Iranian President Hassan Rouhani tried to end uncertainty about Iran’s desire for Turkmenistan's gas during his first official visit to the gas-rich Central Asian country on March 11, promising an unspecified increase in imports.
Over the last few years, at least in terms of gas, Turkmenistan’s relationship with Iran has been second only to its relationship with Russia in volatility. Tehran makes occasional noises about boosting domestic production and doing away with a tiresome trade pickled with disputes.
But during his visit Rouhani confirmed that the Islamic Republic would up imports from Turkmenistan.
That must be music to Turkmen President Gurbanguly Berdymukhamedov’s ears. The Turkmen economy has been struggling on the back of the sharp downturn in Russia and the slumping ruble; moreover, Moscow suddenly slashed imports of Turkmen gas last month.
Referring to increased transport links with Turkmenistan, such as the new Kazakhstan-Turkmenistan-Iran railway, Rouhani set an ambitious target for bilateral trade to grow by more than 15 times from its current $3.7 billion to $60 billion by 2020, his official president.ir website cited him as saying.
For his part, Berdymukhamedov was also effusive: “In recent years, given the growing cooperation in different fields, bilateral ties between Tehran and Ashgabat have taken on a new meaning,” said the Turkmen president, who also called Rouhani a “brother” in comments picked up by AFP.
Turkmenistan is undertaking the first large-scale mobilization of its reserve military forces since gaining independence, which government officials say is required to ward off the threat of ISIS forces gathering in neighboring Afghanistan.
That's according to a report in Central Asia Online, a Pentagon-funded news website known mostly for its sunny promotion of the activities of some of the world's most authoritarian governments. This report, even though it falls into that same pattern, is nevertheless pretty extraordinary for the fact that it gets several Turkmenistan officials to talk on the record, and some of them even disagree with one another.
"This is the first large-scale and serious ... mobilisation of reservists in the nearly 24 years of the country's independence," Defence Ministry official Agamyrat Garakhanov told Central Asia Online, calling the number of called-up reservists a "state secret".
A few weeks ago, Russia’s state-run Gazprom announced it would sharply and immediately cut the amount of gas it purchases from Turkmenistan. Now Turkmenistan’s authoritarian government has responded with a rare outburst. Unfortunately for Ashgabat, these days there’s not much it can do but screech.
Russia is an “unreliable partner,” a think-tank inside Turkmenistan’s own state energy company, Turkmengaz, said in a February 16 rant published on its website.
The article – “Will Gas Exports of Turkmen Gas to Russia Recover?” – criticizes Russia and Gazprom for all of the unhappiest moments in an up-and-down relationship that has seen deliveries of Turkmen gas to Russia drop from a peak of around 45 billion cubic meters per year (bcm) in 2008 to the 4 bcm the Russian giant says it will now import in 2015.
The piece expressed outrage at Gazprom’s failure to fulfill a 2008 agreement to build a Trans-Caspian pipeline and fingered Gazprom for an unexplained pipeline explosion in April 2009 that marked the beginning of the decline in its purchases.
Gazprom and its affiliates “periodically violate agreements at interstate, intergovernmental and interdepartmental levels,” the article notes.
As delegates from the four countries hoping to build a gas pipeline from Turkmenistan to South Asia met on February 11 in Islamabad, Pakistani media claimed that a deal is close. Several outlets reported that French energy major Total may lead the long-delayed project, providing much-needed know-how and capital.
Other than rumored ambivalence towards the Turkmenistan-Afghanistan-Pakistan-India pipeline project in Islamabad and Delhi, the lack of a major commercial investor has been a key obstacle for TAPI. Turkmenistan’s refusal to allow any outsider an equity stake in an upstream field has been another stumbling block, with India reportedly pressuring Turkmenistan on February 11 to change its mind.
But The Daily Times, a Pakistani newspaper, claims a deal is imminent. Citing an unnamed official in the Pakistani Ministry of Petroleum and Natural Resources, the newspaper clarified that Total would not be the owner of the pipeline – which is the privilege of a company created by the four countries called TAPI Ltd. – but would instead assist the Turkmen at the source:
Under a proposed deal, Total will help extract gas from Turkmenistan’s fields, which will be exported to Afghanistan, Pakistan and India. In return, the company will be paid a service fee in cash or in kind. Sources in the energy sector said that gas companies of the four countries have already established a company to build, own and operate the 1,800km TAPI natural gas pipeline. The four state-owned companies will hold an equal share in the pipeline operator.
HQ-9 air defense systems on parade in Beijing. (photo: Wikimedia Commons)
China has reportedly provided both Turkmenistan and Uzbekistan with sophisticated air defense systems, which would represent the largest Chinese military equipment deal thus far in Central Asia.
Reportedly, China has provided one battalion each to Turkmenistan and Uzbekistan of the HQ-9 air defense system, as partial payment for natural gas that it imports from Central Asia. (Each battalion consists of eight launchers.)
The information on the deal is spotty: it comes from Chinese-language Canadian defense journal Kanwa Defense Review, and cites an anonymous Chinese defense industry source. "It is possible, even likely, but it is still unclear at which stage the deals are," Vasily Kashin, a Russian military expert at the Center for Analysis of Strategies and Technologies told The Bug Pit. "Both countries need long range [surface-to-air missile] systems to replace their S-200s which are becoming physically old and unsustainable. Both countries are well known for their careful balancing between Russia, China and the West, they are both fiercely independent from Russia. Besides, Chinese currently can provide very good financial terms for such a deal."
Four months after announcing it would slash the amount of gas it buys from Turkmenistan and Uzbekistan, Russian energy behemoth Gazprom has revealed the extent which its imports from Central Asia will fall this year.
On February 3, Vice Chairman Alexander Medvedev told an investment summit in Hong Kong that this year Gazprom will import two-fifths of the 10 billion cubic meters (bcm) it imported from Turkmenistan in 2014; it will buy less than a quarter of the roughly 4.5 bcm it bought from Uzbekistan last year.
Medvedev said the decisions had the blessings of both Central Asian states, while boasting that his company came to the agreements from a position of strength.
“For Gazprom, thanks to investment in extraction and transport infrastructure, there is no technological necessity for the purchase of foreign gas,” Medvedev said in comments picked up by state-run RIA Novosti. “Gazprom is in the situation to guarantee both the domestic demand in any region of the Russian Federation, and the delivery of gas to our customers in Europe, and in the future, Asia, with our own resources.”
The announcement came just hours before Moscow said Foreign Minister Sergei Lavrov would make a rare stopover in Ashgabat.
Getting reliable economic information out of Turkmenistan is difficult at the best of times, so if the gas-rich country is on the verge of a crisis, the secretive leadership is unlikely to drop any hints.
But a number of recent reports suggest that the effect of falling energy prices is being magnified by limited official information.
Opposition-minded news websites Alternative News Turkmenistan and Chronicles of Turkmenistan have reported long queues stretching out of currency exchange bureaus in recent days. The panic, note both outlets, is based on a rumor that the manat is about to be significantly devalued again.
The manat already fell 19 percent on New Year’s Day, falling from 2.85 to 3.5 manats against the greenback. The rumors point to an alarming 4.5 to the dollar. According to the Chronicles of Turkmenistan:
In recent days queues have been forming at various banks from early in the morning. In the regions, only 40-45 people are able to obtain the dollars at each bank, even though the queues extend to 200 or more people. Then the [people in the queue] are informed that there are no more dollars for the rest of the day.
Passports are required at the point of exchange. Each person can obtain no more than $1,000 in a single day.
A private militia to combat ISIS and the Taliban has been formed in northern Afghanistan, as Afghan and Central Asian officials continue to debate to what extent there is an ISIS presence in the region.
It's not clear how serious the new anti-ISIS militia is: "several dozen" members announced its presence at the provincial council office in Mazar-e-Sharif this week, according to a report by Khaama Press. But they claim to have 5,000 people ready to fight ISIS and the Taliban, and if nothing else they have a keen instinct for PR: their uniforms are the tricolor of Afghanistan's flag -- red, green, and black -- and their name is "Marg," or "Death."
Also this week, a senior Russian defense ministry official visited Tajikistan where he invoked the growing terror threat. The official, Deputy Defense Minister Anatoliy Antonov, called Tajikistan "our outpost in the fight against terror." The officials discussed Russian aid to Tajikistan but no details were announced; Central Asia expert Arkady Dubnov told Nezavisimaya Gazeta (in a piece headlined "ISIS Tests Strength of Central Asia's Borders") that the purpose of the visit was to assuage concerns in Dushanbe about slow deliveries of the military aid Russia has promised Tajikistan.
The International Monetary Fund has revised downward its forecast for growth in Central Asia and the former Soviet Union to account for dramatically lower oil prices and the shriveling Russian economy. The region’s poorest countries can expect sharply higher inflation.
The assessments are part of an economic update released January 21 in Washington.
For energy importers like Kyrgyzstan and Tajikistan, the IMF says, any gains from lower oil prices are overshadowed by weakness in Russia, Central Asia’s largest trade partner and the destination for millions of Central Asian labor migrants. The IMF projects Russia’s economy to shrink 3 percent this year due to “geopolitical tensions” (the Kremlin’s adventure in Ukraine) and sharply lower prices for its chief export, oil.
Already the Central Asian countries are reeling from the 45 percent drop in the value of the ruble against the dollar last year. Kyrgyzstan’s currency, the som, lost 17 percent against the dollar, even as the National Bank spent hundreds of millions of dollars defending it. Oil-exporter Kazakhstan devalued the tenge by 19 percent last February and another downward adjustment appears imminent. Turkmenistan’s manat dropped 19 percent on January 1.
Tajikistan spent over half its hard-currency reserves in 2014 defending the somoni, the Central Bank said this week. Yet the rumpled somoni still fell 11 percent and is bound to plunge further as remittances – which make up the equivalent of half of Tajikistan’s GDP – shrink.
Four of the five Central Asian states have failed to meet basic fiscal transparency standards, according to the U.S. State Department’s latest Annual Fiscal Transparency report. The study does not appear to affect whether a country receives U.S. government funding, however.
In addition to ascertaining whether countries meet State’s minimum standards (such as publishing receipts and expenditures in publicly available national budget documentation and bidding and contract information for natural resource extraction), the study assesses progress—or lack thereof.
Published by the Office of Monetary Affairs since 2008, the report only includes “those governments it anticipated would receive bilateral allocations of assistance” in fiscal year 2014. The latest version of the report was released January 14.
This year, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan were all judged to have made “no significant progress” toward meeting minimum fiscal transparency standards, joining 35 other countries in that category. Overall, 50 fell below the minimum-standards threshold.
Kyrgyzstan, which has harnessed international assistance from USAID and other donors to improve public access to state budgets was judged to have met minimum transparency standards for the second year running.
In 2012, Tajikistan made significant progress toward the benchmark. It has slipped over the last two years, however.
Turkmenistan and Uzbekistan, which routinely rank at the bottom of Transparency International’s Corruption Perception Index, have never glittered in this report.