Country overview

Turkmenistan is on the eastern shore of the Caspian Sea, bordered by Iran to the south, Afghanistan to the southeast, and Kazakhstan and Uzbekistan to the north. The country occupies 491 200 square kilometres (km2) (http://science.gov.tm/turkmenistan/), more than 70% of which is desert, with a population of 5 291 317 as of July 2016 (https://www.cia.gov/library/publications/the-world-factbook/geos/tx.html). Turkmenistan's five administrative provinces (or velayat) are: Akhal, Balkan, Dashoguz, Lebap and Mary. The capital city, Ashgabat, is the largest and most populous city in Turkmenistan.

Turkmenistan gained its independence from the Soviet Union in October 1991, and in May 1992 adopted its own Constitution. In December 1995, at the 50th session of the United Nations (UN) General Assembly, Turkmenistan received neutrality status and thus became an independent, sovereign, neutral state subject to international law. It proclaimed itself a democratic secular state governed by rule of law but retained a Soviet-style centralised planned economy, which has been largely autonomous since the country became independent.

Turkmenistan is one of the largest gas resource holders in the Caspian region and has the fourth-largest total offshore and onshore gas reserves in the world after Iran, Russia and Qatar; it also has significant recoverable oil. Its economy depends heavily on gas, oil and petrochemical production and export and, to a lesser degree, on cotton and textiles. Around 85% of total exports are gas and oil. As the government controls most of the economy, the private sector is underdeveloped, with some private businesses in food processing, consumer trade and services only. Foreign investment in the gas and oil sector is through production sharing agreements (PSAs) with the Turkmen government.

Real gross domestic product (GDP) grew an average 9.8% per year from 2002 to 2015, placing Turkmenistan among the world's fastest-growing economies. As a result, the country gained upper middle-income status in 2012, with real gross national income (GNI) per capita of USD 7 380 in 2015 according to the World Bank (http://data.worldbank.org/country/turkmenistan). Strong economic growth has led to investment in physical infrastructure, including energy infrastructure. Part of continued government investment in oil and gas is a large project to modernise and expand the electricity and heat sector by 2020. According to its Oil and Gas Development Plan to 2030, Turkmenistan's gas production will increase to 250 billion cubic metres (bcm) by 2030 and oil production is expected to be 110 million tonnes (Mt).

Despite a lack of official data regarding the effects of the oil price drop in 2014, there are signs that overall growth has been generally affected. Following the drop ​in oil prices, the Turkmenistan manat (TMT) lost 30% of its value in relation to the US dollar (USD) according to the official rate. In addition, it became extremely difficult to exchange currency: local currency cannot be exchanged, but citizens may charge up to TMT 1 000 per month to a VISA card. This has created complications for entrepreneurs and local markets, so most products are imported. Although there is local milk, bread and sausage production, and some local textile work, 60-70% of products are still imported and the prices of all products have doubled or tripled.

Furthermore, the negative investment climate caused many foreign companies working in Turkmenistan to leave the country while retaining a representative presence but not conducting any actual activity (RWE, Bonatti, etc.), and other companies have cut employment considerably (Schlumberger, Dragon Oil, Buig, etc.).

The energy sector is almost fully subsidised, with citizens receiving free electricity, heat and gas up to a certain level of consumption. These subsidies were introduced after independence and have been guaranteed until 2030, but the government is taking steps to reduce subsidies before 2030 to curb domestic demand and encourage export growth.

A Memorandum of Understanding and Co-operation in the Field of Energy between the European Union and Turkmenistan was signed in May 2008. Regional energy co‑operation between Turkmenistan and the European Union takes place within the framework of the Baku Initiative, which provides for political dialogue between the European Union and the countries of the littoral states of the Black and Caspian seas and their neighbouring countries.

See also Energy Policies Beyond IEA Countries - Eastern Europe, Caucasus and Central Asia 2015

Go to the Sankey Flow of Turkmenistan​

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