Implications of the Turkmenistan-China Gas Pipeline

Alex Goeman

alextgoeman@gmail.com
MC 492, Graham
4/26/2012

Abstract

The struggle over energy export routes in Central Asia has taken the form of a new Great Game, one in which Western energy companies (encouraged and assisted by their governments) compete with state owned Russian and Chinese firms for the right to exploit Central Asian resources. The implementation of the Turkmenistan-China Gas Pipeline, which began to pump gas to China in 2010, has been the most significant development of the past five years and signals, more than any other event, the primacy of Chinese influence in the region. Turkmenistan now possesses the proven reserves and a partnership with China that could help it achieve sustainable development, although there are many domestic factors impeding this. As China increases its presence in the region, it seems that Russia and the West are being left behind in the race for Central Asian hydrocarbons.

Executive Summary

In the complex geopolitical environment of the Caspian region, all the players involved must carefully balance political and economic objectives. Each actor brings its own set of goals for the region, and in the case of the external actors these interests are generally in conflict. While Russia seeks to preserve its hegemony over export routes of Caspian hydrocarbons, Western governments overtly seek to undermine precisely this element of Russian influence. To the East, China has been continuing its resource-based form of checkbook diplomacy in Central Asia in much the same way as it has been aggressively acquiring assets in Africa and other parts of the developing world. Turkmenistan has sought to enhance its flexibility to negotiate favorable terms for exporting gas, which is the core of the Turkmen economy and very likely the only prospect for long-term economic development. However, the aspirations of these actors have frequently been tempered by the realities and complexities on the ground. Western firms have found the Turkmen investment climate to be even more odious and foreboding than in the other Central Asian nations as Berdymukhamedov has continued the Soviet-style authoritarian legacy left by Niyazov. Russia has seen its aggressive and ambitious actions in the early post-Soviet period backfire in a significant way as many of the Caspian energy exporters sought to sever their ties from the ‘steel umbilical cord’ of Moscow. The authorities in Ashgabat have consistently overestimated the strength of their position both economically and geopolitically, although recent developments seem to have unduly rewarded their optimistic stubbornness.
On the other hand, while China has suffered minor setbacks, usually of a technical nature, it is in contrast to the struggles of the aforementioned parties that the emerging Chinese regional primacy becomes clear. While negotiations with Western and Russian firms over the flow of 10 billion cubic meters per year (bcms/year) have gone on for over a decade without tangible progress, China has in the past five years constructed the first significant Central Asian hydrocarbon export route that completely bypasses Russian pipes while also securing additional deposits in Turkmenistan. By taking advantage of its numerous economic and political advantages in the region, China has firmly asserted its position as the preferred energy partner of Turkmenistan, and quite possibly all of Central Asia.
There are several major implications of the recent Chinese emergence in Central Asia. First of all, by demonstrating a legitimate alternative to the headaches that accompany working with the West and Russia, China has secured a steady supply of preferentially priced gas imports. This enhances China’s bilateral energy negotiations with Russia while simultaneously undercutting competing proposed projects by claiming crucial hydrocarbon sources. China is also greatly contributing to the diffusion of advanced hydrocarbon extracting technologies as their recent projects have utilized techniques previously only employed by Western firms. Thus, in many different ways, China is strongly enhancing its geostrategic position through its Central Asian energy strategy.
Another major implication of the agreements between Turkmenistan and China is that Turkmenistan has achieved much greater foreign policy flexibility. Since gaining independence, Turkmenistan has actively pursued an omni-directional, multi-vector foreign policy that sought to maximize Turkmenistan’s positive image internationally while minimizing any tensions that would arise from being the source of great power competition. The Turkmen refer to this strategy (or doctrine as they perceive it) as ‘positive neutrality,’ and it was designed to provide the fledgling state with the maximum range of options to attract investment, expand trade, and increase export routes. Working with China as an energy partner has enabled Turkmenistan to achieve each of these goals without causing Turkmen policy to become more rigid. As will be discussed later, the abundance of Turkmen reserves means that it can commit significant supplies to both Russia and China without sacrificing its potential to supply future export pipelines. Thus, assuming that the Turkmen leadership can properly navigate the next 10-20 years, there is a distinct path for Turkmenistan to achieve not only its foreign policy objectives but also sustainable development. However, Turkmenistan’s economic, political, and social progress will be dependent on a favorable domestic environment in addition to positive external developments. As things currently stand, the largest obstacle to sustainable Turkmen development is the lack of will among the elite to enact meaningful social policy, and the inability of the political system to address this imbalance.
For Russia the implications are less comforting, albeit from a geopolitical versus domestic perspective. Since its post-Soviet zenith of pipeline dominance, the Russian monopoly on energy transit has come under constant attack from consumers, other transit nations, and energy suppliers as Moscow has openly tried to control all aspects of the industry to the detriment of the other actors. Undoubtedly, Russia does not deserve the full blame in many of the disputes that arose from pipeline politics, but it was Russia whose actions could not be sufficiently explained by economic interests alone. Indeed, Russia used its ‘steel umbilical cord’ to try to maintain significant influence in its near abroad while using the threat of supply cut-offs to enhance its geopolitical position.
For this reason, Europe has sought to end its dependence on the geopolitically sensitive pipeline system that transits Russia and Ukraine. Likewise, the energy suppliers in the Caspian region have been eager to explore additional export possibilities with little concern as to how Moscow will respond. Furthermore, players such as Turkey and Iran have sought to limit Russian geopolitical influence in their backyard, although the impact of their efforts have been limited compared to those of the more significant actors. Ultimately, the Russians cannot perceive the Turkmenistan-China gas pipeline as positive unless viewed through a zero-sum prism that focuses entirely on their power relative to the West. Put more simply, if China is winning, at least Russia is losing less than Europe. It is uncertain as to whether Russian officials actually feel this way, but it seems unlikely that such ardent practitioners of realpolitik would be content to have an economic superpower expand its presence in Russia’s perceived sphere of influence.
This paper will elaborate on the above arguments, first providing a review of the primary sources that informed this research. Second will be an analysis of the positions and theoretical perspectives that inform the various actors’ decisions. Next, a brief history of the struggle for hydrocarbons in the Caspian region will be followed by a chronology of significant developments in the post-Soviet period. The final section will analyze the short and long-term implications for the region and outside actors, focusing in particular on the prospects and challenges for sustainable Turkmen development.

Research Materials

This paper uses a combination of traditional print sources obtained through a university library as well as a number of online articles that were accessed via JSTOR and Google Scholar searches. Various news websites were also used to access up-to-date information about regional affairs, especially with regard to negotiations on proposed pipeline projects.
To understand the motivations and perspectives of Turkmenistan and Russia, three major texts were utilized. To understand the Russian position, Russian Foreign Policy by Jeffrey Mankoff is an indispensable text for a attaining a comprehensive view of Moscow’s attitude and priorities in the post-Soviet period. The second edition was particularly useful because in the three years between the publication of the first and second edition the global recession deepened, Medvedev assembled a list of policies on which to be judged, and the strength Russia’s geopolitical position with regard to pipelines has been substantially undermined. Thus, for a paper that attempts to analyze a situation that is constantly evolving, recent publications such as Mankoff’s second edition are extremely valuable.
In order to understand the Turkmen position, two texts were used. Turkmenistan’s Foreign Policy by Luca Anceschi is useful for examining both the letter and the spirit of Turkmenistan’s proclaimed foreign policy aims. It is a careful dissection of every official Turkmen position since independence, and it provides a nuanced analysis of the various ways that ‘positive neutrality’ is interpreted and understood by the Turkmen leadership. For a more nuanced perspective on the unique challenges faced by Turkmenistan, this paper draws significant contributions from Turkmenistan: Strategies of Power, Dilemmas of Development by Sebastien Peyrouse.
In it, Peyrouse meticulously catalogues the multidimensional nature of Turkmen national identity and social organization. He also provides a complete history of Turkmenistan from antiquity to present, with particular attention paid to the radical transformations of the Soviet period. Authoritarianism in Turkmenistan is also addressed, and Peyrouse argues that both Niyazov and Berdymukhamedov have pursued policies that placed survival of the regime ahead of any other priority. With regard to the prospect for sustainable development in Turkmenistan, Peyrouse notes that while it is unwise in the long term to place all hope into the sale of hydrocarbons, in the short term Turkmenistan has few other resources that could spur economic growth. All three of the aforementioned books were published within two years of the writing of this paper, and their contemporary relevance is highly important for an accurate analysis of the dynamic geopolitical environment.
For a broader perspective that included regional perspectives as well as an understanding of the various factors influencing China, Russia, and the West, two texts were used. The first, The Caspian: Politics, Energy, and Security edited by Shirin Akiner, brings together a series of expert contributors to provide a detailed and multifaceted examination of the Caspian region. This is useful for understanding the broader context in which Russian-Turkmen relations are determined. Whether it is the implications of the unresolved legal status of the Caspian or the ongoing Nagorno-Karabagh conflict for alternative Turkmen export routes, or an analysis of external actors’ actions on Turkmenistan, The Caspian comprehensively details the geostrategic environment in the region. Nonetheless, having been written in 2004, the book is outdated on a number of different issues, most notably in its failure to predict or address the rise of China. This does not diminish the value of the analysis in The Caspian, but it did necessitate a search for more contemporary literature.
The other book that was extremely valuable was Russian and CIS Gas Markets and their Impact on Europe, edited by Simon Pirani. This book is useful because it provides a detailed analysis of the complex hydrocarbon industry in the Caspian region. It contains the best collection of hard data - including tables, charts, and graphs - of any available sources. It also makes coherent sense out of a dauntingly complicated series of relationships between producers, exporters, transit nations, consumer nations, global markets, and potential reserves. In this sense, it was an indispensible guide to the economics that drive the actor’s decisions.
With regard to electronic sources, the single most useful article was Andrei Kazanstev’s, “Russia’s Policy in Central Asia and the Caspian Sea Region,” from the journal Europe-Asia Studies. This article was integral to formulating an understanding of the specifics and contours of Russia’s attitude towards the region. It focuses on events since Putin came to power in 2000, a period which saw the most dramatic changes in the relationship between Russia, China, Turkmenistan, and the West. For this reason, this article was useful in understanding the contemporary dynamics of the situation. In addition, “The Strategic Implications of the Turkmenistan-China Pipeline Project,” by Stephen Blank provided a detailed glimpse of the emerging relationship between Turkmenistan and China that directly affects Russia’s position not only with Turkmenistan, but with the other regional states as well. The article argues that a major development in Turkmen-Russian relations in recent years has been the emergence of China, because China directly threatens Russia’s leverage over the Central Asian energy exporters.
In addition to these issue-specific sources, two books were used to inform a much broader theoretical perspective. The first is Prosperity Without Growth, Tim Jackson’s exhortation to aggressively transition from our currently unsustainable economic models to an ambitiously reimagined global system. Jackson’s basic argument is that our economic growth is exponential while our available resources are finite, and the tension between these two systems is unsustainable in the long term. While Jackson’s arguments are geared primarily toward stabilization of anthropogenic climate change due to global warming, his larger arguments about the need to transition to sustainable sources of energy are relevant for the long-term development of Turkmenistan. Even with recently discovered reserves guaranteeing significant export capacity for upwards of 80 to 100 years, Turkmenistan will still face the eventual resource challenges that the rest of the world will. By the time the gas fields run dry, Turkmenistan will need to have dramatically changed its political, social, and economic model to promote a diversified, sustainable economy, because currently there is little being discussed in Ashgabat that seeks to address sustainability.
In addition to suggestions about changes to the economic order, Jackson develops the framework for the necessary changes in social organization, and more importantly, the governance structure. His prescriptions for the role of government include this dictum: “The principal role of government is to ensure that long-term public goods are not undermined by short-term private interests,” (Jackson, 166). This is precisely the opposite of how the current Turkmen government operates, and it seems unlikely that Berdymukhamedov would be eager to give up his lavish lifestyle to genuinely promote the well being of the Turkmen people. However, if someone rose to power in Turkmenistan who was genuinely influenced by Jackson’s line of reasoning, one could possibly see the creation of special long-term development funds, expansion of social services, and a change in the incentives that the government provides to the public. However unlikely this scenario seems, the unfortunate truth is that Turkmenistan needs that magnitude of change in order to guarantee sustainable development. Thus, while it may be a long time before any policy maker in any country actually pushes for the reforms that Jackson advocates, his big-picture thinking about the future of issues such as the sustainability of economic growth and the challenges posed by depletion of finite resources is a valuable contribution to works concerned with development, particularly in resource-rich countries.
The other book that contributed to a broader theoretical perspective was James Lee’s Climate Change and Armed Conflict. This unprecedented and ambitious work takes the 2007 Intergovernmental Panel on Climate Change’s findings about the anthropogenic causes of global warming and climate change as a given, then extrapolates the data and factors in a historical understanding of the way that climate change has been linked to conflict. Climate change takes many forms, but according to Lee the Caspian basin will see increased tensions based on decreased precipitation, increased temperatures, access to trans-boundary river systems, and most tellingly, misaligned growth patterns among different ethnic or tribal groups as a result of the misappropriation of hydrocarbon profits (Lee, 109).
Specifically, Turkmenistan could potentially come into conflict with Uzbekistan over diversion of the Amu Darya River for irrigation, or even over competition for the right to supply additional export volumes to China. Furthermore, Turkmen authoritarian policies have indeed distributed gas rents in a highly centralized, inequitable manner. While effective political repression and the provision of free water, gas, and electricity to all citizens may have given the two Turkmen regimes a fair degree of stability, the extent to which these measures will be enough to assuage the suffering and subsequent anger of the population is far from certain.

Theoretical Perspectives

The most relevant theoretical perspective in the region is realism, with components of mercantilism and defensive realism informing many of the actors’ decisions. Indeed, pipeline politics can reinforce negative sum tendencies as much as they can foster positive sum outcomes. This is the case in the Caspian region, where immediately after the collapse of the Soviet Union a new era of geopolitics emerged that combined the elements of emerging nation states, ethnic upheaval, and economic chaos with a race for hydrocarbon deposits that left all actors in the region scrambling to assess and pursue their optimal foreign policy options.
In this context, elements of constructivism and liberalism were present, although the overall political landscape was dominated by realpolitik. NGOs flooded the post-Soviet space with democracy and market promotion assistance in an attempt to expand the Western liberal democratic order. The US government was also very active in these efforts as it tried to seize the momentum of the collapse of communism in order to further promote its vision of a global democratic order. However, aside from these very limited applications of constructivist frameworks, the majority of the decision-making in the Caspian region was driven by the desire to maximize national self-interest. In the case of Turkmenistan, officials decided that a policy of positive neutrality, which emphasized Ashgabat’s desire to become a fully integrated member of the international community, would serve their national interests best (Anceschi, 9), an idea rooted in basic liberal internationalist theory. Nonetheless, for the largest actors in the region, realism is the most useful theoretical framework to analyze their perspectives.
Russia has displayed a tendency to view events through a geopolitical lens (Mankoff, 21), although the immediate post-Soviet years could be characterized as a honeymoon period where Moscow actively sought to integrate with the West and their multilateral institutions. However, once Russian officials failed to obtain the benefits that they expected from full cooperation with the West, Russian foreign policy began to settle into familiar geopolitical habits (Mankoff, 26). Reasserting Russia’s position in the CIS, especially with regard to the Caspian and Central Asia with their abundance of hydrocarbons, became a priority of national interest. With its monopoly over hydrocarbon export routes inherited from the Soviet period, Russia found that in many places where the iron curtain had fallen, the steel umbilical cord was able to preserve Moscow’s sphere of influence. While Russia gained a healthy revenue stream from maintaining these export routes, its concerns were motivated by geopolitical, not geoeconomic, concerns. More than just a source of income, the hydrocarbon transport network that Russia controlled provided the Kremlin with a context for managing its relations with not only the Caspian and Central Asian states, but also with the European energy consumers (Mankoff, 165).
American thinking toward the region also framed the struggle over hydrocarbons as a geopolitical contest, realizing that if Iran or Russia were to gain to significant influence in the development, extraction, and transit of regional resources it would undermine the newly acquired independence of the Caspian and Central Asian states (Akiner, 69). Thus, while the US government was certainly sensitive to the economic needs of their energy firms operating in the region, they made sure to coordinate a strategy with their companies and European allies to try to circumvent Russian and Iranian influence by whatever means possible. Without the strong backing of the US, it is uncertain as to whether the Baku-Tbilisi-Ceyhan pipeline would have been chosen as the primary export route for Caspian hydrocarbons. Indeed, this route faced much scrutiny and criticism because of the relatively minor economic gain (Akiner, 135). Nonetheless, it was the US desire to prevent Russia from tipping the balance of power in the region that led the US government to aggressively champion the BTC pipeline. This position highlights the realist assumptions underlying American foreign policy in the region.
Turkmenistan, on the other hand, wanted to maximize its potential for foreign investment and thus wanted to outwardly project its willingness to become a respectable and enthusiastic member of the international community (Anceschi, 129). This awareness of the benefits of international trade and the dividends of membership in the United Nations reveals an understanding and appreciation of liberal internationalist theory. Nonetheless, it would be foolish to assume that the Turkmen leadership legitimately aspires to adopt international liberal norms domestically.
President Garbanguly Berdymukhamedov has shown no signs of easing the authoritarian political system or reforming the opaque and hostile investment climate in Turkmenistan (Overland, 85). Thus, officials in Ashgabat have decided that it may be possible to maintain the Soviet interior of their state while projecting the façade of a modern, liberalized nation. The extent to which this policy has been effective in pulling the wool over investors’ eyes has been dubious as most prospective investors are immediately deterred from keeping their assets in such a Soviet-style state.
Furthermore, any possible urgency resulting from a lack of Western finance that might induce the Turkmen to liberalize their policies has been avoided with the arrival of China as a preferred energy partner (Overland, 143). Thus, Turkmenistan may undergo a shift from an outwardly liberal driven foreign policy to one of a cautious, patient, defensive realism with China as a guarantor of security both economically and politically.
Another theory that is of particular relevance to Turkmenistan is that of the resource curse. While the scholarly debate over the existence of such a curse rages on, most observers would agree that there is a complex matrix of factors that influence the developmental trajectory of a nation possessing significant mineral resources. Political structure, presence of corruption, coherent national development strategies, and international pressure all play a major role in determining whether a resource is exploited to the benefit of the nation and its population or whether it merely flows to the coffers of the elite, crippling sustainable development and subjecting the people to undue suffering (Luong, 2). Countries such as Chile and Norway demonstrate that if a state develops a binding, institutionalized plan to utilize resources that is transparent and accountable, then that state will gain substantial benefit from the exploitation of its resources.
However, other regional states such as Azerbaijan, Uzbekistan, and Kazakhstan demonstrate that the Soviet legacy of central planning and authoritarian political systems has provided the CIS countries with another series of developmental challenges (Luong, 78). From the persistence of productivity-destroying economic central planning, to the elite’s comfort in engaging in corruption and repression, to the economic legacy of Soviet investment prioritization of cotton and hydrocarbons, it is clear that post-Soviet states came into existence with pressing developmental challenges. As a state that consistently ranks near the bottom of the CIS with regard to successful economic, political, and social development since independence (Freedom House), the challenges that Turkmenistan faces are significant and daunting. As a result, if Turkmenistan is to successfully avoid the resource curse, it will require a drastic change in the course of development that it has pursued thus far.
China, for its part, is pursuing a policy that is well coordinated and effective. In addition to security concerns stemming from its western Muslim Uighur population, China looks to Central Asia to help supply the rapidly increasing Chinese demand for energy (Bellacqua, 158). Thus, it has signed a flurry of agreements since 2006 for the exploration, extraction, and transport of Central Asian hydrocarbons. The style in which Chinese energy companies conduct business is particularly conducive to productive engagement in the post-Soviet area, and China has utilized this fact to bolster its position in the region (Overland, 144). Thus, by ensuring its energy security for the coming decades and establishing itself as the preferred partner in the region, China has greatly enhanced its absolute power in the region, and increased its power relative to Russia and the West to an even greater degree. Chinese policy in the region exhibits characteristics of mercantilist realism in that its economic activities are designed to increase the power of the state, as well as defensive realism, which dictates that a state not engage in belligerent, hostile, or threatening actions but rather focus on internal stability and security. To these ends, Chinese policy in the region has been a success as its aggressive acquisitions have positioned it as the main energy partner of Central Asia.

Policy Objectives

Turkmenistan has three primary foreign policy objectives. First, it wants to pursue alternate gas export routes so as to avoid reliance on one energy partner. Second, it wants to attract the maximum amount of foreign direct investment possible. Third, Berdymukhamedov would like to channel resource rents in a way that consolidates the strength of his regime. This final objective directly undermines any positive effect that attainment of the first two objectives would accomplish, because the authoritarian regime in Turkmenistan is the country’s greatest obstacle to long-term sustainable development. In order to accomplish these objectives, the doctrine of positive neutrality was designed to enable Turkmenistan to pursue an omni-directional foreign policy that would strengthen its negotiating position with prospective energy partners. These broader policy goals largely refer to the need for Turkmenistan to find gas export routes that bypass the Russian pipeline system. Natural gas is Turkmenistan’s primary export, and the energy sector makes up a majority of the Turkmen economy (Pirani, 271). Thus, Turkmenistan has placed its hopes for financing its national development on gas revenue. Turkmenistan certainly does possess the reserves to dramatically transform itself (rferl.org), although this would require careful and responsible management of energy rents so as to avoid corruption and the development of Dutch disease. Nonetheless, the key for Turkmenistan is to gain the maximum possible economic return for its finite but substantial deposits (Pirani, 310).
Throughout most of its independence, Turkmenistan has had no choice but to export its gas through the Soviet gas pipeline system that passed through Uzbekistan, Kazakhstan, and Russia to Ukraine (Akiner, 192). Under this arrangement, Turkmenistan had very little influence over price or quantity negotiations. Instead, Russia was able to gain a significant geopolitical advantage owing to its role as a producer, consumer, and transit nation. In this position, Russia was able to pay prices well below market value to Turkmenistan, ensure delivery of gas for domestic consumption regardless of fluctuations in demand, and exploit its role as the primary supplier of natural gas to Europe (Pirani, 69). In this way, Gazprom – and thus Moscow – greatly benefitted from the state of Central Asian and Caspian gas production in the immediate post-Soviet period.
However, Turkmen President Saparmurat Niyazov was aware that Russia was exploiting the Turkmen resources to a degree that approached extortion. In response, during periods of heightened tension over price disputes Niyazov would openly discuss the possibility of beginning new pipeline projects that would end Turkmen dependence on Russian export routes (Overland, 142). This is the reason that diversification of export routes is a matter of utmost national importance for Turkmenistan – experience has shown officials in Ashgabat that continued reliance on Russia as an export partner is highly detrimental to the broader goals of securing Turkmen independence and autonomy. Thus, Berdymukhamedov, like Niyazov before, has been eager to hear proposals from Western and Chinese firms in order to expand the range of Turkmen energy partners.
This highlights the second priority for Turkmen foreign policy, which is to attract foreign direct investment. Turkmenistan is a chronically underdeveloped nation, with glaring inadequacies in basic infrastructure and health and education facilities (Peyrouse, 141). Thus, Turkmenistan has an urgent need to channel foreign investment towards development projects. While Turkmenistan would certainly appreciate the flow of funds no matter the purpose, the only part of the economy that is attractive to foreign investment is the gas sector. Thus, potential sources for foreign investment are limited to the large Western multinationals that are active in the Caspian, Chinese state-owned companies, and Russian firms.
Since Turkmenistan wants to limit the influence of Moscow over its foreign affairs, it would clearly prefer to keep Russian firms from acquiring significant holdings in Turkmen energy projects. Additionally, the legal and political environment in Turkmenistan, which has notoriously awarded the same contract to different firms during the same time frame (LeVine, 296) and has steadfastly refused to create a climate that guarantees investments, has proved to be unattractive to Western business interests. For this reason, China has been able to emerge as an ideal energy partner for Turkmenistan based on Beijing’s ability to finance massive portions of projects and willingness to forego ownership of deposits (Blank, 11). Furthermore, China’s unobtrusive stance on national sovereignty eliminates the political and human rights hurdles that have kept Western firms on the sidelines.
It is precisely this kind of relationship that helps Berdymukhamedov achieve the third major goal of Turkmen foreign policy: consolidation of the incumbent regime in Ashgabat. This is the most significant threat to sustainable development in Turkmenistan, because as long as the president holds absolute power, authority, and decision making, there will be no incentive to channel gas profits into projects for sustainable, socially beneficial development. Instead, Berdymukhamedov will continue to lavish on his capital a series of new building projects, all obligated to adorn a marble façade. This behavior is inherited directly form Niyazov, and the tragedy of the misappropriation of funds brings to mind the most glaring aspects of the Soviet period (Overland, 88). While much of the rural population in Turkmenistan languishes on an existence of basic subsistence, Berdymukhamedov continues to create an ivory tower in Ashgabat where he can feel undeservedly confident about his contributions to the Turkmen nation.
While the long-term stability of the existing political system in Turkmenistan is difficult to judge because of the lack of credible records of public opinion, the flow of gas rents into the elite will certainly help Berdymukhamedov maintain the loyalties of key supporters. While as the successor to the Turkmenbashi (meaning “leader of the Turkmen people,” the term that Niyazov bestowed on himself upon gaining the presidency) Berdymukhamedov has wide-ranging and nearly un-opposed executive power, he is not so foolish as to think he could maintain his position without the support of key networks among the elite. The price for such support is predictable: an undeserved post here, a briefcase full of cash there, and in all places the knowledge that gas rents and money from various forms of trafficking were finding corrupt channels of transmission into the pockets of the elite.
Such is the Soviet-style government of Turkmenistan, which has stood out as one of the least-reformed countries in the CIS. Indeed, while Berdymukhamedov has softened the tone of his rhetoric and emphasized the discontinuity with his predecessor, in reality he has done little to change the structure of decision making in Turkmenistan. The summary table from Freedom House’s 2011 Nations in Transit: Turkmenistan report shown below supports this claim. It stands to reason, then, that Berdymukhamedov would be eager to support any project that could maintain the coffers of the elite in Ashgabat. Freedom House: Nations in Transit
Russia’s foreign policy objectives in Turkmenistan are representative of Moscow’s broader objectives in Central Asia. The over-arching theme of Russian objectives is the desire to maintain its dominant position in the transport of Central Asian gas (Kazantsev, 1084). Specifically, Russia has sought to prevent the construction of a Trans-Caspian pipeline that would entirely circumvent Russian export routes. As a major producer, consumer, exporter, and transit nation, Russia’s energy politics are more complicated than any of the other actors.
Jonathan Stern has conceptualized the complexity of the Russian gas industry in terms of input and output factors. Basic inputs are Russian production and imports from Central Asia. Basic outputs are domestic demand, CIS exports, and non-CIS exports (Pirani 55). The relationship between these factors is fluid and complex. Russia’s first priority is to meet domestic demand. This is largely provided by domestic production. However, Russia sells nearly half the volume of domestic consumption to non-CIS European countries at approximately 250% of the price that it receives for sales to CIS countries. However, it is important for Russia to maintain the subsidized prices to the CIS countries because these nations – Ukraine, Belarus, and Moldova – are all transit routes for Russian gas exports to Western Europe (Pirani 80).
Thus, Russia must perform a careful balancing act to ensure sufficient domestic supply, maximum profit from non-CIS exports, and stable relations with CIS transit nations. Turkmenistan figures prominently into this equation. With the largest supply of gas in the CIS behind Russia, Turkmenistan is a crucial partner for Russian energy interests (Pirani, 297). However, it is not enough for Russia to simply have access to Turkmen gas supplies. The calculus of Russian pipeline strategy dictates that Russia try to extract the lowest possible price for Turkmen gas in order to lower domestic prices and maximize the profit from European sales.
This strategy largely worked for Russia during much of the early post-Soviet period. With Ashgabat firmly tethered to Moscow’s steel umbilical cord, Russia was able to extract extremely generous terms of trade from Turkmenistan. In order to preserve this relationship, Russia made prevention of a Trans-Caspian pipeline its primary regional objective. This would require a diligent effort on behalf of the Kremlin, because for precisely the same reasons that Moscow sought to maintain control of its monopoly, Europe, the US, and Turkmenistan made independence from Russian export routes a major regional objective (Akiner, 83). Thus, a struggle for Central Asian and Caspian influence emerged in the form of a competition over gas export routes.
While Russia has been successful in preventing the construction of a Trans-Caspian pipeline, its relative power in the region has declined nonetheless. Russia has still not secured approval for any new gas projects with Turkmenistan, and the West is still aggressively trying to make the Nabucco project feasible. In addition, Russia must now contend with the fact that Turkmenistan’s potential export routes are not just to the north and west, but also to the east, and even potentially the south (Pirani, 297).
Thus, the implementation of the Turkmenistan-China gas pipeline has undermined Russia’s sole source of leverage in regional energy negotiations. This means that Russia does not enjoy the privileged position that it aspires to in a CIS country such as Turkmenistan, and as such must vie for contracts as one of many potential suitors. Turkmenistan’s policy of selling gas to whomever can purchase it at the Turkmen border means that Russia will always have gas to buy if it is willing to pay market prices. However, Moscow’s attempts to keep Turkmenistan within its sphere of influence has had an irreversible impact on decision making in Ashgabat, making Turkmen authorities averse to doing business with Russia. In this sense, Russian foreign policy in Turkmenistan was far from successful. While Russia remains a major energy partner for Turkmenistan, Russia’s blatant desire to exert influence over its former territory will serve as an impediment to future Russian-Turkmen energy cooperation.
China’s policy objectives are much more simple than Russia’s. Rather than absolute control over Turkmen resources, China merely wants reliable access to gas to fuel its rapidly increasing demand (Bellacqua, 293). To accomplish this, China has practiced the same sort of “checkbook diplomacy” that it has in other resource-rich parts of the world. Whereas partnerships for resource extraction with Western nations and companies generally require some basic legal framework to guarantee the security of their investment, China has a much more flexible, “hands off” approach. This works to China’s benefit in dealing with countries that have human rights and political records that draw international criticism (Overland, 143). China also has an advantage in dealing with nations that detest the patronizing tone of Western experts and simply want to be treated like equal members of the international community without undue domestic interference.
This is precisely the case in Turkmenistan, and it is here that the geopolitical advantage that China enjoys in acquiring mineral resources is most visible. While China was not a major direct player in Central Asian energy politics as recently as 2005, the agreement to construct a pipeline connecting the Turkmen South Yolotan gas fields to the western Chinese border in April 2006 marked a watershed moment in Beijing’s regional involvement (Blank, 10). In addition to securing access to gas supplies that are much needed to satiate growing Chinese energy consumption, Beijing increased its relative power vis-à-vis Russia in Central Asia. While up to this point, Moscow could claim to still be the dominant power in Central Asia, the severing of the steel umbilical cord meant that Russia had lost one its primary channels of influence over Central Asian energy exporters.
While China’s foreign policy in Central Asia is driven more by economic than by geopolitical considerations, its participation in regional pipeline politics has important ramifications for the regional objectives of the other significant actors. The idea of working with a foreign government that is demonstrably committed to respecting absolute sovereignty and noninterference in domestic affairs is very attractive to the largely unreformed Soviet-style strongmen that currently hold the highest offices in the Central Asian energy exporters. Thus, China’s emergence as a lucrative energy partner for the Central Asian despots not only diminishes the likelihood of cooperation with Western firms who demand economic and political reform, it also removes any incentives for the leaders of those nations to pursue such reforms. Thus, while China’s involvement in the development of Turkmen gas resources is driven by domestic needs, its actions are having dramatic repercussions for the trajectory of post-communist reform and the implementation of sustainable development.

Key Developments

After gaining independence, Turkmenistan sought to establish its formal neutrality, distance itself to whatever degree possible from Russian dominance, and finally to cooperate with Russia on matters in which it had no choice. Specifically, Turkmenistan declined to join many regional multilateral groups and had the United Nations formally recognize their inviolable neutrality (Hanks, 163). It also was forced to cooperate with Russia as its primary trade partner, only gas export route, and also the only guarantor of Turkmen security. Thus, Turkmenistan established a jointly controlled Turkmen-Russian security force to guard the unstable Afghan border. It was also initially able to sell its gas to non-CIS European markets, which were able to pay higher prices for Turkmen gas than the CIS countries (Akiner 194). However, after the initial post-independence period, relations between Moscow and Ashgabat became much more tense between 1993 and 1999. During this period Gazprom, the Russian state-owned gas company, restricted Turkmen gas exports to CIS countries, with Ukraine receiving the overwhelming bulk of the imports. This led to lower prices for Turkmen gas, which combined with the drop in gas exports from the Soviet average of 80 billion cubic meters (bcms)/year to a mere 22bcms in 1995 took a large toll on the Turkmen economy. In addition, the weakness of the other CIS economies during this period meant that frequently Turkmenistan did not receive payments for its gas shipments, with arrears reaching 10 percent of GDP (Akiner 184).
This situation deteriorated until 1997, when Turkmenistan unilaterally suspended deliveries to Ukraine. This also worsened overall relations with Moscow as this strained Gazprom’s supply commitment to Europe (Peyrouse 289). In order to explore alternate energy partners, that same year Turkmenistan and Iran commissioned a pipeline to diversify Turkmen export routes and provide gas to Iran’s northern regions. However, this did not benefit Turkmenistan as much as it did Iran, and thus Turkmenistan was still in need of more lucrative export routes (Akiner 197).
However, during the late 1990s Turkmenistan’s international standing was severely downgraded. Hopes for legal, political, and economic reform in Turkmenistan had gradually eroded as Niyazov continually tightened his authoritarian grip. Furthermore, while Turkmenistan proclaimed a desire to attract foreign investors to fund development of gas resources, in reality the business environment was a nightmare for foreign investors, who saw absolutely no respect for rule of law and no guarantee that their investments would be protected (Levine 297). Thus, whatever desire Niyazov had to expand Turkmenistan’s prospective field of energy partners was undermined by his own unwillingness to promote the proper climate for such partnerships to emerge. Instead, Ashgabat was once again forced to rely on Gazprom and Ukraine as buyers, signing agreements with them in 1999 and 2000, respectively (Pirani 289).
During the period from 2000-2006, Russian and Turkmen relations were stable, if not slightly improved. This owed partly to Putin’s new approach to Central Asian energy, where he advocated a competitive, but not coercive, strategy. Another major factor was the fallout from the alleged assassination attempt on Niyazov’s life in November of 2002. After this event, Niyazov spread the blame from Uzbek to Russian authorities, and he consequently unleashed a brutal wave of repression across Turkmenistan. Dissidents were silenced, and hundreds were arrested. This prompted protests from the international community, and the end result was a more isolated, authoritarian Turkmenistan (Akiner 186). However, Niyazov could still turn to Putin, and it was in this context that a rapprochement was able to occur.
The improvement in Turkmen-Russian relations during this period was also a result of the renegotiation of the process by which Turkmen gas eventually reached European markets. Because of rising energy prices in Europe, Gazprom found it more advantageous to buy Turkmen gas at the border and sell it to Ukraine itself rather than to allow Turkmenistan to sell to Ukraine at the border (Blank 10). A series of agreements signed between Ukraine, Gazprom, and Turkmenistan between 2003 and 2006 ended the direct sale of Turkmen gas to Ukraine. Furthermore, part of this agreement was the planned export of up to 80bcms/year to Gazprom, a volume that was significant in that it matched peak exports during the Soviet period (Pirani 275). However, later developments would alter this agreement.
2006 marked the beginning of a new chapter in Turkmenistan’s independence, and Russian relations were dramatically affected. One significant event was the death of Saparmurat Niyazov, the head of the Turkmen state for 21 years. His successor, former dentist Garbanguly Berdymukhamedov, emerged victorious in the ensuing struggle for power. Western observers held much hope that Berdymukhamedov would bring Turkmen actions in line with their rhetoric, and Berdymukhamedov fueled their hopes with reassuring guarantees of political and economic reform. Nonetheless, little has changed in Turkmen policies, regardless of foreign or domestic. Instead, there has been a large degree of continuity between the Niyazov and Berdymukhamedov regimes (Overland 85). While Niyazov’s death did not change the course of Turkmen-Russian relations, another event in 2006 proved to be much more significant for regional dynamics.
In April that year, Beijing and Ashgabat signed an agreement to build a pipeline that would bring Turkmen gas through Uzbekistan and Kazakhstan to China. The initial agreement was for 30bcms/year by 2009 with plans to eventually increase capacity to 50bcms (Peyrouse 182). This was significant for a number of reasons.
First, it allowed Turkmenistan to finally sever the steel umbilical cord. While the initial planned sale amount of 30bcms/year was not sufficient in and of itself to fuel Turkmen development, many subsequent agreements have increased this total to 65bcms/year by 2015 (Peyrouse 183). This combined with the 15bcms/year to Iran and the 30bcms/year to Gazprom give a rough estimate of optimal Turkmen gas sales of 110bcms/year by 2015. This is very significant for Turkmenistan, because that would finally increase exports beyond their Soviet peak, an important benchmark for any post-Soviet nation. Furthermore, China is a rapidly growing demand market for energy, and it is not unreasonable to assume that Turkmen gas exports to China will only increase with time. While current data for the last three years show that the agreed-upon volumes have not been met, this is for technical rather than political reasons. It reflects the poor state of Turkmen infrastructure, which is now being rapidly renovated thanks to generous Chinese financing. Thus, the projected volumes will likely be able to be met by 2015 once all of the infrastructure projects have been completed.
This agreement was also important for Turkmen-Russian bilateral energy negotiations. With a genuine alternative in China, Turkmenistan now possessed a much stronger position than it had a year prior. This was immediately reflected in the price renegotiations that occurred in 2007 and 2008. In 2005, Gazprom paid $44/mcms (thousand cubic meters), $65/mcms in 2006, $100/mcms in 2007, and $140/mcms in 2008. Beginning in 2009 Gazprom agreed to purchase Turkmen gas at world market prices (Bellacqua 251). Thus, the trend is unmistakable. For years, Russia (via Gazprom) was able to take advantage of its monopoly on export routes for Turkmen gas by paying levels far below market price. However, the recent entry of China into the region has clearly impacted Russian strategic calculus in a significant way. From the rapid pace of price increases following China’s April 2006 agreement to the softened stance that Gazprom has taken in negotiations, it is clear that the Turkmen-Russian relationship changed in an important way in 2006.
These new trends continued at an accelerated pace starting in 2008, when rising European demand had led Gazprom to determine that it could turn a healthy profit by taking advantage of higher prices in Europe, even if it meant increasing the amount it paid for Central Asian gas. This led Gazprom to push for a new regime in which Gazprom would be the direct purchaser of Turkmen gas and would then sell gas to Ukraine (Blank 11). However, just as Gazprom was finishing the contracts for these sales, the global economic crisis decreased the demand, and thus price, for gas. As a result, Gazprom was stuck buying Turkmen gas at a net loss. Naturally, Moscow was eager to reverse this situation, and there were attempts to free Gazprom from the onerous purchase agreements. Russia was spared the trouble of withdrawing from the agreements in April of 2009 when a segment of the Dauletabat-Darialy gas pipeline, which is part of the export route to Russia, exploded (Blank 11). Berdymukhamedov placed the initial blame on Gazprom, charging that it had deliberately neglected the maintenance of the pipeline infrastructure in order to create a crisis (Peyrouse 179). Based on publicly available information, the ultimate cause of the explosion has gone undetermined. Regardless, the incident led to a nadir in Russian-Turkmen relations, a point from which they have not completely recovered.
The first casualty of the explosion was the Turkmen economy. Gas sales to Russia were reduced to ten percent of pre-crisis levels, and the Turkmen GDP took a loss of 25 percent (Peyrouse, 178). This alone was enough to prompt cries of foul play from Turkmen authorities. Ashgabat sought financial compensation from Moscow. This never materialized. As a result, the second casualty of the pipeline explosion was the series of Turkmen-Gazprom purchase agreements. According to the 2003 agreement, Gazprom was to buy 80bcms from Turkmenistan in 2010. However, in 2010 Gazprom only purchased 12bcms, causing further damage to Turkmen exports in that year and giving Turkmenistan an even greater sense of urgency in pursuing alternative pipeline projects (Peyrouse 179).
Another significant event in the development of Turkmen energy reserves was the announcement of the findings of an audit conducted by the British firm Gaffney, Cline, and Associates in October 2011. For much of the last twenty years the actual size of Turkmen gas reserves had been the subject of much speculation. The Turkmen government always claimed figures at the higher end of the estimated range (claiming reserves of over 20tcms), and using these rosy predictions to fuel great expectations domestically. Conversely, many Western observers questioned the logistics of including Turkmenistan in the European supply route via the Caspian, because they wondered if Turkmen reserves would prove adequate enough to make the necessary investments lucrative (Peyrouse 188). With the pre-2011 reserves estimated between 4-14tcms, there was a massive difference between the upper and lower range of the estimate. Thus, when the British firm announced that it had verified that Turkmenistan’s South Yolotan field possessed between 13-21tcms alone, it changed the cost-benefit analysis of Turkmen energy projects drastically (rferl.org). By possessing reserves likely above 20tcms, Turkmenistan will undoubtedly be able to supply many large consumer markets, including China, Russia, Europe, and, depending on external geopolitical and security developments, south Asia.
Still, since the events of 2009-2010, there have been no drastic changes to the relationship between Turkmenistan and Russia, which now inextricably includes China as an important third party. Thus, 2006 marked a dramatic turning point in Turkmen-Russian relations. Whereas prior to this the relationship was characterized by varying degrees of tension arising from Moscow and Ashgabat’s antagonistic foreign policy objectives, after 2006 the relationship has evolved with Turkmenistan decidedly gaining a strong relative position. Occupying the dominant position that Russia once held, China is currently poised to maintain its position as a financial giant whose relationship with the Central Asian energy exporters can be characterized as one of mutual benefit.

The Next Ten Years: Opportunities and Constraints

The next decade will be characterized by the potential for positive sum outcomes in regard to Turkmen sustainable development, bilateral energy negotiations between Russia and the EU, gas supply agreements between Beijing and Moscow, the linking of Caspian hydrocarbons deposits with European markets, and an expansion in trade between China and the Central Asian nations. However, once the veil of optimism is removed, the magnitude of the challenges that stand in the way of meaningful progress on these issues becomes dauntingly clear. While positive sum outcomes are certainly possible, all of the involved players view their interactions through a negative sum lens. This seems unlikely to change in the near future, with European countries being possible exceptions.
Thus, while it is possible that Central Asian geopolitics could gradually become “The Great Cooperative Struggle” (or some other non-competitive variant of the “Great Game”), its internal and external actors continue to approach each other with deep mistrust. As such, the trajectory that Central Asian energy politics will take over the coming decade is highly uncertain. This section will address a number of possible scenarios, not only for the prospects of the implementation of sustainable Turkmen development, but also for the future Sino-Russian and EU-Russian relations.
The first scenario will pertain to the ways in which the relationship between the consumers of Europe and Russia will evolve. While the gas wars with Ukraine in 2006 and 2009 impressed upon Europe the need to diversify its supply routes from the highly problematic Russian-Ukrainian pipeline system, this did not lead to a push to bypass Russia entirely. Indeed, while Gazprom and Transneft’s willingness to unilaterally halt shipments to Belarus and Ukraine were troubling, the non-CIS Europeans seemed willing to assign shared blame to all parties as the result of a price dispute.
Thus, the real vulnerability to European gas supply does not arise solely from Moscow’s willingness to engage in economic blackmail, but rather from the complex relationship between Russia as a producer, importer, and exporter and Ukraine as a consumer and transit nation. Even if the Europeans’ disdain for the monopolistic tendencies of Gazprom were great enough to try to sever their relationship with Moscow, the overwhelming need to obtain guaranteed gas supplies has overridden these concerns.
Thus, the future of Russo-European pipeline politics will center around three proposed pipelines: Nabucco, a Trans-Caspian pipeline project that would take Central Asian gas to Central and Southeastern Europe via Turkey while bypassing Russia; Nord Stream, which would connect Germany and Russia while bypassing Poland and the Baltic nations; and South Stream, which would supply Southeast Europe with Russian gas while bypassing Ukraine (where 80% of Russian gas exports to Europe must transit) (Mankoff, 169). The motivations behind these proposed projects are clear enough – one only need look at the territory that the new pipeline would bypass.
Nabucco reflects a mistrust of Gazprom and Ukraine as transit routes, in addition to a European desire to eliminate Russian influence from the negotiations on terms of trade for the import of Central Asian gas. While the Turkmenistan-China gas pipeline may have broken Moscow’s overall pipeline monopoly in Central Asia, its still possesses a monopoly of Central Asian gas exports to Europe. Thus, construction of a Trans-Caspian pipeline such as Nabucco would not only benefit the European consumers, but would allow Turkmenistan to receive European prices (which are far more generous than what China pays) for its exports (Pirani, 297). Nonetheless, as has been seen, it is unlikely that these increased profits would find their way into sustainable development funds as opposed to the coffers of the elite.
Nord Stream, on the other hand, reflects a relationship between Germany and Russia that is much more cooperative and much less strained than Russia’s relations with other European importers. It also reflects the desire of both countries to engage in a productive energy partnership without worrying about interference from the Eastern European countries (Pirani 422). South Stream, for its part, is Russia’s attempt to directly undermine the economic justifications for the Nabucco project. By establishing a supply of gas to the same region as Nabucco by crossing the Black Sea as opposed to linking up with a Trans-Anatolian pipeline, Russia would be able to prevent Turkey from exerting influence over Russia’s energy exports (Pirani 426). In addition, Russia would be well positioned to secure additional Central Asian gas to supply any such pipeline.
In the coming decade all three projects are feasible, with the implementation of Nord Stream the most likely, with the next most likely being the winner of the struggle between South Stream and Nabucco, for it is unlikely that both could be implemented and remain economically viable. Nonetheless, an increased partnership between Russia and Europe with regard to energy supplies seems all but assured, for increasing European access to natural gas is a priority for all parties.
Another relationship that is likely to develop along constructive lines is the Sino-Russian energy partnership. It would be difficult to make the claim that Moscow is completely ambivalent about the Sino-Turkmen energy partnership, but any Russian chafing at the loss of relative power over Turkmen energy negotiations will not be enough to derail the relationship that Beijing and Moscow have been building with regard to energy cooperation. The two states’ energy priorities overlap so such an extent that an expanded partnership, particularly in Siberia and Manchuria, is all but inevitable.
The two share mutual interest on two major points. First, China has a rapidly increasing demand for oil and gas to fuel continued economic growth, and Russia has an abundance of both. Second, China wants to diversify its energy imports away from the Persian Gulf to insulate itself from political shocks to supply, while Russia wants to diversify its exports away from Europe (Bellacqua 148). Also, the shared 4,200-kilometer border will facilitate the construction of pipelines as the exclusion of third parties from the negotiations will streamline the process considerably (Bellacqua 151). The most likely area of cooperation will be the linking of East Siberian gas and oil reserves with the heavily industrialized and rapidly expanding Chinese northeastern provinces.
With regard to the Turkmenistan-China pipeline, China did not consider Russia to be a factor in the decision to pursue the project. Many analysts support this view, as China increased the strength of its position in Central Asia, but not in order to counter Russian influence. Instead, the decision was overwhelmingly determined by economic considerations. Nonetheless, the guaranteed supply of Turkmen gas, which was recently discovered to be adequate enough to supply China for decades (rferl.org), gives China the edge in bilateral energy negotiations with Russia. A partnership between Russia and China would benefit Russia more than China, and Russia has more to lose than China from the failure to create such a partnership.
This is not to say that such a partnership is unlikely to materialize in the next five years. As was stated above, the two states have a natural structural affinity for energy cooperation with each other owing to geography, resource endowment, and stages of industrialization. Rather, the advantage that the Turkmenistan-China gas pipeline confers on Beijing is both sides’ tacit understanding of the shift in relative power in the region. Russia has no choice but to accept the growing primacy of China in Central Asia, but China could choose to avoid doing business with Russia. Still, the most likely trajectory of the Sino-Russian energy relationship for the next ten years is that pipelines will be built linking the two countries’ far eastern regions, with both countries playing a relatively minor role in the other’s overall energy strategy.
Turkmenistan faces greater challenges any other nation in the region. While there is a fairly delineated path to sustainable development that Turkmenistan could follow, the main question remains not how, but if it will be able to do so. The abundance of hydrocarbons and a relatively small population are two promising factors that make Turkmen development feasible, but there are a cornucopia of obstacles, most originating from the authoritarian political system, that severely diminish the prospects for successful implementation of sustainable development policies in Turkmenistan.
In order to properly assess the feasibility of Turkmen development, it will be useful to consider three factors. First, an analysis of the present challenges posed by the Soviet legacy will help inform an understanding of the social and structural challenges faced by Turkmenistan. Second, the effects of Niyazov’s policies during the fifteen years he ruled during independence will shed much light on the way that authoritarian political systems with access to mineral wealth are able to extract profit from what are ostensibly public resources and transfer it to the elite without benefitting the general population. Finally, an examination of the massive disconnects between Berdymukhamedov’s professed and actual policies will illustrate the extent to which sustainable development in Turkmenistan will require a radical change in the leadership structure.
The largest impact that the Soviet period had on Turkmenistan was to prioritize the cotton and gas industries to the detriment of all other sectors of the economy. Despite the fact that Turkmenistan is a desert, the Soviet desire to achieve cotton self-sufficiency led them to construct a series of massive (and massively inefficient) irrigation projects (Overland, 79). In addition, there was significant investment in the Turkmen gas industry. Here, one can see an official policy of Dutch Disease during the soviet period. Decades of policies that produce such major structural shifts in a country are hard to reverse, and thus Turkmenistan faced significant obstacles to development right out of the gate.
The other major development during the Soviet period was Niyazov’s outright rejection of Gorbachev’s perestroika reforms. As Moscow’s attempt to improve the quality (and implicitly root out the most corrupt local officials) of regional governance, the Central Asian leaders saw this as an attempt at Russification and a blatant example of imperial overreach. As the new first secretary of the Turkmen SSR, Niyazov opposed Gorbachev’s attempts at religious liberalization, establishing a trend that would continue into the post-Soviet period (Peyrouse 45). Thus, during the final years of perestroika, Niyazov learned how to preserve his power amid a tumultuous political environment. During the next fifteen years as the Turkmenbashi, he would remind the world of the most brutal and bizarre aspects of Stalinism, and his country would suffer as a result.
After successfully making the transition to independence intact, Niyazov consolidated his control of the government and created an environment that was, “based on coercion, fear, and patronage,” (Overland 81). There was no independent legislature or judiciary, and every aspect of the country was under direct control of the Turkmenbashi. In addition, and more significantly, Niyazov quickly established mechanisms for gas to flow through intermediate firms and Russian territory while channeling the rents back into off-balance accounts. Deutsche Bank currently still holds an amassed $3 billion in oil, gas, and cotton rents that were channeled out of the country, and that is only the money that has been made public (Overland 82). Thus, Niyazov was able to set in motion a pattern by which the mineral wealth of Turkmenistan was deliberately channeled into offshore accounts for the elite.
This attitude of neglect and unconcern for the welfare of the Turkmen people has produced a host of pressing social and structural issues that will, left unaddressed, prevent Turkmenistan from achieving sustainable development. The first is a health crisis, with many qualified health professionals having fled the country and a resolute refusal by the government to increase health expenditures. Making the situation worse, Turkmenistan stopped reporting statistics to the World Health Organization in 2000 (Peyrouse, 137), and this in itself is emblematic of the extent to which quality information about Turkmenistan is elusive owing to the lack of official records.
In addition to the general health crisis, Turkmenistan has seen a reduction in standard of living as result of Niyazov’s policies. While Niyazov guaranteed the free provision of gas, electricity, salt, and water to all Turkmen citizens in his 1993 “Ten Years of Stability” policy (Akiner 183), overall wages have collapsed under weight of uncontrolled inflation. Furthermore, economic difficulties have caused Turkmen authorities to reduce the larger social welfare net, slashing pensions and reducing public wages (Peyrouse 142). This failure to address basic social needs is even more odious when the amount of wealth extracted from the country is taken into account.
It is clear that the policies enacted by Niyazov reflect a distinct lack of consideration for the needs of the average Turkmen citizen. While the provision of basic utilities and the subsidization of basic staple foods may have eased the suffering of the populace enough to prevent outright hostility to the ruling regime (Peyrouse, 70), it is difficult to get an accurate sense of public sentiment in Turkmenistan owing to the lack of NGOs and international organizations operating there. While Niyazov’s policies did almost nothing to promote sustainable development in Turkmenistan, there was hope that his replacement would fulfill the un-kept promises of liberalization. Unfortunately, Berdymukhamedov quickly demonstrated to the international community that any change in policy would be purely rhetorical (Overland, 85), demonstrating that the most significant obstacle to sustainable development in Turkmenistan is the durability of the authoritarian system in Ashgabat.
The death of Niyazov in December of 2006 led many observers in the West to have high hopes for the future of Turkmen liberalization and development. However, more than five years removed from this event, it has become clear that the authoritarian system that Niyazov created was durable enough to make the transition to Berdymukhamedov unscathed. While Berdymukhamedov has introduced nominal reforms, such as the repeal of many of the provisions of the cult of personality and the establishment of a new constitutional structure his presidential authority is still absolute, and corruption and human rights abuses remain endemic (Overland 85).
Turkmenistan’s situation is instructive in answering a number of questions about the nature of the resource curse, and the political environments that encourage them. First, it must be noted that Niyazov’s initial authoritarian policies cannot be solely attributed to a plan to eventually gain control of the lucrative gas resources. This is because while at independence the newly sovereign Turkmen leaders were aware of their extensive cotton industry, they were surprised when they discovered the revenue being generated from gas exports (Overland 79). As such, when Niyazov was initially consolidating his regime post-independence, he was unaware of the magnitude of his mineral wealth.
As such, it seems that the Soviet leadership structure can receive the lion’s share of the blame for the durability of the Turkmen regime. While Aliev, Karimov, and Nazarbaev all exhibited varying degrees of Soviet strong-arm tactics as well as repression of dissent, Niyazov’s regime is widely regarded as most brutal and bizarre. These leaders were all familiar with the full range of repressive tools at their disposal, yet the degree to which they used them varies greatly. Certainly the different geopolitical environments in the respective countries play a significant role, as does the specific organization of the elite in the government. Still, it seems that the establishment of the Stalinist regime structure in Ashgabat must also at least be partly attributed to particulars of Niyazov’s personality. Regardless, it is impossible to determine the complete set of factors that led to the creation of such an eccentric, repressive, and detached regime.
Resource curse theory, while being unable to fully explain the establishment of Turkmen authoritarianism, may be more useful in explaining the durability of authoritarianism (Overland, 89). While there are different understandings of the resource curse, this analysis will adopt the position that while the linear trend does not hold for resource-poor countries, resource-rich countries do face higher (though not insurmountable) obstacles to sustainable development. Norway and Chile show that the establishment and proper management of a national oil (or gas) fund can pay impressive dividends for a country. Yet countries like Angola, Sudan, and Turkmenistan show that without responsible governance, mineral wealth is practically irrelevant to the general population. This is because in Turkmenistan, the initial environment that Niyazov created exacerbated the tendency toward corruption and entrenchment that gas rents produced (Overland, 88). In this sense, Turkmen authoritarianism is like a tropical storm that has gained critical mass, with Niyazov’s initial policies as the lower pressure system and the influx of gas rents as the warm waters of the Gulf of Mexico. The system only picks up steam and grows, and thus it seems that Turkmen authoritarianism is caught in a mutually reinforcing cycle with the expansion of the gas industry. The situation is best articulated by the words of an exiled Turkmen journalist: “Turkmenistan’s people are increasingly impoverished while a coterie of courtiers gorges itself on pilfered wealth,” (Overland, 82).
Obviously, this does not bode well for the people of Turkmenistan. As standards of living decrease and poverty becomes more widespread, the social impacts will be drastic. Recent reports coming out of Turkmenistan indicate that some provinces have unemployment of up to 70%, with the result being an increase in crime, particularly heroin smuggling from Afghanistan, which has direct health repercussions as a result of addiction and the transmission of HIV. In addition, the combination of a rise in crime and the desperate situation within Turkmenistan meant that in addition to cotton and gas, the country was now a major exporter of criminals (eurasianet.org). This destabilizes relations with neighbors, and as the government seems unwilling to address these issues, they will inevitably only get worse.
So what, if any, signs of hope are there for sustainable development in Turkmenistan? Unfortunately there may not be any. While one could place hope in a change in governance structure, this wishful thinking is far out of line with reality. Any possible challenge to the status quo would necessarily arise from within Turkmenistan, because the external channels of pressure are simply nonexistent. China, Russia, and Iran, the only countries in a position to influence the Turkmen leadership, will not ever consider doing so. Even if the West was willing to engage in serious democratization efforts in Central Asia (neither the US nor EU are willing to instigate a confrontation with Russia over the matter), it lacks the economic or diplomatic leverage to cause any significant changes in the Turkmen political structure.
Thus, while Turkmen GDP may rise over the coming decade as its gas resources become more completely exploited, its population will likely suffer from the results of irresponsible governance. While many countries have shown the ability to take the difficult, but necessary, steps required to transform mineral wealth into sustainable development, Turkmenistan reminds us what can go wrong when none of the ameliorating factors are present.
The Turkmenistan-China gas pipeline has already produced a dramatic effect in many ways: it has changed the calculus of Caspian pipeline politics; it has altered the regional balance of power, particularly vis-à-vis Russia and China; and it has opened up the possibility for increased Turkmen energy partnerships. Yet by ensuring the continuation of the current corrupt authoritarian rentierism, it may have also guaranteed another twenty years of chronic underdevelopment, political repression, and suffering of the Turkmen people.

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