In this year’s World Press Freedom Index, Turkmenistan came ahead of North Korea in the 'competition’ for the state with the most limited freedom of speech and was ranked in the rather shameful last place. Why is the country described as an 'informational black hole’, where all the media are controlled by the state and the very few independent journalists are even tortured, is tolerated by EU officials?
Informal social contract
Since its independence in 1991, Turkmenistan has been an authoritarian state. The foundation of the legitimacy of power is an informal social contract – in exchange for subsidies, peace and large public investments, the citizens tacitly consented to governments limiting their civil rights.
The privileges granted to the residents included the right to free rations of water, gas, electricity and gasoline. These subsidies have become the foundation for the stability of the regime. Everything was paid for with cotton (Turkmenistan is the 9th largest producer in the world) and the main subject of this text – natural gas.
According to the agreement and acting under the auspices of the UN, in December 1995 President Saparmurat A. Niyazov proclaimed the neutral status of his country. The 'Arc of Neutrality’, built in the capital for USD 75 million, is a symbol of Ashgabat’s non-threatening attitude to the interests of its neighbours.
Unfortunately, together with neutrality, isolationism and a growing cult of the ruler came to the country. Niyazov in Ruhnama (The Book of Souls) – published in two volumes, in 2001 and 2004 – presented his ideas on politics and morality. The knowledge of the most important quotations from the work was even necessary to obtain a driving licence and find employment in the civil service, amongst other things.
State interference is not restricted to the ideological surroundings of statehood. The most extreme example of the repression of the local society is the continuation of the Soviet times, the so-called 'Saturday work’. Under pain of penalties such as salary cuts and dismissals, employees associated with the public sector (e.g. officials, teachers, doctors, lawyers) are sometimes forced to work on cotton harvest. According to Anti-Slavery International, in 2016 as many as 49 thousand teachers worked on the harvest throughout the country.
The… lazy gas
Turkmen soil conceals 19.5 billion m3 of natural gas, which corresponds to 10% of the world’s resources and ranks Ashgabat 4th internationally. In comparison, Azerbaijan has 2.1 billion m3 of gas in its reserves. Last year’s production of Turkmen blue fuel amounted to 61.5 billion m3 (while Polish gas consumption in 2017 was 17 billion m3).
The broad inflow of money from immense deposits of natural gas allowed the government to maintain power and avoid a reform of the production structure, cementing the post-Soviet economic model. The European Bank for Reconstruction and Development defined the Turkmen economy as the least competitive among those in which it operates.
Experts emphasize that there is too much state interference even in private companies, where managerial independence does not exist. The information on foreign business risk prepared by the British government defines Turkmenistan as a country that does not protect business contracts, and both local and foreign companies can be pushed out of the market by officials without giving a reason.
Official data from sources close to the government indicate that Ashgabat’s economy is growing. The World Bank points to a 6.2% GDP growth this year, and 5.1% in the following. However, there is no guarantee that the data are reliable. On its website, the British Ministry of International Trade explicitly states that Turkmenistan does not publish reliable economic data.
The crumbling economy
Despite the somewhat satisfying official macroeconomic data, experts agree that Turkmenistan is in the midst of the biggest economic crisis since regaining the independence. The beginning of the crisis was marked by a slump in gas prices in 2014. Two years later, the situation worsened after a drastic step was taken – the exchangeability of the manat for the dollar was suspended. The government decided to make this move to increase control over the flow of capital and stop its outflow abroad, in the face of rising inflation and depletion of foreign currency reserves. Entities implementing priority projects, such as the TAPI gas pipeline (to India), bypassed the possibility of legal purchase of US dollars.
This was not the end of the government’s isolationist policy. After the suspension, currency transfers were completely blocked and foreign currency surpluses were removed from the internal market. All this, although mainly affecting privileged people, impacted the entire economy.
The surge in the price of imported food has caused it to be rationalised. According to one of the few reliable sources of information operating in the region, Radio Free Europe/Radio Liberty (RFE/RL), the monthly flour limit for each family is now 50 kg, which in large, traditional Turkmen families is a drop in the ocean. Also, two years ago, one of the foundations of the stability of the regime – the subsidies – was eliminated.
In an attempt to stop the exodus of the citizens, an informal ban on travelling abroad under the age of 40 was introduced. The difficulties in leaving the country are so great that, according to RFE/RL, a bribe of approximately $3,500 is required to go through passport control. Despite attempts to detain citizens, many people migrate, most often to Turkey.
The regime is not helped by the looming foreign debt. The annual debt service cost is estimated as at least USD 1 billion! The majority of loans are of Chinese origin and amount to approximately USD 10 billion. Part of the receivables is repaid in raw material – 'credit for gas’ – reducing raw material prices and limiting direct cash injection into the budget. As a recipient of 90% of Turkmen fuel, China has all the tools to dictate its contract terms. Such an enormous degree of dependence is unbearable for the ambitious Ashgabat.
Faced with shaky foundations and a realistic vision of becoming a de facto Chinese province, President Gurbanguly Berdimuhamedov has decided to intensify his diplomatic efforts on a different front. The 2016 price conflict with Iran and the termination of gas cooperation with Russia in 2015 (following Gazprom’s unexpected announcement of a threefold reduction in imports of Turkmen fuel), pushed it far to the West, to Europe.
The origins of actual gas cooperation on the Brussels-Ashgabat line go back to the Ukrainian-Russian energy crisis of 2006. It was then that a diversification remedy began to be sought in Central Asia. This is how the idea of the Southern Gas Corridor (SGC) was born. Over the years, the SGC project has undergone many modifications, but one of its features has remained unchanged – the investment does not run through the territory of the Russian Federation.
Bypassing Russia is the main reason for the European Union’s promotion of the concept. This motivation was repeatedly and explicitly expressed, amongst others by the European Commission in 2008 in the Second Strategic Review. Despite the collapse of the Nabucco project in 2012 and the consequent deterioration of the prospects for pan-European diversification of gas supplies, the project has remained beneficial for South-Eastern Europe. The region, heavily dependent on Russian fuel, was able to diversify its gas sources and help reduce its lignite consumption in the energy sector.
The renewal of EU interest in the SGC came after the Russian aggression against eastern Ukraine. In 2017, the European Commission has confirmed its priority for the European Union by giving it the status of a Project of Common Interests (PCI).
The European Union’s particular support for this investment has not been limited to empty directives. A lot of money has been invested in the project. Last year, the trans-Adriatic section of the corridor was the most heavily financed project of all European investments. The total amount was 3.9 billion euros! This immense amount of money came from the European Investment Bank, the European Bank for Reconstruction and Development, as well as 17 commercial banks, including BNP Paribas, UniCredit, ING, Societe Generale and the Bank of China.
Implementation of the corridor
The main element of the SGC is the Trans-Anatolian gas pipeline (TANAP) connecting the Georgian-Turkish and Turkish-Greek (1850 km long) borders with the gas route. Its current capacity is 16 billion m3 of natural gas – 6 billion m3 is allocated to the Turkish market, while 10 billion m3 is to reach Europe after the completion of the Transadriatic section of the SGC. The volume of gas transported is to be increased in 2023 to 23 billion m3, and 2026 to 31 billion m3.
The pipeline was officially opened on 12 June 2018 in Eskisehir, Turkey. The importance of the investment is confirmed by a wide range of dignitaries present at the ceremony. Among them were the presidents of Turkey, Azerbaijan, Ukraine, Serbia, and the leader of the Turkish Republic of Northern Cyprus. At the opening, the Turkish leader, Recep Erdogan, called TANAP the 'energetic Silk Road’.
For Brussels, the key element of the SGC is the extension of the Trans-Anatolian gas pipeline in Europe, i.e. the Transadriatic Section (TAP). It stretches from the Turkish-Greek border, through Greece, Albania and the bottom of the Adriatic Sea to the town of Lecce, where it will be incorporated into the Italian system. The investment is planned to be completed by the end of the year, and in 2020, 10 billion sq.m. of Azerbaijani gas will start flowing to southern Europe.
Will Turkmenistan be part of the Corridor?
Where is Turkmenistan in all this, taking into account that the Southern Gas Corridor currently ends in Azerbaijan? It is not necessarily its final form. The signalled ambitious plans for the development of the gas route (up to 31 billion m3 in 2026) require finding additional sources of blue fuel. And this is what the homeland of the Galkynysh gas field, the second-largest deposit in the world, can offer.
The 2015 Energy Union strategy explicitly mentions Azerbaijan and Turkmenistan (sic!) as potentially strategic energy allies, in gaining which Brussels will use all possible methods. In May of the same year, the Vice-President of the European Commission and Commissioner for Energy Union, Marosh Shevchovich, confirmed this during his visit to Turkmenistan, announcing the EU’s political decision to include Ashgabat in the gas corridor.
The interest is still visible today. Recently, the first Caspian Economic Forum was held in Avaza (Turkmenistan), where the EU representative in Central Asia, Peter Burian, confirmed that intensive talks are taking place this year with Ashgabat on the construction of the Trans-Caspian Gas Pipeline (TCP).
The pipeline at the bottom of the Caspian Sea is a prerequisite for the effective use of this cooperation. The idea is not new. Already in the 1990s, oil companies proposed similar investments. The lack of implementation of the concept has so far been caused by the unsolved division of the largest internal water reservoir in the world.
The Caspian Gordian knot
The wealth of the Caspian Sea has not served to resolve the dispute for years. According to the American Energy Information Agency, 48 billion barrels of oil and 292 billion m3 of gas are concealed under the waters of the Caspian basin! Even establishing the status of the basin as either a sea or a lake was a sensitive issue, as it can determine how it is to be divided under international law. Although bilateral delimitation agreements have long been signed by some parties and raw materials have been extracted from there for many years, there has been no common five-party convention to implement this underwater gas pipeline. On 12 August last year, after 22 years of dispute, an agreement was signed.
On that day, in Aktau, Kazakhstan, the leaders of the coastal territories of Azerbaijan, Iran, Kazakhstan and Turkmenistan, adopted the Convention on the Legal Status of the Caspian Sea. The provisions of the document concerning the division of the seabed with its wealth were formulated in very general terms, referring to the need for further bilateral arrangements. The established methodology for future delimitation of impacts is to be based on the coastline of the neighbouring states. Iran is losing the most from such a solution because its sector is the deepest, saltiest and poorest in terms of natural resources. Kazakhstan is the biggest winner, taking into account this point of the agreement. The part belonging to Nur-Sultan (formerly Astana) contains more than half of the hydrocarbons found in the entire body of water.
The Convention can be a game-changer in the context of the construction of the Trans-Caspian gas pipeline. The document indicates that only the consent of the countries through whose sectors the pipeline will pass is required to instal the underwater pipeline (or cable). However, other coastal states have retained the right to assess the environmental impact of the project, which may delay its implementation.
Ecology as a pretext
Russia and Iran are trying to use this environmental barrier. Doubts about the truly pro-ecological motivation of Moscow and Tehran are raised by the lack of any reaction of Moscow and Tehran in September 2013 to the massive leakage of both gas and oil off the coast of Kazakhstan. Moreover, the Caspian Sea is not virgin territory. On its bottom, there are already pipelines leading from hydrocarbon subsea fields to the shores of coastal countries, among others from the Kazakh Kashagan Field (13 billion barrels of oil).
Iran, by putting the environmental risk on the political agenda, hopes to redirect the Turkmen fuel stream to its infrastructure. Moscow, in the case of future development of the corridor, would be willing to fill the missing volume with its raw material. The hypocrisy of Russian activities is also indicated by their own underwater blue web network, which is often a much bigger threat for nature (Blue Stream, Turkish Stream and Nord Stream).
An attempt to block investments by Russia is also being made by returning to imports of blue fuel from Turkmenistan. In April this year, after a 40-month break, the gas flowed again from Turkmen deposits to Russia, based on a short-term contract. Three months later, Gazprom signed a five-year agreement to purchase 5.5bn m3 of gas annually from Ashgabat. With an immediate cash injection into the depleted budget, Moscow is trying to distract Turkmenistan from the idea of gaining new markets in the West, where it would become a competitor of the Russians.
The protracted dispute over the Trans-Caspian pipeline forced Ashgabat to look for a market in areas full of international mines. The TAPI pipeline (Turkmenistan – Afghanistan – Afghanistan – Pakistan – India), with a target annual capacity of 33 billion m3 of gas, is an investment that aims to overcome Pakistani-Indian and American-Taliban antagonisms, offering enrichment to an unstable region. The inauguration of the construction of the first section of the gas pipeline took place in Turkmenistan in December 2015, while the construction of the Afghan element of the route began a year ago.
Is the flirt a start of something more?
Turkmenistan will undoubtedly insist on the development of gas cooperation with the EU. His dependence on the Chinese Republic is too great for President Gurbanguly Berdimuhamedov to sleep peacefully. Moreover, the greatest economic and social crisis since independence, especially after the elimination of civic subsidies, has greatly shaken its position and a new source of regular budgetary revenue may be necessary for the continued survival of the regime.
The future of relations will most likely be decided by the European Union. Last year’s repeal of the legal loophole for gas transmission on the bottom of the Caspian Sea may have turned out to be too late. Does Europe today have to seek the favour of an authoritarian regime? Especially in the era of developing a technology of liquefied natural gas (LNG), which allows for diversification of blue fuel sources on a previously unknown scale. Besides, Turkmen deposits will have to compete with the closer – both geographically and politically – gas fields discovered in recent decades on the bottom of the Mediterranean. Let us not forget either that this is an investment in the further extraction of fossil fuel, the growth in demand of which is not at all certain, and its market is approaching saturation in Europe.
Also, the political aspect of the project does not help the ambitions of Ashgabat. The memory of the annexation of Crimea is fading with every passing year. However, the financing of an energy source that contributes to global warming and funds authoritarian regimes may not find enough support in Brussels in the long term.
Polish version is available here.
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