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Qishloq Ovozi

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.
Kazakhstan Nursultan Nazarbayev (right) raised hackles in Bishkek when he met with Kyrgyz opposition presidential candidate Omurbek Babanov (left) in Almaty in September. Babanov subsequently lost the election to Sooronbai Jeenbekov the following month.

The dispute between the governments of Kazakhstan and Kyrgyzstan is affecting many aspects of bilateral relations between the two countries, but one result that seems very likely is that Kazakhstan's government will be taking a much greater interest in Kyrgyzstan's domestic politics in the years to come.

Kazakh President Nursultan Nazarbaev might have sparked the current tensions when he met with the head of Kyrgyzstan's Respublika party, Omurbek Babanov, on September 19 in the Kazakh capital, Astana.

Babanov was running for president of Kyrgyzstan at the time and his main challenger was Sooronbai Jeenbekov, who was supported by sitting President Almazbek Atambaev. Jeenbekov eventually won the October 15 election.

But since that meeting in Astana it has been Atambaev who has been dumping fuel on the fire Nazarbaev touched off.

First there were some angry statements exchanged between the two countries' foreign ministries.

At an award ceremony in Bishkek on October 7, Atambaev addressed the Nazarbaev-Babanov meeting, calling it "meddling in Kyrgyzstan's internal affairs," and adding some uncomplimentary comments about Kazakhstan's government and Nazarbaev.

Kazakhstan closed the border with Kyrgyzstan on October 10, less than one week before Kyrgyzstan's presidential election.

The 'Entourage' Strikes Back

On October 18, three days after Jeenbekov won the Kyrgyz presidential election, Atambaev made a feeble attempt at an apology by saying that Nazarbaev "is a trusting person ... [and] much like any president, [Nazarbaev] trusts his entourage, but his entourage are oligarchs who think of their own future, not about Kazakhstan and Nazarbaev."

This is a good time to move things forward a few weeks.

Nazarbaev has not publicly responded to anything Atambaev has said about Kazakhstan and its leader. But some of Nazarbaev's "entourage" has.

Mukhtar Kul-Muhammad is the deputy chairman of Kazakhstan's ruling Nur-Otan party, founded on March 1, 1999, with the intention of seeing Nazarbaev reelected president.

Kazakhstan's Tengrinews information website printed an article on November 27 titled Mukhtar Kul-Muhammad: This Is A Complete Failure For Atambaev.

Former Kyrgyz President Almazbek Atambaev (file photo)
Former Kyrgyz President Almazbek Atambaev (file photo)

The Nur-Otan deputy chairman questioned Atambaev's knowledge of Kyrgyz and Kazakh history, but later got right to the heart of it.

"Lately the expressions heard from the mouth of Atambaev ... (give) the impression that this is a person in prison or a hospital. (Words like) 'flunky, a**hole, mankurt [a completely Sovietized Central Asian], idiot, stinky, bastards, sh*t' have already become commonplace in the lexicon of Atambaev."

Kul-Muhammad's article came after Tengrinews carried an piece on November 20 by Nurlan Nigmatulin, the speaker of the Mazhilis, Kazakhstan's lower house of parliament.

Nigmatulin wrote: "Concerning Atambaev, it is obvious to everyone that during the years of his presidency he could not accomplish even one result in the economy, or in politics."

Atambaev had continued with his intermittent criticism of Kazakhstan through late October and into November. On November 15, Atambaev said he would not apologize to the "aged president," a clear reference to Nazarbaev. Atambaev said Kazakhstan continued to impose a "blockade" on the border with Kyrgyzstan.

"Some people seem to say that Atambaev must bend his knee in front of the rich neighbor and apologize," he continued. "It is not Atambaev but those who impertinently meddle in our affairs who must apologize."

He had more to say.

That prompted not only the responses from Nigmatulin and Kul-Muhammad, it also elicited comments from Kasymzhomart Tokaev, who as speaker of the Senate, the upper house of Kazakhstan's parliament, would constitutionally take over as president (temporarily) in the event that Nazarbaev cannot perform the duties of his office.

'Hysterical Speech'

Tokaev used Twitter to respond to Atambaev on November 15.

"The latest hysterical speech of Atambaev, with foul attacks on Kazakhstan, only work to the detriment of relations of genuine good-neighborliness," he said. "Such emotion has no place in politics. There is no talk of a blockade on Kyrgyzstan. The norms/demands of the EEU [Eurasian Economic Union] need to be fulfilled. This is a subject for negotiations."

Tokaev was not finished. On November 23, one day before Jeenbekov took the oath of the office of Kyrgyzstan's president, Tokaev posted another tweet about Atambaev.

"WikiLeaks published comments of U.S. Ambassador [Stephen] Young based on information of Turkish doctors about Atambaev's psychiatric afflictions and his dependence on alcohol that contribute to his paranoia. Everything becomes clear then! We're hoping for his recovery," he said.

Tokaev's earlier experience as Kazakhstan's foreign minister shows in the diplomatic language of his tweets, but more importantly, Tokaev is one of the most powerful figures in Kazakhstan. Nigmatulin and Kul-Muhammad are also part of the elite. They help determine policy and should Nazarbaev, who is 77, be unable to perform his presidential duties these three would have a lot of say in the succession.

Tokaev, Nigmatulin, and Kul-Muhammad, as well as other Kazakh officials, have been very careful to distinguish Kyrgyzstan's people from Atambaev in their comments.

But those three, and others in Kazakhstan's elite, probably have a different view of Kyrgyzstan now than anyone in Kazakhstan had just three months ago.

Kyrgyzstan' new president, Sooronbai Jeenbekov
Kyrgyzstan' new president, Sooronbai Jeenbekov

There were hopes that after Jeenbekov officially took over as Kyrgyzstan's president this unpleasant episode would start to wind down.

But in the first few days of Jeenbekov's presidency there have been no signs of a thaw.

Jeenbekov decided to make his first trip as Kyrgyzstan's president to Russia, not Kazakhstan.

In Jeenbekov's defense, the Kremlin invited him and he needs to travel on to Minsk on November 30 for the 15th anniversary summit of the Collective Security Treaty Organization (CSTO). Nazarbaev should be in Minsk also, but there were no reported plans for the Kazakh and Kyrgyz leaders to meet on the sidelines of the summit.

Since the collapse of the U.S.S.R. in late 1991, Kazakhstan has been a benign neighbor that worked with Kyrgyzstan but did not ever seem to interfere in internal Kyrgyz politics.

But possibilities for Kazakhstan to exert influence on Kyrgyzstan's internal dynamics exist.

Ties between groups on both sides of the border are strong.

Certainly, there is the potential for groups or individuals in Kazakhstan, many of whom have access to vast amounts of money, to finance political parties or candidates in Kyrgyzstan, though of course under Kyrgyzstan's laws this would be illegal.

One thing seems sure -- many of the elite in Kazakhstan will not want to see a repeat of this ongoing saga with Kyrgyzstan and they will be much more interested in Kyrgyzstan's domestic politics.

The views expressed in this blog post do not necessarily reflect those of RFE/RL.

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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. Content will draw 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.