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Turkmenistan: Economic Progress Slow Despite Advantages

By Anthony Hyman

Prague, 26 February 1997 (RFE/RL) -- For many Western analysts, Turkmenistan remains a conundrum. From a geopolitical point of view, the country has the potential to be one of Central Asia's most promising success stories -- blessed with oil and gas riches and relatively stable neighbors. Yet, despite such advantages, economic progress for the country remains slow.

A British specialist on the former Soviet Union, Mark Webber, recently compared the country's potential advantages with its current shortfalls in a report presented to the Royal Institute of International Affairs in London. The comparison indicates that Turkmenistan's economic potential is unlikely to be realized for some years to come.

Webber writes that Turkmenistan is favored with massive reserves of natural gas and oil, and the most ethnically homogeneous population in the Central Asia region. At the same time, it is better positioned geopolitically than its neighbors, being far from both China and Russia and -- unlike Uzbekistan -- not having a common border with the strife-ridden republic of Tajikistan. Even in the case of Afghanistan, the other state of the region affected by civil war, and with which Turkmenistan does have a long border, relations have been fairly stable.

But Webber says that for all these potential advantages enjoyed by Turkmenistan, some serious disadvantages are much more obvious. Its economic problems have not been resolved and appear even to have sharply worsened over the past year.

Most Western analysts assess the main causes of this deterioration to be the eccentric economic priorities being followed by the government of President Saparmurad Niyazov. Ashkhabad has put deliberate emphasis on expensive "prestige" building projects which include a vast new palace for the president and an extraordinary number of foreign-built luxury hotels, most of which look wholly redundant. Close observers of the Turkmen scene are puzzled at why more productive investment projects have not been chosen which could help revive the flagging economy.

Equally serious are logistical problems besetting Turkmenistan's ability to get its oil and gas riches to market. The government's goal of exploiting its vast energy riches by exporting gas and oil at world market prices cannot be satisfied as long as it has to rely on pipelines controlled by Russia. Moscow has its own priorities for maximizing its own hard currency earnings from gas and oil, with the result that Turkmenistan is deprived of potential hard currency earnings in Western as well as in Central European markets.

That means that Turkmenistan instead has been forced to concentrate on customers for its plentiful natural gas in the southern successor republics of the former Soviet Union. But most of these states, including Ukraine, Uzbekistan, Georgia, and Armenia, lack hard currency with which to pay for gas supplied.

The result is that Turkmenistan's gas exports to largely insolvent customers is creating debts aplenty but very little money for Turkmenistan. The lack of incentive to export gas has naturally enough greatly reduced Turkmenistan's level of gas production since 1991, and in turn indirectly put great pressure on the standard of living inside the country.

Turkmenistan's present dependence upon Russia for export would be reduced considerably if one or more alternative pipeline routes were built for this and the other landlocked states of the region.

One such pipeline has been agreed to in principle: a pipe which would take Central Asia's gas and oil across Iran to an Iranian seaport. But even as construction of the pipline was recently reported to be beginning, most observers say the total $6 billion completion cost could be too high for Iran and other states of the region to fund alone.

Energy industry specialists are adamant that the project will require participation by international oil or gas companies. But the U.S. government's embargo on commercial dealings with Iran, backed by the firm threat of reprisals or punishment against even non-U.S. companies doing business with Iran, may well be an effective deterrent to Western involvement.

An alternative, and less expensive, southern route for a pipeline through Afghanistan and Pakistan to Karachi or another seaport on the Indian Ocean currently is being investigated. Another possibility is a southern pipeline route across the entire length of China.

Even if one of these projects is completed successfully, however, it is certain that it will not be able to routinely carry exports of gas and oil from Turkmenistan to world markets for at least another four years from now.

That means Turkmenistan will be unable to benefit from most of its potential energy riches, and will remain as dependent as before upon Russia, at least until the year 2000.