of Turkmenistan,” Kurdov said.

But the convention did not dot all the i’s regarding the possible construction of the gas pipeline along the bottom of the Caspian Sea. It will require the signature of additional protocols, environmental assessment by all littoral countries, which means that the process can take quite a while.

“The analytical support of foreign policy and economy of Turkmenistan is very poor. No one dares to stand against the chief executive because everyone fears to lose their status or face repressions. But we need to understand that the market very often does not depend on the will of Moscow, Ashgabat or anyone else. It is regulated by many factors. And everything needs to be calculated, analysed, and reasonable decisions should be suggested to the government of the state instead of supporting unjustified hopes,” the Russian expert said.

Ilkham Shaban. Photo: ru.oxu.az

Ilkham Shaban, the director of the Caspian Barrel Azerbaijan Oil Research Centre, also noted that construction of the Trans-Caspian gas pipeline, in accordance with the convention on the legal status of the Caspian Sea, will require permission from all Caspian Sea countries, which will be difficult to obtain. But the main obstacle to the supply of Turkmenistan gas to Europe is the matter of trading.

“Today and in the foreseeable future, the sales of Turkmenistan gas in the European markets are deemed uncompetitive. Therefore, representatives of companies that could be potential buyers of Turkmenistan gas in Europe and even in Turkey still stay away from Ashgabat. This is the key secret why the Trans-Caspian gas pipeline project is not yet implemented,” Shaban.

ДThis article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project.

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