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Turkmenistan: Economy Facing Brighter Prospects

Turkmenistan's government is again showing signs of financial turmoil at a time when its fortunes may be set to improve.

Washington, 10 January 2000 (RFE/RL) -- Last week, Turkmenistan's President Saparmurat Niyazov fired Deputy Prime Minister Khudoiberdy Orazov, citing "serious shortcomings in the course of his work." The president blamed Orazov, who was in charge of banking and finance, for a shortage of tax collections and funds to support industry. Orazov was replaced by Central Bank Chairman Seyidbay Kandymov. But it may be hard for any official to feel secure in office for long.

In September, Niyazov made a similar move in dismissing the chairman of Turkmenistan's Vneshekonombank for a series of faults, including failure to attract foreign investment and reporting an allegedly false foreign debt figure to the International Monetary Fund.

The most recent firing is part of a pattern set by Niyazov, who last month accepted the title of Turkmenistan's president-for-life. While the Turkmenbashi, or head of the Turkmen, has touted strong economic figures, he has masked the country's troubles by blaming his officials when problems emerge.

Last month, the government reported a 13 percent increase in industrial production in the first 11 months of 1999 compared with the year-earlier period. Output of natural gas was up 80 percent. Those figures should be signs of a thriving economy in the gas-rich country. But Turkmenistan has been an exception to economic rules.

On December 30, the government estimated that gas production for all of 1999 would reach 22.4 billion cubic meters, a gain of nearly 71 percent. But over 90 percent of the increase came from sales of 8,700 cubic meters of gas to Ukraine in the first half of last year. Niyazov halted the exports last May after Ukraine paid only $8.7 million, leaving a debt of over $300 million.

Under terms of an agreement, Ukraine was only obligated to pay for 40 percent of the gas in cash, with the rest in investment and bartered goods. Even if Ukraine had paid in full, the deal would have left Turkmenistan with relatively little cash for its budgetary costs and debts.

Even on paper, the growth of Turkmenistan's gas output must have been disappointing to Niyazov, who had set a target of 36.1 billion cubic meters for last year. The frequent firing of officials suggests that such goals are treated as plans to be fulfilled, as in the central planning days of Soviet times.

But Turkmenistan's outlook for 2000 could be considerably better. Under an agreement with Russia's Gazprom last month, Ashgabat will sell Moscow 20 billion cubic meters of gas this year. The deal may end a series of disputes with Russia which have decimated Turkmenistan's exports since 1997.

Despite earlier demands for higher prices, Turkmenistan has agreed to sell its gas to Russia for $36 per 1,000 cubic meters. As with Ukraine, only 40 percent must be paid in cash, giving Turkmenistan $288 million in currency this year. In addition, Turkmenistan has agreed to discuss sales of 50 billion cubic meters of gas to Russia in 2001.

Unlike the previous agreement with Gazprom, this one does not appear to rely on payments from Ukraine. Kyiv is working to settle its debt by February 20 so that it can negotiate additional supplies from Turkmenistan.

After years of hardship, the isolated country may now be ready to benefit from a rise in regional demand. Iran intends to buy 8 billion cubic meters of Turkmen gas this year. While Iran has recently completed a gas pipeline to sell gas to Turkey, the country has also experienced shortages at its own power plants this winter. In addition, Iran will need 200 million cubic meters of gas per day to inject into its older oilfields for production, according to Oil Minister Bijan Namdar Zanganeh. Although he insists that Iran's gas needs will not interfere with its exports, Turkmenistan may be the logical source in case of a shortfall.

Russia, which also has plans to boost its gas exports to Turkey, suffered similar gas shortages at its power plants last year. Gazprom has estimated that its output fell by 2.5 percent last year at a time when exports to Western Europe rose 4.5 percent. Gazprom plans a further increase in exports of 3.1 percent this year. Again, Turkmen gas may be the best choice to fill the gap.

Ironically, Turkmenistan's plan to sell gas directly to Turkey through a trans-Caspian gas pipeline may face the biggest problem because of Azerbaijan's bid to gain access for its own gas instead. But if both Russia and Iran turn to Turkmenistan for gas to meet their commitments to Turkey, Ashgabat's exports could be in for a boost.

That could leave Niyazov with fewer complaints about the real state of his economy this year, and fewer worries for government officials who have been taking the blame.