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Qishloq Ovozi

The fact that so many oil workers decided to hold a brief, two-hour strike on July 28, in defiance of rules against unsanctioned demonstrations and illegal strikes, is a disquieting development for the government.

The name means more than just an oil town in western Kazakhstan. To people in Kazakhstan, especially government officials, Zhanaozen is synonymous with civil unrest, protest, and bloodshed.

Which is why the news that hundreds of oil workers went on strike on July 28 must surely be generating concern in the halls of government in Astana. The complaints of these workers are likely to resonate widely in Kazakhstan during these hard economic times in the country.

Zhanaozen was a little-known backwater until 2011, when oil workers went on strike demanding wage increases. The workers said they were paid less than foreign employees, mainly Chinese workers, who were performing the same tasks.

The protest lasted more than six months until on December 16, Kazakhstan's Independence Day, unrest erupted at celebrations in Zhanaozen and police fired on the crowd. At least 16 people were killed in what was at the time the most violent episode in Kazakhstan's brief history as an independent country.

In the aftermath, Kazakh authorities first worked to defuse the situation, rehiring fired workers, promising better pay and benefits, and chastising and often dismissing local officials, both from the government and the oil companies, for failing to appreciate the seriousness of the situation in western Kazakhstan.

The government then moved to weaken labor unions that had played a large role in the protest, and also tightened laws on holding unsanctioned demonstrations, rallies, and protests.

So the fact that so many oil workers decided to hold a brief, two-hour strike on July 28, in defiance of rules against unsanctioned demonstrations and illegal strikes, is a disquieting development. The workers from the Burgylau company, which engages in drilling operations, are objecting to plans to reduce working hours, effectively making them part-time employees with the accompanying decrease in salaries.

The protesters also complained about 66 of their fellow workers being laid off earlier this year and demanded the dismissal of Burgylau general director Askhat Sariev, whom employees accuse of orchestrating dismissals and the reduction in work hours.

And, the protesters said they have no confidence in the union representing them and demanded their choice to lead the union, Saduakas Bekkaliev, be appointed as its head.

RFE/RL's Kazakh Service, known locally as Azattyq, reported that Bekkaliev was not at the protest in Zhanaozen on July 28. Some of the protesters said he was being questioned by the police, although he appeared later as the protest was winding down. Bekkaliev said a written statement of the workers' demands had been presented to the Burgylau leadership and the local government administration.

The deputy mayor of Zhanaozen, Isakhan Sagimbaev, and officials from labor unions in the Mangistau region, where Zhanaozen is located, met with the protesters. Azattyq reported they had a heated discussion with the workers, the latter accusing the officials of failing to pay sufficient attention to their plight.

The workers then boarded buses and went to work.

Kazakhstan's economy is based on oil exports. The strike in 2011 cost the government a lot of money but the price of oil back then was high enough that the authorities were able to keep the country running without much noticeable effect.

The situation now is very different and as a result, Kazakhstan has already slashed many state programs, including funding for housing and education. A strike now like the one in 2011 would have a significant effect on the country's already ailing economic situation.

The government also cannot afford to sit and watch as the situation escalates. Already this year there have been unsanctioned protests against planned land reforms. And separately, violence has broken out twice, leaving more than 30 people dead.

That said, Kazakhstan's government has tried to avoid mass layoffs, which is why workers in Burgylau are being moved to part-time shifts rather than solving the problem by cutting back on the workforce. Akylbek Nurlybaev, a representative of the Zhanaozen protesters, told Azattyq that 66 Burgylau employees were fired in the first half of 2016, but Azattyq reported there are some 2,200 employees at Burgylau.

Similar processes have been under way in many sectors in Kazakhstan, with the government opting to move people from full-time to part-time employment to prevent mass dismissals that would likely lead to further unrest.

There is little more that Kazakh authorities can do as long as world oil prices remain low but the specter of events in Zhanaozen in 2011 has now risen again and Kazakh authorities will need to neutralize it quickly in a way that does not stoke popular unrest.

Worse may be yet to come. In a separate report on July 28, Azattyq noted that Deputy Energy Minister Aset Magauov said at a meeting in Astana that 36 of the country's 60 companies involved in oil production ended 2015 in the red. Magauov said work would be cut back at about half the drilling operations at the country's oil fields this year, meaning more layoffs or reductions in work hours can be expected.

Based on reporting by Azattyq
A gas processing plant in Turkmenistan. The Central Asian country has the fourth-largest gas reserves in the world. (file photo)

Turkmenistan is apparently having enormous economic problems. The country's system is so opaque that it is always difficult to know much about what is going on there. But the recent decision to scrap the two entities that were overseeing the oil and gas sector and to restructure the management of that industry give the impression that the authorities in Ashgabat are getting desperate.

The hydrocarbon sector, particularly natural gas, is critical not only to Turkmenistan's economy but to its authoritarian political system also. There have been large-scale layoffs in the sector this year.

What does the restructuring mean for Turkmenistan, a country with the fourth-largest gas reserves in the world, and why were changes necessary? How bad is the situation in the country's hydrocarbon sector? And is there a way out of this for Turkmenistan?

Those were some of the questions discussed at a Majlis, a panel, organized by RFE/RL's Turkmen Service, known locally as Azatlyk.

Muhammad Tahir, soon to be RFE/RL's Washington-based media relations manager on Asian affairs, moderated the panel. Participating from Baku, where he was attending a conference, was legendary energy expert John Roberts, a resident senior fellow at Dinu Patriciu Eurasia Center and Global Energy Center at the Atlantic Council. From Scotland, our extremely knowledgeable friend Dr. Luca Anceschi, professor of Central Asian Studies at Glasgow University, took part in the Majlis again. I would have been happy to sit back and just listen to those two but I need to earn my paycheck, so I said a few things.

Roberts started the talk by going to the heart of the matter, noting, "The only real source of income that Turkmenistan has is from gas." Anceschi followed that up by saying Turkmenistan has "essentially a mono-resource economy."

So the need for restructuring of the gas and oil industry, the major provider of revenue for the country, sends a signal that there are some serious concerns within Turkmenistan.

'Deck Chairs On The Titanic'

President Gurbanguly Berdymukhammedov issued a decree on July 15 that abolished the Oil and Gas Ministry and the State Agency on Management and Use of Hydrocarbon Resources. The latter was the more important entity, being subordinate to the president's office.

But it is not clear what purpose the restructuring serves. Anceschi said the changes "probably won't affect [Turkmenistan's hydrocarbon industry] in any significant way." Roberts said, "I think you'll probably find that this is no more than moving the chairs around as the Titanic sinks. There isn't any real rational understanding."

The decree divided the state oil company, Turkmennebit, and the state gas company, Turkmengaz. It made them, as "legal successors" to the state agency, separate entities, vaguely under the control of the Cabinet of Ministers. But the decree also says "relevant work on international oil and gas projects [is] entrusted to the State Concern Turkmengaz."

Roberts explained Turkmengaz has the greater experience and has proven "in relative Turkmen terms" to be an efficient organization. This contrasts with recent problems at Turkmennebit. A multimillion dollar embezzlement scandal was recently uncovered at Turkmennebit and in late June there were reports that a reservoir tank at the Turkmenbashi oil refinery caught fire, killing at least several people less than two weeks after a new fire-fighting facility was commissioned at the refinery.

The basic functions of the former Oil and Gas Ministry now fall to the Cabinet of Ministers, specifically to Deputy Prime Minister Yashgeldy Kakaev, a veteran of Turkmenistan's gas sector. Anceschi recalled that, among the regular purges that occur in all sectors of the government and key industries, "Kakaev survived, [and] is still the man in charge of TAPI (The Turkmenistan-Afghanistan-Pakistan-India pipeline), is still the man in charge of many other projects, so it seems to me that we can consider him now the most powerful figure in the gas industry."

'Impossible Job'

Roberts said of Kakaev: "He thinks very carefully before he says anything and he is actually occasionally open to new ideas. It might be quite interesting now that he is no longer, as it were, one of the top two people, but is the undisputed person."

But Roberts cautioned, "[Kakaev] has got the most impossible job you could have in energy on his plate right now, which is mainly trying to find how Turkmenistan can break out of its energy isolation at a time when it has no cash and when international interest in Turkmenistan is probably at an all-time low."

Anceschi gave an example of what Kakaev has to deal with by noting, "revenues are actually decreasing quite drastically, whereas the amount of gas that they are selling is pretty much stable."

So barring the appearance of new gas customers, it seems there is little Kakaev, or the changes in the gas and oil industry, can do to stop Turkmenistan's economic decline.

The panel agreed that new ideas and policy changes are needed. Roberts pointed out that Turkmenistan's mentality toward gas sales needs to change.

"The Turkmen for two decades...kept wanting to think big, 30 [billion cubic meters] to India, Pakistan, and India, 30 bcm or maybe more, maybe 40 or 50, to Europe."

Roberts said Azerbaijan has approached Turkmenistan at least four times in the last two years to discuss sending "5 bcm, maybe as much as 10 bcm" but Turkmenistan appears to have shown little, if any, interest in the plan. The Turkmen government, Roberts said, "never understood that if things go bad, you need to think small."

Onshore Vs. Offshore

The subject of onshore contracts came up several times during the discussion.

Many large foreign companies have shown interest in investing in Turkmenistan but only if they could get rights to develop sites on the Turkmen mainland and share in the profits.

The Turkmen government has been loath to give any contracts to develop sites on its territory, but is less concerned at signing deals with foreign companies for exploration and development at Turkmenistan's offshore sites in the Caspian Sea. The sole exception is the China National Petroleum Corporation that works a gas field on the right bank of the Amu-Darya River.

Anceschi said, "Obstructing the entry of foreign actors to onshore development is no longer sustainable."

This would prove problematic for the isolationist Turkmen government, which obsessively controls its onshore sites and, more importantly, the opaque bookkeeping for the revenues.

Roberts suggested that granting onshore contracts might now be Turkmenistan's last hope for turning its unfortunate economic situation around, and at this point even that might not be enough.

"It's probably far too late, but should a major international company come to [President Berdymukhammedov's] attention with a suggestion for a combination of construction of a major external pipeline in exchange for a direct stake in the upstream sector, he should look very carefully and change, if necessary, whatever regulations would prohibit such an arrangement."

The panel discussed these topics in more detail and looked at other issues connected to Turkmenistan's gas and oil industry. And audio recording of the Majlis session can be heard here:

Majlis Podcast: Challenges In The Turkmen Energy Sector
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About This Blog

Qishloq Ovozi is a blog by RFE/RL Central Asia specialist Bruce Pannier that aims to look at the events that are shaping Central Asia and its respective countries, connect some of the dots to shed light on why those processes are occurring, and identify the agents of change.

Bruce Pannier
Bruce Pannier

Content draws on the extensive knowledge and contacts of RFE/RL's Central Asian services but also allow scholars in the West, particularly younger scholars who will be tomorrow’s experts on the region, opportunities to share their views on the evolving situation at this Eurasian crossroad.

The name means "Village Voice" in Uzbek. But don't be fooled, Qishloq Ovozi is about all of Central Asia.

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