January 3, 2015
The year has started with news about Turkmenistan devaluing the manat against the dollar and raising their domestic gasoline prices. This relates to the ongoing problems faced by the Russian rubble, which have had a ripple effect throughout FSU and Central Asia especially.
The fall of the rubble in Russia as well as the general economic troubles that Moscow face have had repercussions throughout Central Asia, to different degrees, depending on the countries considered. Apart from currency pressures, Tajikistan, Uzbekistan and Kyrgyzstan have seen a decrease in remittances while Kazakhstan is struggling to maintain competitiveness of their non-oil industries for both internal and external markets. Just like the other countries in the region, Turkmenistan and Russian economies are linked through trade flows, including through the Turkmen’s gas exports to Russia.
Turkmenistan has registered 10% GDP growth during 2014 and therefore the manat devaluation will have a marginal effect on the economy, with little to no impact on the budget. However, the increase in gasoline prices is likely to hit the population, even if subsidies are in place. Turkmenistan’s GDP growth relies on the energy sector – but it often doesn’t translate into an increase of income or of the living standard for most of the population, generally impoverished. While protests are rare and usually small in this country, and we haven’t seen yet any reactionary movements over the economic hurdles the population faces, they are not impossible.
Overall, Turkmenistan is, however, in a relatively comfortable position. The country is officially neutral in its foreign policy and its energy resources – particularly natural gas, has given Ashgabat the option to engage in bolder foreign policy moves. In addition to Russia, it currently has energy ties with China and, with the Ukraine crisis, Turkmenistan could develop its relations to Europe. The European Union has long thought about Turkmenistan (and Azerbaijan) as an option to diminish its dependence on the Russian energy. The project having received particular interest from the Europeans is the Trans-Caspian pipeline project, which would entail constructing a 300-kilometer underwater pipeline from the western Turkmen port town of Turkmenbashi across the Caspian Sea to Baku in Azerbaijan. Given its fear of Russian power projection, Ashgabat has always acted cautiously on the project, not willing to challenge Moscow on key strategic matters.
Turkmenistan’s willingness to do business with Europe seems to be linked to the degree that Russia weakens. The probability that Ashgabat is likely to take the opportunity to export natural gas to the Europeans is also growing with the generational change in the country’s leadership. Ashgabat’s consideration of routes around Russian energy export interests is a sign that Turkmenistan has become less wary of Russia. However, for Turkmenistan to be positive on its participation in the project, production levels need to be increased, taking into account the contracts with China and the fact that Beijing doesn’t want significant amounts of natural gas flowing westward. Not to mention the legal obstacles referring to territorial rights in the Caspian Sea that need to be resolved. This is why, even if there is more optimism about the Trans-Caspian project becoming real now than before, it is unlikely that this will happen in the near term.Author : Antonia Colibasanu