Turkmenistan-Russia Trade and Investment Summary (YTD) 2022

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By Constanin Duhamel 


Historical neutrality. 

A neutral state ever since its independence in 1991, Turkmenistan is nonetheless at the crossroads between ex-Soviet patron Russia’s influence, Turkic culture’s natural pull towards Ankara and China’s growing presence. There is clearly room for arbitrage between all these foreign policy vectors to extract maximum gains, including in the strategic gas sector where the TransCaspian Pipeline (TCP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) projects are stalling (see the Natural Gas section below). Gas is Russia’s primary leverage point in the country, despite Russia being an exporter itself.

Political transition.

Former president Gurbanguly Berdymukhamedov handed over to his 40 year-old son Serdar on March 19th this year in an attempt to rejuvenate the political picture and increase legitimacy of his dynasty at the head of the notoriously closed Central Asian state. Though it is possible health concerns also played an important role, authoritarian leaders often tire from the day-to-day demands of a personalized political system and Turkmenistan is no exception. Berdymukhamedov Sr. nonetheless retains the title of ‘Arkadag’, or ‘Protector’ – similar to his predecessor Sapparmirat Niyazov, known as ‘Turkmenbashy’ or ‘Father of the Turkmen’.

New impulses in Russia’s favour. 

Searching for a relative boost in attractivity in light of neighbour Uzbekistan’s recent market reforms, Turkmenistan signed a joint investment agreement with Russia for 2021-2023. There has been even more cooperation under Serdar Berdymukhamedov – Russia itself is eager to appear less isolated. Serdar’s visit to Moscow in June 2022 heralded a ‘new era’ between the two countries and according to Turkmen Foreign Minister Rashit Mededov (cited in Caspian News), “Russia was, is and remains the largest world power in the global political arena” in Turkmenistan’s view.

Strategic cooperation in banking, high-growth industries. 

The two countries signed no less than 15 cooperation agreements in June of this year, covering banking and industries such as logistics, communication and agriculture. The Russian Central Bank and its Turkmen counterpart have signed a “Memorandum of Understanding” to inch forward on common standards of banking supervision and will now exchange information on Anti Money-Laundering issues and other “suspicious” transactions. This is particularly important in the context of Russia’s isolation by the West on the exchange of banking information.

No change on existing tariff-free trade with Russia.

The legacy trade Free-Trade Agreement (FTA) signed in 1993 with Russia is still in force and has not been revamped, though the Eurasian Economic Union (EAEU) has courted Turkmenistan’s membership but so far to no avail, despite the latter having acted as an observer in many EAEU meetings.

2022 Investment & Capital Markets Summary 

No access to international capital markets 

Accessing pools of capital remains a monopoly of the Turkmen state, though some countries’ interests (FX, insurance) are partially managed through local ventures and branches such as Turkmen-Turkish Bank, Iran’s Saderat Bank and Deutsche Bank. All contact with the world’s financial institutions and market infrastructure is concentrated within the state-owned Vneshekonombank (VEB – Foreign Trade Bank). Despite being a monopoly and likely mired in inefficiency, the VEB in theory is a full-spectrum commercial (and retail) banking business.

Switzerland as a future platform for exchange? 

Transactions via UBS AG appear as the natural choice for the Western investor: a multi-currency offer on top of a (more) neutral political stance guarantees its attractivity for those considering exposure to Turkmenistan. Regarding Russia and considering the measures taken against the two banks listed above, national currencies and proprietary communication systems will have to be used in lieu of SWIFT unless transactions can be made through unsanctioned alternatives.

Turkmenistan government has raised debt capital from other states. Ashgabat has a debt-to-GDP ratio of 11%, implying having turned to foreign creditors for some of its key projects. On top of its TCP and TAPI pipeline projects, these may include the “Ashgabat – White City” project, the Turkmenbashy International Seaport and the East-West transport corridor. A Q3 2021 presentation indicated Japan was Turkmenistan’s top investor (US$113 million or 48% of Turkmen debt portfolio), followed by South Korea (US$40 million, 17%) and Saudi Arabia (US$28 million, 12%).

Russia as the underlying driver of some direct investment projects. Though it is unclear whether Russian banks have provided capital for Turkmenistan, several capital-intensive projects have involved Russian companies in recent years, to which the joint 2021-2023 joint investment project have new life.


Typically running a deficit, Turkmenistan was a net exporter in 2021. Recent data suggest that imports rose 205%YOY to US$6.6 billion (versus US$3.2 billion in 2020) while exports hit nearly US$8 billion with a solid trade balance of over US$1.2 billion.

USD millions                 Imports          Exports          Balance 

Turkmenistan, 2021        6607                7815               1208

Source: OEC 

Gas-related volatility? 

Beyond its contingency on political relations, Turkmen trade results also depend on the importance and volume of gas exports booked on an arbitrary basis as new contracts come into force or demand for gas increases/abates.

2021 Turkmenistan main importers

US$ million Imports, 2021 Relative Importance, %
Turkey 1092 25
UAE 502 12
Russia 408 9
China 290 7
India 130 3
Other 1890 44

Latest available figures.

Source: CABAR.asia, SNG Today. 

Import figures correlate with the investment picture. 

Turkmenistan’s main source of imports is the same as its main provider of funds – Turkey. On a regional basis, Gulf countries are an important presence with UAE as a key goods hub, while Russia and China are a constant presence. Imports include finished products such as gas turbines, pharmaceutical products and harvesting machinery.

US$ million Exports, 2021 Relative importance, %
China 6018 75
Uzbekistan 414 5
Russia 351 4.5
Turkey 344 4
Other 860 11

Overleveraged to China on exports. 

Turkmenistan exports the vast majority of its produce – mostly Natural Gas – to China. Figures show an even split between other key commercial partners thereafter. Other exported produced include fertilizers and agricultural goods.

A new point of equilibrium in 2022. 

The most recent figures for 2022 have returned to negative territory for Turkmenistan, though with a significantly reduced deficit (-77% to 2020 figures, though this will increase) as exports to Russia continue to grow (up 35% YOY). An increase of over US$ 250 million versus Russia in an exceptional 2021 (especially on Natural Gas), and positive political signals in the run up to and after Serdar Berdymukhamedov’s takeover may have contributed to Russia regaining market share early this year over some of the countries typically responsible for Turkmenistan’s imports. This has led to a more balanced result for Russia-Turkmen trade slightly favoring Russia – for now.

High growth potential for unexpected sectors. 

The export category with the most growth this year has been in agricultural produce and specifically fruits and vegetables: according to Rosselkhoznadzor, imports from Turkmenistan have grown 30% YOY in volume terms this year. Such unexpected hikes may await other sectors of Russia-Turkmen trade.

High turnover, reduced deficit.

Our base case scenario sees Turkmen trade with Russia return to its structural deficit but with a significantly reduced spread (-30%) between imports and exports for Russia. This would indicate a more sustainable and healthy rhythm for Turkmenistan over the long-term as part of its export diversification strategy. Turnover will continue to remain high and oscillate around the US$1 billion mark, though the strength of the dollar in markets will be key to see if it breaks this plane.

Large spread between official and black-market rates 

Investors and visitors must be wary of the gap between official and market exchange rates in Turkmenistan. Tight control over foreign currency in the country has pushed rates up 80% on the black market. Increasing trade with foreign countries will mean a reform of the monetary system will be due – with a certain devaluation of the currency perhaps on the cards to bring the manat exchange rates back into government control. For the time being, Turkmenistan will have to continue being a rule-taker by operating in USD in practice both for price formation and exchange, though this may suit the ruling class just fine.

The Natural Gas Sector

Gas is strategic. Turkmenistan rests upon the 4th largest confirmed gas reserves in the world and Turkmenistan’s trade can largely be reduced to the question of Turkmen gas exports. Turkmenistan jockeys between foreign states in terms of gas exports: China replaced Russia as its largest importer in 2009 with the construction of pipelines to that extent (see below). Russia renewed its imports of Turkmen gas only in 2019 but with the aim to make a statement about its presence in the country.

Gas is a priority for Russia’s presence in the country. According to Russian ambassador Alexander Blokhin in late 2021, imports of gas from Turkmenistan by Russia increased to twice their typical yearly amount, going from 5 to 10 billion metres cubed – reaching 30% of Turkmenistan’s export total (see Fig. 8). While this alone reversed Turkmenistan’s deficit with Russia, it also signaled Russia’s desire to ramp up its relative importance versus top natural gas exporter China and Turkey as top creditor and source of imports. This is especially true as Russia is a net exporter of gas and has no real demand for Turkmenistan’s product other than to secure its hold on the country and better its relations with the Berdymukhamedov clan – a welcome post-Covid boost from Russia.

Increased dependence on Russia. 

Otherwise remarkably stable, Turkmen gas exports have strongly benefited from Russia and enabled it to go over a slightly poorer 2020 as Chinese and global gas demand abated. Russia’s relative importance has indeed doubled, and this can only be conducive to better treatment hereon as Serdar Berdymukhamedov’s treasury fills with Russian cash.

Russian expertise in operating oil and gas infrastructure is in demand. Gas exports are not the end-all for Russia’s energy presence in the country. Communication from the Russia-Turkmenistan summit in April highlighted certain companies already active and providing services in the country. These included Gazprom, who leads on gas purchases from Turkmengaz and “long-term” contracts. Lukoil is currently discussing being an operator for the oil and gas deposits at Dostluk in the Caspian Sea, while Tatneft offers its repair and maintenance services in-country. With Turkmenistan a Guest Attendee at the current Shanghai Cooperation Organisation Heads of State meetings currently being held in neighboring Uzbekistan, the jostling for influence in the country between Russia and China may have some twists and turns in it yet.

Constantin Duhamel is an analyst covering Eurasia. He may be contacted at 3cduhamel@gmail.com  

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