Publication: Eurasia Daily Monitor Volume: 1 Issue: 120

Turkmenistan’s official foreign policy of “positive neutrality” is facing new challenges as Russia continues the drive for greater influence over Central Asian affairs. The Turkmen policy of neutrality, announced by President Saparmurat Niyazov shortly after the country became independent in 1991, has successfully enabled the country to avoid many confrontations with its neighbors. But it has also led to a higher degree of isolation than in any of the other countries of the former USSR.

President Niyazov, also known as Turkmenbashi (Head of the Turkmen) has used positive neutrality as a means to steer the country away from divisive political confrontation while guiding the country toward beneficial commercial relations. Turkmenbashi has declined to participate in the expanding network of regional multilateral agreements such as the Eurasian Economic Community or the Shanghai Cooperation Organization, preferring to negotiate bilateral commercial agreements and leave politics aside. Russia’s new assertiveness in Central Asia has succeeded in helping top Russian firms to win control of energy, manufacturing, and transportation resources throughout Central Asia in a way that would appear to deepen Turkmenistan’s economic isolation.

As Turkmenistan celebrated the 13th anniversary of its national independence on October 27, the results of positive neutrality were plain to see (Turkmenistan.ru, October 28). In some respects the country has made an impressive recovery from the economic downturn that followed the collapse of the USSR. The past 13 years have witnessed a transition from a neglected and run-down corner of the Soviet Union to an independent state founded on a policy of economic self-reliance that depends almost wholly on export earnings from the country’s natural gas industry.

On the plus side, Turkmenistan’s gas reserves have been managed by the state to finance a supply-led economic boom for the capital and large cities. Turkmenistan’s capital of Ashgabat is now home to some of the most magnificent public buildings in the world, including a newly opened mosque that accommodates as many as 10,000 believers and was constructed at cost of more than $100 million. Turkmenistan’s state-controlled trading companies have focused on providing the population with state-subsidized consumer goods, often from the country’s primary trading partners, particularly Ukraine. On the negative side, however, Turkmenistan’s state-run economy rests upon artificial management of currency relations and strict control over export and import operations. State-managed economies are inclined toward administrative syndromes, bureaucracy, and corruption. State-controlled economies tend to only function well when the government energetically enforces sanctions against official corruption among governmental officials, business people, and the general population.

Turkmenistan is rich in natural gas, but estimates of the size of the gas reserves vary widely, because exploration has not been systematically carried out. Turkmenistan almost certainly ranks within the top ten natural gas producers in the world and may rank within the top five. The size of Turkmenistan’s gas reserves is important, but because Turkmenistan is located far from markets, selling the country’s gas will require substantial infrastructure investment. At present most of Turkmenistan’s gas is shipped through Russia-controlled pipelines to Ukraine and to other Western countries. A small portion of the country’s gas exports go to Iran and to Afghanistan. Plans to ship gas through an undersea pipeline to the west through the Caucasus fell through in 2001. Afterwards Turkmenistan concluded long-term agreements with Russia to continue shipping gas to Western markets. But many of these deliveries involve barters rather than sales at market rates and, like all non-transparent barter transactions, are subject to distortion, inefficiency, and abuse.

In order to make Turkmenistan’s policy of economic self-reliance work, Turkmenbashi has moved further and further in the direction of economic isolation, virtually concentrating all foreign economic interactions on Turkmenistan’s gas sector. The new Russian initiatives for influence in Central Asia are raising questions as to whether Turkmenistan’s isolation may imply greater dependence for the country. Russia has dramatically expanded its influence throughout the Central Asian region in the last six months, first by exercising its dominant geographical advantage over pipelines, then by winning control of key energy production facilities in the Caucasus and Central Asia through purchases, management contracts, and debt-for-equity swaps, and then by expanding its participation in financial markets and banking.

Russia’s natural linkage of the key energy sectors of natural gas and electricity production make good economic sense, given that Russia holds the world’s largest gas reserves and is positioned to expand its electric power capacity in anticipation of growing electricity markets in Asia and the Middle East. In arid Central Asia natural gas and electric power are closely related to the region’s key natural resource — water. Central Asia’s up-stream states are Kyrgyzstan and Tajikistan, both of which have vast potential for hydroelectric production in ways that often set them apart from down-stream states such as Uzbekistan and Turkmenistan. Linking electricity, gas, and water management in Central Asia would create a triangle of unparalleled influence. If Hamid Karzai continues to be successful in normalizing Afghanistan, the competition for Central Asia’s down-stream water resources could become fierce as Afghanistan’s farmers return to the practice of irrigated agriculture and the country begins to draw off its entitled portion of the Amu-darya River for irrigation uses.

Given Russia’s increased influence in the Central Asian region, Turkmenistan can be expected to have fewer and fewer opportunities to pursue the bilateral agreements that it prefers under the policy of positive neutrality. It may be in Russia’s interest to have a small, isolated, relatively dependent, and idiosyncratic state on its southern flank as a buffer zone to shield it from extremist political doctrines from the Middle East. How this affects Turkmenistan’s relations with its immediate neighbors may depend on Turkmenbashi’s ability to put new meaning into positive neutrality.