Country profile: Turkmenistan

Central Asia is loosely defined as including the countries of Turkmenistan, Uzbekistan, Tajikistan, Kyrgyzstan, Kazakhstan, and Afghanistan. The energy sectors of Turkmenistan and Uzbekistan are covered briefly in the Caspian Sea Region Brief, but this report discusses these two countries’ growing energy sectors in greater detail. Turkmenistan and Uzbekistan sit on large reserves of oil and natural gas, yet both countries face a myriad of challenges in bringing those reserves to world markets. Both countries are geographically far from the end-use markets they serve and lack sufficient pipeline infrastructure to export more hydrocarbons. Also, other hydrocarbon-rich Central Asian and Caspian states with more favorable investment climates and greater access to markets pose competition for Turkmenistan and Uzbekistan. Both countries are eager to diversify export routes for their resources outside of the Russian-controlled pipelines, but each must seek to obtain capital, technical assistance, and political support for alternative pipelines. The most recent political shift in the region, the death of former President Saparmurat Niyazov (also referred to as Turkmenbashi) in December 2006 and the election of Gurbanguly Berdymukhammedov in early 2007 have sparked new interest and hope for a stable environment for foreign investors in Turkmenistan’s oil and gas sector. Turkmenistan’s new leadership is renewing diplomatic relations with Russia, China, Europe, the US, and other Central Asian neighbors after 15 years of isolation. Foreign energy firms experienced extreme political challenges and investment impasses during Niyazov’s era, and several exited the country leaving a dearth of investment. Since Berdymukhammedov became president, there have been modest signs of a more business-friendly environment, and international competition for Turkmenistan’s hydrocarbon industry has intensified.