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TURKMENISTAN


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 6,010 7,672 4,000 110
         
GNI per capita
 US $ 1,120 1,200 950 131
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 358 - (26/10/10)

A climacteric
A massively important event has occurred in Turkmenistan. A country with by far the greatest personality cult in the world is dismantling it.

Another huge vent is that Turkmenistan has fallen out with Russia, that used to have a stranglehold over its exports of energy, primarily gas. No longer. A diversification of gas exports both westwards and eastwards is under way, with massive new markets opening up.

Niyazov's golden statue toppled
The giant is down. Big Brother is no more. The gold-plated statue of Turkmenistan's late leader, Saparmurat Niyazov, has been removed from its gigantic plinth in the capital, Ashgabat. The tripod towered over parts of the capital, Ashgabat, obviously to intimidate its inhabitants with his might.

President Kurbanguly Berdymukhamedov, who took power after the strongman's death in December, 2006, gave the order to remove the monument in January. The rotation of the statue, which always faced the sun, was stopped some time back. On August 25 it was removed and workers are now tackling the huge tripod base, a tougher job. There is perhaps symbolism here.

The 15m (50ft) statue and its 75m marble-covered plinth - called the Arch of Neutrality - were seen as representative of the excesses of Mr Niyazov. The self-styled "Turkmenbashi" - meaning the father of all Turkmen - established a comprehensive personality cult. Streets, cities and months were named after him and his family, and portraits of him hung across the country.

Since Niyazov’s death Berdymukhamedov has overseen efforts to remove the most prominent reminders of the late leader. He has promised to introduce reform in the Central Asian nation, which under Niyazov experienced two decades of authoritarian rule and near-total isolation from the outside world.

But critics say reforms to date have been mostly cosmetic. It takes time, however, to dismantle a despotism without courting a revolution.

Curiously, Niyazov's successor was his dentist, and by all appearances, his son. Burdymukhmadov is his spitting image, albeit a younger and saner version, let us hope.

The Caspian cornucopia commences – Westward Ho!
Energy-rich Turkmenistan is in a period of transition. It used in Niyazov's day to be a satrapy of Moscow's. It is now opening up to a wider world.

For years, the idea that Europe might get gas from the Caucasus and beyond, breaking Russia’s monopoly on east-west pipelines, seemed fanciful. Not any more. The leading contender, the Nabucco pipeline, backed by the European Union, is gaining speed (see map). Last month the project won $5 billion in loans from the World Bank, the European Investment Bank and the European Bank for Reconstruction and Development.

Nabucco is not yet a done deal. Two big members of the consortium, RWE of Germany and OMV of Austria, said on October 8th that they had postponed to next year a final decision on whether to invest. RWE would like to build the Turkish part of the project. But Turkey is considering a public tender in which local firms would get a share of the cake. Any slowdown may raise the pressure on the EU to shoulder more of the risk itself.

Another problem is the source of gas. At first Nabucco needs 8 billion cubic metres (bcm) a year from Azerbaijan, but it wants a lot more to be fully viable. Turkmenistan is the best option: it has fallen out with Russia, thawed relations with Azerbaijan, and built a pipeline from its onshore gasfields to the Caspian coast. Gas could continue from there either by a pipeline across the Caspian (though Russia objects) or, more cumbersomely, by tanker.

Nabucco is not the only party interested in Azeri gas. The authorities in Baku continue to flirt with Russia (though any pipeline going northward would have to cross the unstable north Caucasus). Two rival projects aim to bring Azeri gas to southern Italy via Turkey and Greece. That would not help gas-hungry central Europe. But the costs and politics of the Adriatic route are simpler.

As Turkey flexes its muscles, other countries plot to bypass it. A new scheme, the Azerbaijan-Georgia-Romania Interconnector (AGRI), aims to use an existing trans-Caucasus pipeline and then tankers across the Black Sea. This might use liquefied natural gas (LNG), or cheaper (but untried) compression technology. From the Romanian port of Constanta, it would then go through an existing pipeline to Hungary. AGRI will not carry as much gas as Nabucco’s planned annual target of 38 bcm. But it is cheaper to build, costing perhaps €1.2 billion ($1 billion), and will save on Turkish transit fees. Despite noisy political backing, AGRI’s real role is probably to soften Turkey’s negotiating stance.

For its part, Russia is continuing to push its rival South Stream project, which would go, expensively, across the bottom of the Black Sea, bypassing Ukraine. It has gained some German backers. But crucial bits are missing. Russia’s ill-run and debt-ridden gas industry has little extra capacity. Bulgaria is still furious about having its gas supplies cut off during the Russian-Ukrainian gas row in January 2009. Sofia wants to lessen the country’s energy dependence on Russia, not increase it.

Russia may be down, but it is not out. The Nord Stream pipeline on the Baltic seabed is being built, bringing Russian gas directly to Germany and reducing dependence on transit countries such as Belarus and Ukraine. Russia’s new gas contract with Poland could tie that country to supplies from the east until 2037. Some Poles like this. Others, chiefly in the foreign ministry, think it could jeopardise the country’s plans to develop its own reserves, and to build a terminal to import LNG. The European Commission has now intervened, claiming that Russian restrictions on the destination of the gas, and the use of the pipeline, are illegal.

Stealthily but successfully, the commission has been liberalising Europe’s gas market. A new directive makes it compulsory for all gas pipelines to be reversible, meaning that they can be used not just for funnelling gas into Europe, but also for moving it around the continent. That weakens the position of monopoly suppliers such as Russia.

Another big change is the growth of interconnecting pipelines, hooking up what have until now been energy islands. A new pipe was due to be inaugurated by the Hungarian and Romanian prime ministers on October 14th. Completing the north-south gas grid is a priority for Hungary as it takes over the EU’s six-month rotating presidency in January. (Poland, which comes next, thinks similarly.)

The most important shift, however, is not on land but at sea. The big worries over European energy security came when the world gas market was tight. But the price of LNG has plunged, chiefly because America, now well supplied with shale gas, has stopped importing it. Nabucco remains important as an insurance policy, and as a sign that the EU’s common energy policy is more than talk. But it also looks like an answer to a problem that technology and the market may already be solving.

Eastward Ho!
It is diversifying to the West – but also, as we shall see, to the East.

Turkmenistan, long slow to respond to foreign efforts to enter its energy sector, is now considering tenders for development of its vast Caspian offshore hydrocarbon deposits. The bids are yet another sign of the dramatic changes occurring since the death of the country's mercurial autocrat, "president for life" Saparmurat Niyazov in December 2006.

Among the companies submitting tenders from the U.S. are Chevron, TX Oil and ConocoPhillips along with Mudabala of the United Arab Emirates, ITAR-Tass reported on August 28. For companies seeking to enter the Turkmen energy market, negotiations in some cases have dragged on for years. ConocoPhillips, in conjunction with its partner Lukoil, in 2007 began discussions with the Turkmen government about developing Turkmenistan's offshore Caspian hydrocarbon blocks N19, 20, and 21.

Berdymuhamedov told a meeting with his energy officials on August 27, "Turkmenistan will have to choose the best option for the development of its sea shelf sections number 9 and 20" while urging energy bureaucrats to "keep strict control over and to speed up environmental impact assessment works." The winners of the contracts will join Malaysia's Petronas, Dubai's Dragon Oil and Canada's Buried Hill in developing Turkmenistan's Caspian offshore hydrocarbon reserves, with Russia's Itera and Germany's RWE now ramping up projects in Turkmenistan's Caspian sectors 21 and 23.

According to expert estimates, Turkmenistan's Caspian hydrocarbon resources could total roughly 18 billion tons of oil. Since 1991 the Caspian basin has emerged as the world's leading untapped energy source. According to the U.S. government's Energy Information Administration, the Caspian's 143,244 square miles and attendant coastline could contain as much as 250 billion barrels of recoverable oil besides an additional 200 billion barrels of potential reserves. Additionally, the EIA places the Caspian basin's natural gas reserves at up to 9.2 trillion cubic meters of recoverable natural gas.

Given the difficulties of dealing with Niyazov's government, previous Western efforts to enter the Turkmen energy market largely focused on the country's natural gas reserves, which had begun to be developed during the Soviet era. In contrast, the Soviet Union produced less than two percent of its oil and gas from offshore sectors, all in shallow Caspian waters off Azerbaijan.

Turkmen natural gas is also promoted by boosters of the proposed Nabucco natural gas pipeline, but even if Turkmenistan can be persuaded to contribute natural gas, the seabed of the Caspian has yet to definitively be delineated amongst the sea's five riparian states. The question remains unresolved 19 years after the implosion of the USSR invalidated the 1920 and 1941 Soviet-Iranian bilateral treaties covering the issue of offshore waters. While the dispute has yet to be resolved, Turkmenistan's recent offshore ventures are in waters collectively to be assumed to be in Turkmenistan's eventual sphere of influence if and even a Caspian treaty is finally agreed between Azerbaijan, Kazakhstan, Russia, Iran and Turkmenistan.

Turkmenistan is also literately re-orienting itself – that is heading to forge new links to the East.

In the East lie two huge countries with expansive economies thirsty for energy, China and India. Turkmenistan can offer them an abundance of gas, of which it has the world's fourth largest reserves. Then there is Pakistan and Japan, also short of energy resources, keen to do business with the Turkmens.

A mighty break-through
Turkmenistan and Afghanistan have signed an agreement on construction of the Trans-Afghanistan (TAPI) gas pipeline for the transfer of Turkmen gas to Pakistan and India, local media said on August 31.

The TAPI project, first put forward in 1995, was promoted by the country's late leader, Saparmurat Niyazov, in the early 2000s. It secured strong support from Washington after a U.S.-led offensive ended the Taliban's five-year rule over Afghanistan in 2001.

The Turkmen delegation is expected to visit Pakistan and India to sign agreements with the two countries in the near future.

Local media said earlier that Turkmen President Kurbanguly Berdymukhamedov and his Afghan counterpart Hamid Karzai agreed to discuss the project at the 65th United Nations General Assembly in New York in September, which they have duly done.

An even mightier breakthrough ahead
Berdymukhammedov has ordered oil and gas industry officials to work out the final details for receiving a $4.1 billion loan from China's state development bank and put that money toward developing the massive South Yolotan natural gas field.

The Turkmen government's state website reported on President Berdymukhammedov's August 12 meeting with state energy officials. Berdymukhammedov ordered officials to get the money from China and quickly build a "state-of-the-art complex for cleaning gas so its quality meets the highest international standards."

South Yolotan is one the world's major gas fields, with estimates of its reserves reaching as high as 16 trillion cubic meters.

Many foreign companies are negotiating with Turkmenistan to participate in developing this relatively untouched deposit.

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