Editor’s introduction by John Heathershaw
Turkmenistan is the least-well studied and perhaps most-poorly understood of the Central Asian republics. We have not previously published features on Turkmenistan on this site and rarely does it feature in the research of our group. However, Turkmenistan has been enduring a financial and economic crisis for many years and deserves greater academic attention, not withstanding the enormous barriers to knowledge.
This series, ‘Inside Turkmenistan’s Economic Crisis’, features three original articles of political economic analysis on Turkmenistan written by a business/political risk analyst with ‘insider’ experience of the Turkmen economy. Ronald Watson is, of course, a pseudonym. The articles are longer than we typically feature on the site and offer fascinating insights into the country’s economy and society.
The author’s introduction is below and the first of the three articles appears this Friday, 2 December, with successive articles on 9 and 16 December.
Introduction by Ronald Watson
In 2008, when the financial crisis had just begun to sink in, the mood in Turkmenistan was parochial at the very least. Many Turkmen citizens watched Russia’s re-presentation and narrative of the economic meltdown of the world with a sense of detachment. Regardless, it is certain that there were prudent people who wondered: how will it affect us and what should we do? But her husband interrupted with a reassuring ‘that doesn’t concern us’.
It is unfortunate that the latter attitude prevailed in the country because presently Turkmenistan is beginning to realise that it is part of the globe the hard way. The falling gas prices on the world market led to the deterioration of supplier relations with Gazprom — Turkmenistan’s only source sizable hard currency. China’s devaluation of Yuan in 2015 sent big waves across the global market which the Turkmen economy rode without any adjustments in course or sails. Further still, the multi-billion energy deal with China has left Turkmenistan bleeding as China imports Turkmen gas based on a ‘debt for gas’ policy and it is not possible to predict when Turkmenistan will have paid its debt and China starts paying hard currency.
Today, Turkmenistan is in a dire situation. Turkmenistan has the fourth largest reserves of natural gas that it is struggling to monetize. In the heydays of energy exporters, the state failed to make prudent investments to diversify its sources of income, so its economic lifeline remains plugged to the energy sector. Gazprom has broken its agreement with Turkmengaz and will not import any gas from Turkmenistan at least until 2018. Afghanistan remains a conflict zone and a major obstacle to TAPI, a project that could help the Turkmen economy and allow a greater degree of independence from Russia. Iran will only barter for gas and could potentially offer a rival and more feasible project than TAPI. At the northeast, Uzbekistan lingers in uncertainty following the death of Islam Karimov. Kazakhstan remains strong and does not have any demands that it cannot satisfy without Turkmenistan. And access to the West across the Caspian Sea remains blocked by the disputes between the Caspian countries made insurmountable by Russian interests. Azerbaijan could be a potential buyer to boost its own exports; however, as Turkmenistan’s desperation grows, Azerbaijan is likely to demand from Turkmenistan to give up its claim for the disputed Omar, Osman, and Serdar oil and gas fields in the Caspian (Azeri’s refer to these fields as Azeri, Chirag, and Kyapaz).
Unfortunately, there is no effective policy to address the economic crisis, nor does the government provide any honest and objective narrative on some of the problems it is experiencing. As is characteristic of this country, the government is most effectively fighting the rumours about the problems rather than the problems themselves. By drawing on the measures the authorities have taken to deny the crisis and how these measures implicate ordinary people, this feature discusses three aspects of the economic crisis in Turkmenistan in three respective parts: the government appears to have run out of cash; its current energy politics is unlikely to yield any sizable revenues; and that there is an increasing authoritarian backlash against the crisis. In the first part, presented now, I provide an overview of the monetary crisis in the country, its consequences, and how the authorities have attempted to address the issue. In the second part, I will focus on the countries energy relations; explore how pricing issues and supplier relations pose formidable obstacles to monetization of Turkmenistan’s vast energy resources and offer my humble, but grim, evaluation of future prospects. I hope I am wrong. In the third part, I make an argument on the pragmatic benefits of more liberal and democratic ways to address failure in the Turkmen government by appealing to Berdymukhammedov’s interest number one: self-preservation. It is a controversial claim but I believe that, in the context of increased spread of information from inside the country and the growing authoritarian backlash against the sources of information, it is critically necessary for such principles as freedom of speech to stick their pragmatic limbs through the door at the very least. Parts two and three are forthcoming in the following weeks.