Turkey and Turkmenistan push mutual energy interests

By bne IntelliNews August 13, 2012

bne -

Turkmen President Gurbanguli Berdymukhammedov embarked on a two-day state visit to Turkey on August 10 - his second of the year - as the two countries look to cement growing ties. Energy hungry Turkey is pushing to secure gas from the secretive producer to help it diversify its suppliers, while dangling the prospect of investing in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, for which Ashgabat is seeking to gather support.

With independent surveys showing that Turkmenistan's has the fourth largest gas reserves in the world, Ankara is pushing to becomes a key importer of Turkmen gas, especially given the ongoing arguments with Russia - its largest supplier - over prices. Meanwhile, Turkey faces several challenges elsewhere in the region, with US sanctions suppressing trade with Iran, intra-regional difficulties blighting Iraqi relations, and the Syrian crisis.

At the same time, Turkmenistan is keen to diversify its export routes. Until 2009 it was totally reliant on Russian infrastructure, which saw it sell its gas at low prices to Gazprom, only for Moscow to pass it on to European customers at hugely increased prices. It is now also plugged into China via a Central Asian route, but still needs further options. While the country's trade with Turkey grew 25% in 2011 year on year, according to UPI, it still ranked a distant third after Azerbaijan and Kazakhstan - whose trade relations with the country are also primarily made up of energy exports - among Turkic speaking countries.

The TAPI pipeline, which is planned to connect Turkmenistan with the energy hungry markets of Pakistan and India, is a key plank in Ashgabat's strategy to expand its export options, but with the precarious security situation in Afghanistan - through which it must pass - it has been struggling to whip up interest from investors. It is currently on a roadshow to sell the project, but is also wary of a potential Pakistani plan to build a pipeline to Iran.

Perfect political relations

Those mutual interests have seen the two countries pushing relations recently. Berdymukhammedov is back in Turkey after having made it his first port of call after being re-elected in February. Back then he reiterated that Ashgabat views its relationship with Ankara as strategically important and Turkmenistan would welcome greater investment by Turkish companies.

Turkish President Abdullah Gul has made four visits to Turkmenistan in the last several years, with his last official trip in May 2011, during which he discussed ways to improve cooperation in energy, construction, transportation and communications, as well as lavishing praise on Berdymukhammedov and his strict authoritarian regime.

"Turkey is the first country to have recognized Turkmenistan as an independent state. Likewise, Turkey was the first to support Turkmenistan's neutral status in 1995," Gul said during that visit, according to UPI. "There have been perfect political relations between Turkey and Turkmenistan. Our aim is to further develop and diversify our cooperation with Turkmenistan on the basis of mutual respect and interest."

Gul also pointed out that Turkish firms have undertaken projects in Turkmenistan valued at more than $21bn in recent years, a total that accounts for 12% of such projects by Turkish companies. "Turkmenistan has achieved a distinguished and influential position in the international community with its neutrality policy. Taking into consideration its rich energy resources, Turkmenistan's role in regional development and stability is of critical importance," Gul said.

Turkish Economy Minister Zafer Caglayan has also been a frequent visitor to Turkmenistan, In January, Caglayan initialed a protocol within the context of the Turkish-Turkmen Intergovernmental Economic Committee, by which both countries agreed to instruct their central banks to make arrangements so they could use their national currencies in bilateral commercial contracts.

Despite the two nations' determination to deepen relations however, in 2011 Turkmen-Turkish bilateral trade accounted for only $8.6bn, a mere 3% of Turkey's overall trade volume. In 2011, Turkey's imports from Turkmenistan totaled $392.7m, while its exports were worth $1.5bn. Turkmen exports to Turkey consist primarily of energy, textiles, chemicals and agricultural produce, while Turkish exports to Turkmenistan consist of metal manufactures, household goods, hardware, building materials, chemical and light industrial goods, food, vehicles, and medicine.

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