Few are buying Turkmenistan’s hot air
Few nations are so reliant on a single resource as Turkmenistan is on its natural gas. For 25 years, gas flowed freely, and for free, to households across the country. The provision of free water and energy utilities, though finally abolished in 2018, was widely seen as a pacifying measure to ensure the stability of one of the globe’s most repressive regimes. Turkmenistan’s gas reserves, the world’s fourth-largest, provide the country with one of its few economic lifelines, with geopolitical implications for Central Asia and its relations with regional powers.
In the middle of the Karakoram desert, the “Gates of Hell” has been burning for almost fifty years. The Darvaza gas crater, reputedly set alight by Soviet engineers in the 1970s, shows no signs of running out of gas any time soon. The crater is but one sign of the huge gas fields beneath Turkmenistan. For the European Union, which imports 80 per cent of its gas needs, Turkmen gas fields offer a tantalising opportunity to reduce European energy dependence on an increasingly assertive Russia. Given the country’s shattered economy, Turkmenistan would be eager to supply Europe, and plans for a Trans-Caspian Pipeline (TCP) have long been mooted.
Politics, however, complicates any potential arrangement. The political differences between EU states and Turkmenistan, which ranked dead last in the 2019 World Press Freedom Index, are stark. Regionally, Russia and Iran have both expressed opposition to the TCP on “environmental” grounds. Until recently, Russia was Turkmenistan’s biggest import partner, but it has little interest in facilitating Turkmen gas flows to Europe that circumvent its territory and control of European energy. Moreover, foreign investment in Turkmenistan, especially from the West, has proven particularly hard to come by, courtesy of the repressiveness of its government and the difficulty of doing business. Combined with dropping gas prices that have contributed to Turkmenistan’s latest economic crisis, the European market seems firmly closed to Turkmen gas for the near future.
Against this background, the 2009 construction of the Central Asia-China pipeline, now part of the Belt and Road Initiative, has greatly increased cooperation between China and Turkmenistan. China’s deteriorating relationship with Australia has meant the breaking off of energy imports, and Turkmenistan is now China’s largest natural gas supplier. China is now by far Turkmenistan’s largest trading partner, importing 82 per cent of Turkmen exports and the vast majority of its gas.
Given this overdependence, Chinese trade diversification with Kazakhstan represents a critical threat to Turkmenistan’s fragile economy, at no expense to the clear major trading partner. China has also helped fund much of the requisite infrastructure for the expansion of Turkmen gas extraction, leaving billions of dollars to be repaid.
By value, gas accounts for over 80 per cent of Turkmenistan’s exports. Now facing lower gas prices, food supply difficulties, and the coronavirus pandemic, Turkmenistan’s overreliance on its most abundant resource is leading to predictable results.
Other opportunities for diversification remain distant. The status of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, which would allow Turkmenistan to reach a growing Indian market, is unclear. Despite the construction of some sections having begun, it has stalled since the beginning of the pandemic. Security challenges, given its long route through Afghanistan, have also left it facing an uncertain future. In any case, diversification of buyers will not address extreme single-export overreliance.
Despite its importance to the Turkmen economy, gas has not saved the country from its recent fiscal turmoil. Falling gas prices and food shortages have contributed to an economic disaster, with long queues at many locations and a poor outlook for the future. Loan repayments and shrinking export revenues have led to foreign exchange difficulties, with the black market now thriving. Turkmenistan’s government refuses to recognise the extent of the difficulties faced by its citizens, even as it continues to deny the existence of coronavirus cases in the country.
Some observers argue that Turkmen diplomacy fundamentally revolves around securing demand for energy, with infrastructure development the “central international concern of the Turkmen state”. Yet, rather than secure its long-term future, this approach to foreign relations has isolated the country and contributed to domestic insecurity. Actual export volumes have decreased, even as trade dependency on China has grown.
The cheapening costs of renewable energy sources suggest that natural gas may not be a sustainable long-term economic prospect. Turkmenistan faces significant challenges from climate change in droughts and rising temperatures. Still, with China already looking to diversify its suppliers, Turkmenistan will not have to wait for the climate crisis for further serious issues to present themselves. The confluence of crises has given rise to public unrest, a rare sight in the country, and while it may be premature to suggest that falling gas prices could lead to the fall of the regime, the status quo is a recipe only for further discontent.
Samuel Garrett is the Young Diplomats Society’s Regional Correspondent for South and Central Asia, and a student of Arabic and International Relations at the University of Sydney.