Fifth in a Five-Part Series
Turkmenistan sits upon around one-tenth of the world’s proven natural gas reserves. Tajikistan is so poverty-stricken that around half its adult male population is forced to travel abroad in search of work.
Even with their starkly different economic profiles, the two countries share a common feature: a growing and possibly irreversible dependence on China.
The closed nature of Turkmenistan’s economy makes outlining its position uncertain, but the essential importance of its energy exports is beyond doubt. A glance at International Monetary Fund export data for 2014 tells a story. Turkmenistan’s exports to China reached $8.65 billion. In a distant second place was Turkey with $567 million.
“Turkmenistan is becoming increasingly dependent on China — indeed, it is hard to see what significant sources of income it has apart from those gained from gas exports to China, and loans provided by China,” said energy analyst John Roberts.
Ashgabat has over the years burdened itself by taking on copious debt from Beijing in exchange for future gas supplies.
A turning point occurred in 2009, when a pipeline explosion in Turkmenistan ruptured gas supplies to Russia. That incident sparked a row that has never quite been resolved. Turkmenistan’s state company Turkmengaz then took out loans worth billions of dollars from the Chinese Development Bank.
Turkmen leaders appear to be willing to take on more debt.
“In 2013, when [Turkmenistan] secured the contracts to develop the second phase of [the] Galkynysh [field], CNPC agreed to develop it as a 30 [billion cubic meters (bcm) per year] program of which 25 bcm/y is to be supplied to China. At the same time, negotiations were begun with the State Development Bank of China for project financing,” Roberts said.
If expectations are that Beijing’s deep involvement in Turkmenistan presage boom ties, Ashgabat may have to brace for a cold shower. “Chinese purchases are not growing significantly. This tells me that China is not interested in entrenching this relationship of dependency,” said Luca Anceschi, a lecturer in Central Asian Studies with the University of Glasgow. “This dependency is ultimately the Turkmens’ fault — when they signed the deal with CNPC, they must have got confused between investment and loan, and they’re now wondering why their revenues are shrinking.”
Turkmenistan’s exit strategy from this corner hinges in large part on the development of alternative gas export routes, including the trans-Afghan TAPI route and the Europe-oriented trans-Caspian pipeline. For financial, political and security reasons, however, neither of these options appear realizable over the near term.
Tajikistan operates from a position of greater vulnerability.
It was all smiles this week though on the sidelines of the Shanghai Cooperation Organization summit in Tashkent.
“Trade turnover between [Tajikistan and China] reached more than $200 million in the first three months of 2016,” Tajikistan’s presidential administration said in a statement on June 23 after a meeting between Tajik leader Emomali Rahmon and Chinese President Xi Jinping. “Moreover, certainty has been expressed that through joint efforts, that indicator could be increase to $3 billion [per year] by 2020.”
That is a bold prediction given that the total-year figure for 2015 was $793 million. Most of those goods are going from China into Tajikistan. Only around 8.5 percent of Tajikistan’s overall exports go to China.
Again, the growing importance of China does not necessarily reflect health in Tajikistan’s economy, but the retrenchment of traditional partners like Russia. Chinese direct investments into Tajikistan in 2015 came to $273 million — 58 percent of the overall total. Russia’s direct investment dropped to a total of $35 million in 2015, down to a proportion of 7.4 percent from 30 percent in 2010.
Russia will remain a core element of Tajikistan’s economic survival as long as hundreds of thousands of Tajik laborers earn their incomes there, but figures on remittances over the past couple of years hint at a major shift. Russia’s Central Bank announced in March that the amount of money transferred to Tajikistan last year had fallen almost 67 percent, from $3.8 billion in 2014 to $1.28 billion in 2015. The figure in 2013 was $4.16 billion.
Half of Tajikistan’s $2 billion in external debt is owed to Russia.
The potential consequences of Tajikistan’s growing economic reliance on China came into sharper focus in 2011, when Dushanbe agreed to hand over around 1 percent of its territory to Beijing in exchange for having some of its debts forgiven. On the positive side for Dushanbe, China has shown that it puts its money where its mouth is.
In the most recent development, construction began earlier this month on a metals processing plant in the northern town of Istiqlol, which is being completed with $200 million dollars of Chinese cash. Tatyana Panteleyeva, head of the economic development department in the Istiklol city administration, said that was only the start. “Here, across 70 hectares of land, there are plans to create a Tajik-Chinese industrial zone. We will build five industrial enterprises,” Panteleyeva was quoted as saying by RFE/RL’s Tajik service, Ozodi.
The government announced earlier in 2016 that China plans to plow $500 million into building seven industrial concerns in the north of the country.
The government has over the past few years steadily crushed all semblances of opposition and cracked down on independent media. Consequently, public discussion about the potential excess of Chinese economic influence over Tajikistan has been largely sidelined, relegated to hushed grumbling and the objections of marginal opposition elements.