Turkmenistan has pulled the plug on an expensive – and tardy – Iranian construction project. Even so, Ashgabat’s action is unlikely to cause a significant breach in bilateral relations.
On September 8, President Gurbanguly Berdymukhamedov announced that for “some economic reasons” he was annulling a $700-million contract with Iran’s Pars Energy to build a rail track linking Iran with Kazakhstan along Turkmenistan’s Caspian coastline. He said Turkmenistan would carry on with the project by itself.
Tehran and Ashgabat inked the deal in January 2010, and it was scheduled for completion last December. The 550-mile line would not only expand Turkmenistan’s trade links with its neighbors, but connect the landlocked country to the Persian Gulf. It would also provide a connection for Iran to Kazakhstan and Uzbekistan. If it is ever completed, the line is projected to handle 3- to 5-million tons of goods annually.
Elsewhere in Central Asia, Tehran hasn’t always been the most reliable project partner. Iran has been building a five-kilometer tunnel [7] through the Tajik mountains for over six years that is still partially flooded.
The timing of Ashgabat’s announcement surprised some observers. It came less than two weeks after an Iranian rail official promised the line would open by the end of this year, Azerbaijan’s Trend News Agency reported. As recently as May, Berdymukhamedov hailed the rail link as a “trans-continental bridge connecting Europe to Asia,” Russian media outlets quoted him as saying.
It appears as though Iran isn’t taking Berdymukhmedov’s move at face value. On September 10, Iran’s transportation minister, Ali Nikzad, told the Fars News Agency that Berdymukhamedov’s decision “will not affect the two countries' joint railway construction project," stressing that the railway was in its final phase of construction and that it would still be completed by the Iranian firm.
The project’s troubles are unlikely to hurt Iranian-Turkmen relations, says Slavomir Horak, a scholar at Johns Hopkins University, because both countries need each other. Increasingly isolated, Iran needs a friend, and Turkmenistan needs links to the outside world.
Natural gas is the centerpiece of Turkmenistan’s exports to Iran, while Iran sends textiles and processed foods north. The two countries share a 992-kilometer border.
After gaining independence in the early 1990s, Turkmenistan needed to diversify its gas shipments, to move away from its singular reliance on Russia. Though the two countries have had disagreements in the past, such as in 2008 when Turkmenistan cut gas exports to Iran [8], Ashgabat and Tehran have always managed to sort out their differences [9], says Horak.
In 2010, the two opened a second natural gas pipeline, which industry analysts predicted would eventually double Turkmenistan’s exports to Iran. (Due to its limited gas transport infrastructure, gas-rich Iran uses the Turkmen gas in its north and exports some to Turkey, while exporting its own gas abroad from the south.) Turkmen gas also passes through Iran on its way to Turkey.
Bilateral trade, valued at around $5 billion in 2011 and projected to balloon to $10 billion this year, has been increasing steadily, although Western sanctions, imposed in an effort to force Iran to be more transparent on its nuclear program, may dent the 2012 figures.
“The problem with [the railroad] contract is that the deadline was December last year,” Horak explains. “Finally Gurbanguly Berdymukhamedov went to inspect the project and saw that it was delayed and took it over.”
Western sanctions may have played a role [10] in delaying the project. The Iranian-run firm behind the railroad has been accused of having ties to Iran’s Revolutionary Guard.
Turkmenistan has not always bowed to the West’s wishes on trading with Iran. In July, the foreign ministers from Iran and Turkmenistan met and promised to keep trade channels open. Turkmen Foreign Minister Rashid Meredov said the relationship between the two would never be influenced by “marginal issues” such as sanctions, Radio Free Europe/Radio Liberty quoted him as saying.
But Alex Vatanka, an Iran scholar at The Middle East Institute in Washington, DC, believes Western sanctions are disrupting the operations of Iranian firms doing business abroad. “The value of the Iranian currency has fallen drastically,” Vatanka said. “The rial has lost half its value in the past few months. The difference is huge for contractors and subcontractors” working on the railroad.
Vatanka suspects Washington and possibly Iran’s archenemy Israel – which has been attempting to open an embassy [11] in Ashgabat for several years – could be putting political pressure on Turkmenistan.
“I wonder,” Vatanka said, “if they [the U.S. and Israel] are playing a role here, saying; ‘You might not want to get close, it’s not in your best interest.’”
"I think these are all tactical maneuvers, not strategic maneuvers,” Vatanka added. “Joint projects, like the railroad, could be revived in another format in the future."