POLITICS
Was 2020 the year that “hermit nation” Turkmenistan slipped into a state of Dickensian misery?  Some accounts have it so.

Just as it can refuse to acknowledge the country’s embarrassing food queues but can’t cover up their existence, the wretched government – dominated by the ‘action man’ personality cult of dictator Gurbanguly Berdimuhamedov – can persist in denying the reality of the nation’s coronavirus (COVID-19) outbreak, but the patently absurd contention that the Turkmen have experienced zero infections can by now be exposed by heaps of evidence to the contrary. The consensus is that Turkmenistan is in fact experiencing a debilitating outbreak that has severely exacerbated the economic crisis that has bedevilled it for so many years.

Berdimuhamedov, above, projects an 'action man' personality cult.

Ashgabat ended 2019 complaining about a Netflix action thriller’s depiction of a fictional country named “Turgistan” – in the spoof plot, the leader of Turgistan is named Rovach, which is the name of the favourite stallion of equine-mad Berdimuhamedov – and it has concluded 2020 expecting to be taken seriously when it explains that officials are telling citizens to wear face masks because of a marked outbreak of “dust” in Turkmenistan's air.

Hardly moved a muscle

The Berdimuhamedow administration also reportedly proved a severe let-down in spring when it hardly moved a muscle to help people in eastern regions whose homes were battered by calamitous windstorms and torrential rains. The situation prompted street protests, a rare phenomenon in the tightly controlled country.

Because what Turkmenistan really needs is a giant golden statue of an Alabay shepherd dog.

Not so rare are Berdimuhamedov’s insanely expensive raids on the public purse for his vainglorious follies. Who knows what awaits us in 2021? In November, the wraps came off a giant golden statue of an Alabay shepherd dog, the favourite Turkmen dog breed of the president.

The despot, referred to by Eurasianet lately as  “Mr Boombastic”, inquired during a September video conference call with regional leaders what progress was being made on giant yurt-shaped buildings that are to serve as provincial concert halls. So perhaps 2021 will see the unveiling of these 3,000-seater venues in the Balkan, Dashoguz and Lebap regions. Will that sate Berdimuhamedov’s appetite for throwing good money after bad?

Constitutional changes afoot

The president, meanwhile, has some officials secretively working on constitutional amendments. Critics say the 63-year-old plans to use the changes to secure himself a lifetime presidency and eventually allow his son and grandchildren to succeed him. Representatives from a group calling itself the Democratic Choice of Turkmenistan assembled at the Turkmen Embassy in Washington in September to hold a protest against the proposed changes to the Constitution. Vienna-based Chronicles of Turkmenistan reported that the ambassador, Meret Orazov, did not come out to meet the protesters, preferring instead to summon the police and report the picketers for incitement to terrorist activities.  

On the perennial struggle between Russia and China for influence and rewards in Central Asia, a report issued by a Washington-based think-tank, the Wilson Center’s Kennan Institute, has determined that the traditional “division of labour” – where Russia takes care of security matters and China focuses on economic influence – is fading.

Chinese military equipment sales to the region are said to be one indicator of this. They have come to account for 18% of military hardware in Central Asia in the past five years as opposed to the mere 1.5% in 2010-2014. Turkmenistan’s purchase of a QW-2 Vanguard 2 portable surface-to-air missile, modelled on Russia’s 9K38 Igla 2018, from the Chinese military technology company CATIC was given by the report as an example of the changing picture.

In terms of projecting its own influence, Turkmenistan attempts to portray itself as an important player in the future development of conflict-torn Afghanistan. In November, Turkmenistan sent a delegation to the Afghanistan Conference, co-hosted by Finland and the United Nations, and intended as a ministerial-level event that serves as a forum for discussing international commitments toward advancing development and stability in Afghanistan.

On the eve of that conference, Turkmenistan and Afghanistan pledged to strengthen co-operation on the use of three transboundary rivers – the Amu Darya, Murghab and Hari. Afghanistan is eager to develop its hydropower potential. Downstream nations like Turkmenistan are concerned about the implications for their access to water.

MACRO
Getting dependable statistics on Turkmenistan’s economic standing is hazardous work. Institutions often exclude the country from their data sets for want of verifiable data.

The Asian Development Bank (ADB) is anticipating Turkmen growth of 5.8% in 2021, following on from 3.2% in 2020 and 6.3% in 2019. The International Monetary Fund (IMF) sees 1.8% in 2020 and 4.6% in 2021.

The current European Bank for Reconstruction and Development (EBRD) GDP growth forecast for Turkmenistan in 2021 is 1.0%. The development bank also noted: “Turkmenistan reported strong GDP growth (5.9% year on year in the first half of 2020 from 6.3% a year ago) despite a large drop in the country’s export revenues. The retail trade turnover is reported to have increased by 13.8% y/y in 2020.

“While no COVID-19 cases have been diagnosed in the country, the authorities took preventive steps to restrict cross-border and internal movements, and impose social distancing. Large shopping centres, markets, theatres, parks and sports facilities had to briefly suspend operations from July 21 to August 1, 2020.”

Turkmenistan remains at a primitive stage of making the transition to a sustainable market economy. Private sector activity is severely limited.

Another huge obstacle to economic development in the remote country of 6mn is forex rationing, with hard currency unavailable at reasonable rates to those outside the elites. The black market “street rate” for the Turkmenistani manat (TMT) soared to around 25 per dollar in the closing months of 2020, while the official rate – which has remained fixed for five years – stood at 3.51. In May, Turkmen companies were ordered to sell all their FX to the country’s sovereign wealth fund at the official rate. The requirement previously stood at 50%. Foreign exchange cash withdrawals from ATMs were banned from April.

Reports from the ground indicate that recent months have seen prices for food and other staples spike by 10-15% in Turkmenistan, with people in Mary Province, for instance, reportedly having to sell off belongings to pay for groceries.

The IMF calculates that the annual inflation rate in Turkmenistan will end 2020 at 8% (from 5.1% in 2019 and with a projection pointing to 6% in 2021), while the ADB sees 10% (with 8% in 2021).

Source: IMF DataMapper.

In forecasting the country’s 2020 current account balance, the IMF gives a figure of 1% of GDP (compared with 5.1% last year and an expected 1.8% in 2021) and the ADB minus 1.4%.

The IMF also determined that the Turkmen general government gross debt would be 30.9% of GDP in 2020.

In its September update on the economic outlook for Turkmenistan, the ADB said: “Lower gas exports required 2020 state budget revision, and the International Monetary Fund cut its revenue projection from 13.7% of GDP to 11.8%. With government response to the pandemic, outlays are still projected to equal 14.0% of GDP, widening the fiscal deficit to 2.3% of GDP. In 2021, anticipated export recovery is forecast to raise revenue to 12.6% of GDP, narrowing the fiscal deficit to 0.5% of GDP.”

Turkmenistan’s biggest economic headache is that although the country is home to the world’s fourth biggest gas reserves, with 19.5 trillion cubic metres proven, according to BP, it does not have the markets or pipeline infrastructure to sell enough of its gas riches. The economy is massively reliant on gas, yet Turkmenistan is largely dependent on one buyer, China, to take its supplies.

Since the collapse of hydrocarbon prices in 2014 and Russia’s decision in 2016 to entirely halt purchases of Turkmen gas, Turkmenistan’s economy has been crisis-stricken. Russia in 2019 resumed importing Turkmen gas – it said in June it had paid around $300mn for gas imported from Turkmenistan in 2019 – but not at levels that would come close to solving Ashgabat’s economic woes.

ENERGY
Given its nightmare with economic over-dependence on gas exports, Turkmenistan has prioritised moves in the diversification of its economy, value-added products for export and import substitution, though not with any particularly telling impact to date.

In the field of energy, Turkmenistan continues to step up efforts to generate more value from its plentiful supplies of cheap gas by turning gas feedstock into petrochemical products. Production at the two-year-old Kiyanli petrochemical complex in the west of the country has reached full capacity, according to what Turkmen state media reported in late August. Kiyanli has the capacity to produce polyethylene (PE) and polypropylene (PP) at 381,000 and 81,000 tonnes per year respectively, bringing the national capacities as presented by officials to 1.37mn tonnes/yr of PE and 711,000 tonnes/yr of PP. The $3bn Kiyanli complex is operated by state gas firm Turkmengaz. The facility is on the shore of Caspian Sea, providing it with easy access to markets in the Caspian region.

Turkmenistan has completed several other gas-based downstream projects in recent years, including a gas-to-gasoline plant that entered operation in 2019.

Planned route of the TAPI pipeline. Source: DQtTwo, public domain.

Also in the drive to deliver more revenues from the country’s gas reserves, officials in the autumn pledged significant progress would soon be unveiled in the construction of the Turkmenistan-Afghanistan-Pakistan-India, or TAPI, natural gas pipeline. Such promises have been an annual fixture for many years, so nobody should get their hopes up. President Berdimuhamedov in September got on the phone to Pakistan’s President Arif Alvi to brief him on TAPI progress. Work on the Turkmen section was in its final phase, he claimed.

Around the same time, Karachi-based The News International reported that Muhammetmyrat Amanov, chief executive of the TAPI Pipeline Limited Corporation, had promised Pakistani officials during a visit to Islamabad that Turkmenistan was prepared to lower the asking price for its gas. The newspaper also cited officials in the Turkmen delegation as stating that they had made progress in talks with international lending agencies. ADB and Saudi loan pledges are known to have been made for the TAPI investment. But the project is a long way from raising the $10bn it needs.

Construction on the 816-km Afghan section of the TAPI pipeline officially began in February 2018, but nearly three years later no significant progress has been reported despite some security assurances from the Taliban. The pipeline is expected to pass through Afghanistan’s Herat, Farah, Nimroz, Helmand and Kandahar provinces and be constructed alongside the Herat-to-Kandahar Highway.

In December, Russia’s Tatneft announced it will continue its work in enhanced oil recovery (EOR) at the Goturdepe onshore field near the Caspian Sea in Turkmenistan under a contract extension for eight years until 2028.

Turkmen geologists discovered a nearby field, North Goturdepe, in 2010. The government has been seeking investors for North Goturdepe for years. Another field near the Caspian shore, Uzynada, discovered in 2017, is also still in need of a foreign partner.

In the power sector, the World Bank said in October that its new power system modelling analysis for Central Asia has shown that the region’s nations could jointly reduce operating expenses by as much as $6.4bn in the next 10 years by leveraging connected electricity transmission infrastructure.  

TRANSITION
Turkmenistan was in July granted observer status by the World Trade Organisation (WTO), making it the last ex-Soviet country to establish formal ties with the trade body.

It often seems, however, that talk of economic and political transition is only humoured by the Berdimuhamedov administration, rather than acted on with some real application. Discussions on transitioning to a market-based economy sometimes result in privatisation suggestions, though they end up going nowhere.

Lately the Cabinet has entertained a proposal to turn the State Commodity and Raw Materials Exchange (GTSBT) – the market where foreign companies come to buy Turkmen raw exports – into a joint-stock company. And in September, Berdimuhamedov said that the Halkbank savings and pensions lender likewise should be converted into an open joint-stock company. 

"Pervasive state intervention"
The EBRD, one of the few international actors supporting the private sector in Turkmenistan, takes as a starting point that the country’s “economy continues to be characterised by pervasive state intervention and state ownership”.

“In some sectors, particularly energy efficiency, power and municipal services, reforms have been insufficient to enable the EBRD to engage fully,” the development bank noted in a Turkmenistan overview, adding: “The EBRD will therefore limit its activities in these areas to selective and targeted policy dialogue, as requested by the authorities, to promote the adoption of reforms leading to market-based solutions to the challenges in these sectors.”

In the overview, the EBRD also stated: “The EBRD will provide financing to privately owned companies outside the oil and gas sectors, focusing on food processing and distribution, logistics, transport services, packaging, furniture and hospitality.

“To support the development of effective and sustainable financial intermediation to the private sector, the EBRD will prioritise strengthening the financial sector to enable it to fund the economy by introducing market-oriented principles, and will launch a new banking framework agreement with existing and potentially new partner banks to channel funds to private sector MSME [micro, small and medium size enterprise] clients.”

OTHER MATTERS
Turkmenistan is importing $1.47bn worth of equipment and materials as part of a project to build a new city from scratch in southern-central Ahal Province.

The State Commodity and Raw Materials Exchange of Turkmenistan (GTSBT) in November announced an open tender for the development and implementation of the digitalisation of its activities.

Azerbaijan and Turkmenistan have agreed a programme to install fibre-optic cables linking the two countries under the Caspian Sea. The 300-km link would significantly boost Turkmenistan’s internet capacity. It would allow the transmission of data with a capacity of at least 2-4 terabits and become part of the “Digital Silk Road” running from Frankfurt to Mumbai via Azerbaijan.

Turkmenistan in December signed 18 agriculture memoranda of understanding (MoUs), including one with the UNDP office in Turkmenistan to “ensure the sustainability of the socio-economic condition of the population in agriculture”. Another is on the integrated development of “green cities” as regards the capital Ashgabat and Avaz. It foresees the building of greener, more sustainable cities and renewable energy projects.

Brazilian aerospace firm Embraer is in negotiations with Turkmenistan to sell the country A-29 Super Tucano military aircraft, AIRWAY reported in December. Turkmenistan’s air force of just a few planes is still nearly entirely Soviet-era.

Turkmenistan and Afghanistan are reportedly making progress in constructing a railway that would connect Turkmenistan and Tajikistan via Afghanistan. A $21mn contract has been signed to build the 30 km-long Akina-Andkhoy link.

Turkmenistan's Caspian Sea coast provides the country with some useful export routes. Source: CIA World Factbook.

Russia and Turkmenistan in November signed an MoU on co-operation in maritime transportation and logistics that will include a regular ferry service between the two countries that would accelerate mutual trade. The ferry would operate between Turkmenbashi International Sea Port and Olya port in Russia, the largest Russian commercial port on the Caspian Sea. 

The Uzbek and Turkmen foreign ministries in the autumn held consultations in which both sides expressed support for the earliest possible launch of the Uzbekistan-Turkmenistan-Iran-Oman transit corridor.

The EBRD in December agreed to lend $2.5mn to Turkmenistan’s largest tomato grower Agromar. The latter plans to use the loan for an expansion of its hydroponics greenhouse cultivation with advanced cooling systems. The goal is to increase annual production capacity from 1,500 tonnes to 3,000 tonnes, with the majority of output aimed at export markets, particularly Russia.

UK equipment manufacturer JCB in December signed an MoU to supply JCB equipment to Turkmenistan with the Turkmen Ministry of Finance and Economy and State Water Management Committee of Turkmenistan. The deal is to help attain effective water use management via the Karakum canal, one of the largest man-made canals in the world, and improve irrigation.