Turkmenistan's Energy Policy: Risks and Opportunities *
Berdikeeva, Saltanat, Insight Turkey
This paper examines the evolving energy policy of Turkmenistan and how it has changed in the wake of the late Turkmen President Saparmurad Niyazov. The author argues that little has changed since Niyazov's death, though unavoidable choices will force his successors to drive Turkmenistan's energy policy in a new direction. But despite the efforts of the current Turkmen leadership to embrace a more liberal energy policy, coupled with some modest domestic reforms, the extent to which new president Gurbanguly Berdymukhammedov is willing to follow through on initial changes is not clear. In the end, Turkmenistan's ability to successfully tap its energy potential will depend on a complex set of factors, including internal dynamics that affect the country's foreign and energy policies and an inevitable pipeline dilemma with associated issues with its energy partners. As Turkmenistan nears a crossroads in its energy plan strategy, there are many risks, but there are also opportunities for Western countries and companies.
Under the sixteen-year rule of President Saparmurad Niyazov, Turkmenistan's energy policy focused on prioritizing national interests and maintaining a neutral approach to energy partners. The self-proclaimed "head of all Turkmen," or Turkmenbashi, sought to reduce dependency on Russia, which controls export routes for most of Turkmenistan's natural gas, by exploring other pipeline outlets.
At the same time, Niyazov tried with mixed success to raise gas prices for Ukraine and Russia to world market levels. Along with attempting to diversify gas export routes and putting forth a seemingly practical energy policy, the cornerstone of the isolationist regime of the eccentric Turkmen leader was the maintenance of his personal strength within and beyond the country, enabling him to capitalize on Turkmen energy resources and to mold his foreign and energy policies to ensure his own power.
This picture has as yet changed little since Niyazov's death, though unavoidable choices will force his successors to drive Turkmenistan's energy policy in a new direction. The new government of Gurbangaly Berdymuhammedov has opened up the country, albeit to a limited degree, mainly by reinforcing diplomatic relations with strategically important partners. But Berdymukhammedov announced that he would continue the political course pursued by the late Niyazov. He has made it clear that the country has sufficient energy resources to satisfy its customers abroad, and that it is in Turkmenistan's interests to pursue all energy markets. Although the government appears to favor its traditionally strong partner to the north, Russia, it is not refusing to consider pipeline routes to China, to Pakistan and through the Caspian Sea to Europe.
It seems unlikely that Berdymukhammedov would commit to all of the potential pipeline routes. In September 2007, however, he launched the construction of the Turkmen-China natural gas pipeline, which is the first serious endeavor to break from the Turkmen gas export pipeline system, which is solely dependent on Russia. China is also the first foreign country to be granted the right to develop an onshore gas field. Berdymukhammedov's plans include other additional pipelines going west and east.
Despite the efforts of the current Turkmen leadership to develop the country's energy resources in partnership with other countries and some of the steps it has taken to carry out domestic reforms, there are still considerable risks for foreign investors to operate in Turkmenistan. Thus, successful completion of any pipelines and foreign participation in the extraction of energy resources in Turkmenistan will be largely contingent upon the ability of the Turkmen government to create an investment climate that inspires foreign confidence, to provide accurate data on gas reserves to investors, and to uphold and implement agreements. The Turkmen leadership has yet to prove its credibility as a consistent and predictable business partner. …