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Turkmenistan's Bogus Budget

The price of natural gas has plummeted since the end of 2014, and Turkmenistan has lost two of its three significant gas customers -- Iran and Russia.
The price of natural gas has plummeted since the end of 2014, and Turkmenistan has lost two of its three significant gas customers -- Iran and Russia.

Turkmenistan's parliament approved a budget for 2018 that is amazing -- one could even say unbelievable.

According to the State News Agency of Turkmenistan (TDH), the 2018 budget approved on November 24 plans revenues of some 95.508 billion manats and expenses of approximately the same amount.

At Turkmenistan's official exchange rate (3.5 manats to $1), that adds up to some $27.29 billion, though at the black market rate it would be closer to $11 billion.

The expenditures for 2018 might be accurate but the forecasted revenues seem impossible.

Let's break this down. But remember, Turkmen authorities have always been sparing with details about the country's economy, so there are a lot of gray areas.

Turkmenistan's major export is natural gas, accounting for some 70 percent of state revenues. The price of gas has plummeted since the end of 2014, and Turkmenistan has lost two of its three significant gas customers --Iran and Russia -- leaving only China as a Turkmen gas purchaser.

In fact, China is now Turkmenistan's main trade partner, despite worrisome signs.

In January, Chinese Ambassador to Turkmenistan Sun Weidong said trade with Turkmenistan had fallen from more than $10 billion in 2013 to $5.4 billion in the first 11 months of 2016.

Sun said China bought just under 30 billion cubic meters (bcm) of gas from Turkmenistan in 2016, and an earlier report from EurasiaNet put the price China pays for Turkmen gas at $185 per 1,000 cubic meters.

And 30 bcm at $185 per 1,000 cubic meters adds up to just bit more than $5.4 billion.

Turkmen gas exports to China are expected be just over 30 bcm in 2017 and that will tick up a bit more in 2018.

Now, as Qishloq Ovozi and many others have noted, Turkmenistan owes China many billions of dollars for loans Turkmenistan accepted to build the gas pipelines to China in order to ship the gas from Turkmen fields that Chinese financial entities loaned Turkmenistan money to develop.

It has never been clear what percentage of Turkmen gas goes toward paying off the Chinese loans.

There is also the new debt Turkmenistan seems to be piling up from purchases of Chinese-made weapons and military equipment.

A recent article noted new Chinese weapons and equipment on display at Turkmenistan's military parade during October 27 Independence Day celebrations.

Expenses on the military in general have greatly increased since security in the northern Afghan provinces bordering Turkmenistan started to deteriorate in 2014.

So, Turkmenistan can count on sending China maybe $6 billion worth of gas in 2018 but actually receiving something less than that, especially considering that gas might now also being paying for Chinese military imports.

It's worth mentioning here that at least one report from February said the general director of the China National Petroleum Corporation, Den Minmin, visited Ashgabat and demanded Turkmenistan lower its gas price or else “China would be forced to reduce imports of the blue fuel."

According to TDH, the budget plans for “such important branches of the production sphere as the oil, gas, and chemical industry, energy, construction, and others will make the revenue of the budget.”

Revenues from Turkmenistan's oil and chemical industry, energy, and construction combined would not bring in as much revenue as gas does, so we're likely still well under $10 billion.

Turkmenistan does export electricity to Afghanistan and it seems it will also do so soon to Tajikistan through Uzbekistan. But this revenue is counted in the tens of millions of dollars.

Past that, there's not much Turkmenistan can export to bring in any significant further revenue.

In the meantime, there are new signs Turkmenistan's economy is continuing its downward plunge.

According to RFE/RL's Turkmen Service, known locally as Azatlyk, the black market rate as of November 29 was 9.6 Turkmen manats to $1. In January 2016, the rate was 5 manats to $1.

In October, a group of parents in the northern Dashoguz Province staged a rare protest against a decision to increase the price for children to attend kindergarten from 8 to 80 manats per month. Many parents chose to take their children out of these schools.

In response, the government told state employees they would be fired if they did not send their children to kindergarten.

Later in October, farmers in the eastern Lebap Province went on strike, saying they had not been paid for picking cotton.

There was information in November that layoffs were coming to the gas-and-oil sector, two of the key sectors that are supposed to provide this $27 billion of revenue for the budget.

In the capital, Ashgabat, the rent for stores was increased by several times, forcing many of the stores to close.

The price of medicines went up by some 30 percent in November and, in Dashoguz Province, residents say there is no medicine available at all.

People around the country are reportedly stocking up on basic foods such as flour, cooking oil, and sugar, as supplies have already started to run out and prices are rising.

And, of course, the Turkmen government announced earlier this year it was canceling subsidies for water, gas, and electricity that had been in place since shortly after 1991 independence.

Turkmenistan even seems hard-pressed to pay off seemingly small debts.

Azatlyk reported on November 22 that the company CIS Debt Recovery Solutions has been after Turkmen state oil company Turkmennebit for four years to pay some $8 million Turkmennebit owes to the Cypriot company I.S. Intercomplect Ltd for equipment sold to Turkmenistan.

At the start of 2017, China complained that Turkmenistan's state gas company Turkmengaz had failed to repay some $2.5 million owed to CSR Ziyang Co. Ltd for two shunting locomotives. That debt was repaid a few weeks later.

And no one, outside of a few people in the Turkmen government, knows how much Turkmenistan owes for the Asian Indoor and Martial Arts Games (AIMAG), which the country hosted in late September.

The facilities for the games were estimated to cost some $5 billion and the new airport built near Ashgabat ahead of AIMAG cost $2.3 billion.

Again, that is more than bilateral trade with China came to in 2016, at least according to Ambassador Sun.

The budget the Turkmen parliament approved is fiction, pure and simple.

There is no way Turkmenistan can take in $27 billion in revenues in 2018, and there are no new sources of income anywhere on the horizon.

This is a dangerous, delusional game, raising expectations that stand no chance of being met.

Azatlyk's Toymyrat Bugaev contributed to this report. The views expressed in this blog post do not necessarily reflect those of RFE/RL.

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 the dots to shed light on why those processes are occurring, and identify the agents of change.​

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


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