Arbitration Reveals How Turkmenistan Plays Chicken with Investors
A German national’s successful lawsuit against Turkmenistan’s government after Ashgabat expropriated his poultry farm offers insight into some of the unusual tricks the isolated Central Asian country can hatch on investors.
The Washington D.C.-based International Center for Settlement of Investment Disputes found in favor of Turkish-born German businessman Adem Dogan on August 12, Investment Arbitration Reporter (IAReporter) wrote last month. The amount of the award was not disclosed.
Dogan entered the Turkmen market in 1999 during the reign of the capricious Saparmurat Niyazov—who fancied himself Turkmenbashi, the “Father of the Turkmen.” Working with a local partner, Dogan’s egg farm soon became the largest of its kind in Turkmenistan, a country that sources most of its eggs from neighboring Iran.
According to a 2008 report by Bloomberg, not everyone was thrilled with Dogan’s project. Rather than seeing the farm as a way to ensure food security, Niyazov saw its success as a national humiliation. Citing transcripts of cabinet meetings in the totalitarian country, Bloomberg noted that “Niyazov harangued ministers, asking them why it took a foreigner to run a successful chicken farm.”
The project fell apart after control over the farm’s lease was transferred from the Ministry of Agriculture to the Ministry of Defense. Turkmenistan’s army chiefs “began to pressure the operators for a share of profits, and later, for ownership of the entire firm” with “godfather-style offers,” according to IAReporter’s brief on the court hearings.
Niyazov’s administration began moves to expropriate the farm just before he died in late 2006. In the end, the government chose to annihilate the successful operation rather than take it over: “The farm operation was physically shut down, its equipment dismantled, and the site razed,” according to IAReporter. Dogan’s eggs soon disappeared from Turkmen grocery stores.
Throughout the process of expropriation and during the trial itself, in which no Turkmen officials gave testimony, the Turkmen government and the Defense Ministry in particular were “obdurate,” according to Dogan. Even German diplomacy seems to have had little effect. Requests by Germany’s ambassador at the time, Hans Mondorf, to respect a bilateral investment treaty and clarify the legal basis for expropriation received rude responses. “We need no legal basis, this is a demand of the government of Turkmenistan,” one defense official reportedly told Mondorf.
Dogan’s was not the only poultry farm suffering from erratic government behavior around that time. According to a leaked US diplomatic cable dated September 2006, Altyn Hilal, owned by local businessman Ahmet Charyev, suffered an “involuntary five-month hiatus” due to “a covert [import] ban” on poultry products, including the Iranian eggs the firm needed to produce its chicken for the domestic market. This shortage left Turkmen eating aged, expensive chicken before Altyn Hilal was allowed, apparently covertly, to import eggs again.
Attempts to reach Dogan failed. But from its aloof response to the court hearings, it seems unlikely the Turkmen government, one of the most isolated and opaque on the planet, will quickly pay up.
Chris Rickleton is a journalist based in Almaty.