TURKMENISTAN FACES AN UNCERTAIN FUTURE DUE TO LACK OF DIVERSIFICATION.

Publication: Monitor Volume: 6 Issue: 177

Turkmenistan’s economic performance remains extremely dependent on revenues from exports of natural gas and petroleum products. GDP grew 14 percent in the first half of 2000, driven mainly by exports of gas to Russia. Industrial production also rose 14 percent due to rapid growth in the energy sector. A new agreement with Gazprom allowed Turkmenistan to improve its economic prospects by resuming massive gas exports to Russia starting in January 2000. Turkmen gas exports to Russia are expected to reach 28-30 billion cubic meters (bcm) this year and to increase further in 2001 (Reuters, August 29). Turkmenistan’s total exports rose 69 percent in the first half of 2000 as the share of natural gas in the country’s exports surged to 48 percent from 36 percent last year (Interfax Central Asia and Caucasus Business Report, August 20). In 1999, GDP rose 16 percent, largely due to gas exports to Ukraine in the first five months of the year. The rising price of oil and a substantial increase in agricultural output also contributed to growth in 1999. However, some of this growth was fictitious: Ukraine failed to pay for Turkmen gas deliveries, significantly reducing Turkmenistan’s exports on a payments basis. Turkmenistan stopped supplying gas to Ukraine in May 1999. While Russia is more likely than Ukraine to be able to pay for Turkmen gas in the short-to-medium term, Turkmenistan still faces the problem of finding ways to export its gas to creditworthy customers in the longer term. With construction of the Trans-Caspian pipeline almost certain to be delayed significantly if not cancelled altogether, for the next several years Turkmen gas (except for a small amount exported to Iran) will have to travel through Russia, which prefers to sell its own gas to creditworthy customers outside the CIS.

Turkmen authorities continue to maintain the official exchange rate fixed at 5,200 manats per U.S. dollar. The manat is trading on the black market at more than three times the official rate. The fixed official rate is projected to remain in place for at least another year, since increased hard currency revenues from gas exports have averted a currency crisis for the time being. However, the manat will have to depreciate eventually because inflation is unlikely to go below the high single digits, Turkmenistan’s gas exports are not a reliable source of foreign currency revenue, and the gap between the official and the free market exchange rates is extremely wide (PlanEcon Review and Outlook for the Former Soviet Republics, Fall 2000).

The Monitor is a publication of the Jamestown Foundation. It is researched and written under the direction of senior analysts Jonas Bernstein, Vladimir Socor, Stephen Foye, and analysts Ilya Malyakin, Oleg Varfolomeyev and Ilias Bogatyrev. If you have any questions regarding the content of the Monitor, please contact the foundation. If you would like information on subscribing to the Monitor, or have any comments, suggestions or questions, please contact us by e-mail at [email protected], by fax at 301-562-8021, or by postal mail at The Jamestown Foundation, 4516 43rd Street NW, Washington DC 20016. Unauthorized reproduction or redistribution of the Monitor is strictly prohibited by law. Copyright (c) 1983-2002 The Jamestown Foundation Site Maintenance by Johnny Flash Productions