Turkmenistan: the Chinese debt trap unblocked
Out of debt, out of danger. At least that’s the idea.
As Deputy Prime Minister Shakhym Abdrakhmanov said on a government teleconference on April 11, Turkmenistan has now fully repaid the Chinese loan it had contracted to finance its share in the construction of the Turkmenistan-China gas pipeline and the development of its cornerstone gas field at Galkynysh.
News of the milestone, which was reportedly reached on June 8, was passed to Ashgabat by the Xinjiang branch of the Development Bank of China, said Abdrakhmanov, who manages the oil and gas industry portfolio. since february.
President Gurbanguly Berdymukhamedov called this turn of events a justification for his policies.
“The timely and full repayment of foreign credit shows that Turkmenistan is an economically powerful state that pursues a responsible approach to meeting its obligations,” he said during the televised meeting.
As usual, no figures have been released, although state media have put forward the figure of $ 8 billion needed to fund the aforementioned pipeline, the development of Galkynysh and other related projects. gas export to China. Some scholars have calculated that the debt was perhaps closer to $ 10 billion.
In the absence of reliable data, however, bragging about economic strength based on executing narrow addiction alleviation strategies are just words.
As has now become customary, the World Bank does not bother to feature Turkmenistan in its flagship biannual global economic outlook survey. As the survey published this month states, “Due to the lack of reliable data of adequate quality, the World Bank does not currently publish data on economic production, income or growth for Turkmenistan.” Venezuela is the only other country to benefit from this treatment.
A detailed survey published by Crude Accountability, an advocate for transparency, laid out two interrelated key points with absolute clarity.
The first is that Turkmenistan remains dangerously dependent not only on gas exports, but specifically on sales of the commodity to a particular customer: China.
If hydrocarbons represented 83.8% of exports during the last three years of the reign of President Saparmurat Niyazov, who died in 2006, this figure reached 94.6% in 2014. This is the last year that the International Monetary Fund published the relevant data.
Crude Accountability devotes an entire chapter to exploring the extremely nebulous informal networks that control Turkmenistan’s wealth. The two clan families that rule the country to date have, according to the report, widely used the infrastructure conducive to corrupt offshore vehicles to hide ill-gotten gains. Not to mention waste.
“Turkmenistan is a model kleptocracy, where state revenues are embezzled and billions of dollars wasted by President Berdymukhamedov on vanity projects,” the report notes.
That is, the disappearance of onerous debt service charges does not automatically mean an imminent transformation of fortunes.
A more technical argument has been made in a recent article by three Polish academics – Natalia Iwaszczuk, Jacek Wolak and Aleksander Iwaszczuk – who attempt to explore the correlation in Turkmenistan between foreign direct investment, or FDI, inflows and economic growth. What the data show is that Turkmenistan behaves reasonably in terms of FDI. Among the post-Soviet countries (excluding EU member Lithuania, Latvia and Estonia), Turkmenistan ranked fifth for inflows in 2019 with $ 2.2 billion. (However, the trend is downward).
What the researchers find, however, is that standard notions about FDI contributing to economic growth are “unconfirmed.”
“Policymakers should take measures to create the conditions for greater diversification of FDI flows […] by improving human resources, pursuing a transparent economic policy and introducing investment incentives supporting sectors of the economy not linked to gas exports ”, they conclude.
Turkmenistan is arguably failing on most of these points, and the targeted investments it directs to non-gas sectors are being made in questionable fashion.
But the Turkmen economic model has some boosters.
Russian Ambassador to Ashgabat Alexander Blokhin this week praised how economic indicators show how his own country and Turkmenistan are expected to be tolerably enduring the coronavirus pandemic. (Russia is now entering its third wave of massive infections and Turkmenistan is lying by claiming it has had no cases at all).
“I would say that Turkmenistan, despite some negative reviews in the foreign media, managed to get through this period in a very respectable way, because the main areas of the Turkmen economy suffered little. And here we have Russian companies like Tatneft and Gazprom, champions of the petrochemical industry, working at full capacity, ”he told RIA Novosti.
Blokhin did not go so far as to validate Turkmenistan’s claims that the economy has increased by 5.9% in 2020. Instead, he explained how unrelated natural gas trade between Russia and Turkmenistan increased by 40% last year to reach $ 970 million. Including gas sales to Gazprom, the figure reaches $ 2 billion, he said.
For anyone who matters, a rough calculation based on the 5.5 billion cubic meters of annual gas purchases made by Gazprom implies that the price of Turkmen gas for Russia is 187 dollars per 1000 cubic meters. This is exactly what China would have pays Turkmenistan for gas.
At the same briefing, Blokhin was talking in glowing terms on how Turkmenistan and Azerbaijan came to an agreement to jointly develop the Dostluk oil and gas field in the Caspian Sea. Russian Lukoil is in pole position to become the operator of the project. But Blokhin has sought to cast cold water on any idea that joint work on this offshore block could, as has been widely speculated, lay the groundwork for the construction of the Trans-Caspian gas pipeline.
“To begin with, Dostluk is not a gas field, but an oil field, and a fairly large oil field. There is associated gas there, as usual, but not enough for us to talk [about gas pipelines],” he said.
Moscow’s very forward-looking charm offensive is becoming more and more intense. On June 12, the Russian Embassy in Ashgabat popular Russia Day, a national holiday, and invited Berdymukhamedov’s son and heir apparent to the throne, Serdar, to attend as a guest of honor.
Cabinet statements and ambassadorial duties, needless to say, have little bearing on how real life is endured. The Turkmenistan service of RFE / RL, Radio Azatlyk, reported on June 14 that the dollar lost some of its value against the manat on the black market – partly reversing a trend that has continued since November – but food prices remain high.
A kilogram of meat, for example, costs 65 manat (nearly $ 2 at unofficial rates) and five liters of vegetable oil sells for 250 manat, the broadcaster’s correspondent reported. Radio Azatlyk estimates monthly salaries at around 1,250 manat.
Getting the money in itself is a challenge. ATMs often don’t work, and outlets that have card payment terminals report that their machine is down or, at best, charge a 10 percent commission, Azatlyk reported.
The safes could be healthier if these Chinese payment accounts are correct, but people’s pockets are as empty as ever.