Turkmenistan: Economic implications of the Eurasian Economic Union formation for Turkmenistan. By N.M.

N. M. Graduate of the University of St. Andrews. Middle East, Caucasus and Central Asian Security Studies Program.

What started as a customs union between Russia, Belarus and Kazakhstan, the Eurasian Economic Union (EEU) transformed into an economic community with participation of Armenia and Kyrgyzstan, and now obtains more and more features of a regional political association where its locomotive Russia pressures for deeper integration and makes participants fearful that it will take over their sovereign political decision making. Now that Russia has an ambition of turning its project into a Eurasian Union, it’s important to consider what implication its policies and practices will have on non-member states such as Turkmenistan.

Unlike any other country, Turkmenistan adheres to the policy of positive neutrality which takes the form of political isolation and pursuance of economic self-sustainability. The attempts of the government to keep country’s economy integrated into the world resulted in participation in a short list of such economic and financial institutions as  ADB, EBRD, Economic Cooperation Organization, International Bank for Reconstruction and Development, Inter-American Development Bank, International Finance Corporation, ILO, IMF, IOM (observer), ISO (correspondent), Multilateral Investment Guarantee Agency, Organization of the Islamic Cooperation, World Customs Organization.[i] Most of these organizations do not work on narrow domestic economic reforms, and participation in their activities does not require drastic change in the current economic orientation and policies.

On the contrary, the Eurasian Economic Union is “Designed with the hope of eventually guaranteeing the free movement of capital and labour, the Eurasian Union is expected to have a say in the macroeconomic, financial, competition and energy policies of its members. The Commission is also in charge of harmonizing the bloc’s technical and sanitary standards, as the absence of shared and mutually recognized standards has proven to be a major obstacle to further economic integration.[ii]

Given country’s stable economic and political orientation, Turkmenistan does not consider participation in the EEU; however, it is important to examine whether there is any implications in the light of participation of Turkmenistan’s closest neighbor Kazakhstan. Therefore, this paper looks at the EEU as solely economic union without any political motivations. It considers what aspects of Kazakhstan’s integration into the EEU will affect Turkmenistan and how.

Regional infrastructure and trade: railways, pipelines, transit routes

Among one of the prominent cooperation projects between Turkmenistan and Kazakhstan is Iran-Turkmenistan Kazakhstan railway which shall create stronger grounds for regional cooperation and boost cross-country trade. The total cost of the project amounted to $1.13 billion with funds coming from the three governments, Asian Development Bank and loans from the Islamic Development Bank.[iii] The railway was launched in December 2014 with participation of three presidents Gurbanguly Berdymukhammedov, Nursultan Nazarbaev and Hassan Rouhani. The total length of the railway is 926 kilometres with 146 km in Kazakhstan, 700 in Turkmenistan and 80 in Iran. As country leaders state, the railroad shall increase the level of exchange of goods and services among countries in the east of the Caspian Sea, make the trade more economically justified and easier.[iv]

While this project, which is also called the “North-South transnational corridor” aims to promote cooperation among east Caspian states and link the Economic Cooperation Organization (ECO) member states to Shanghai Cooperation Organization (SCO), there isn’t many new trade options that the railroad opens for the countries amongst each other. The hope of the Iranian side is that “the railway would increase the volume of goods shipped between the three countries to 10 million tons a year, up from 3 million tons” without specifying what exactly the country will ship.[v] Turkmenistan emphasizes that the railroad will facilitate transportation of the oil refinery products, such as petrol and LGP[vi], as well as products of the chemical, construction and agricultural industries.[vii] As for Kazakhstan, the railroad is one of its many integration projects with the hope to deliver Kazakh oil to Iranian Persian Gulf and thus have oil transit routes through Turkmenistan.[viii]  Currently, Kazakhstan sees the project as establishing more connections to China.[ix]

Thus, each country has various expectations on the railway depending on its pre-existing most beneficial exports. Importantly, that while Turkmenistan and Iran have a long history of state exports of oil and gas with Turkmenistan supplying 5% of Iran’s total gas demand in 2007-2008[x] as well as continuous petty trade and travels to the health clinics conducted by local residents of Turkmenistan, the trade exchanges with Kazakhstan are limited to wheat and transit of the Turkmen energy resources through Kazakhstan to Russia.[xi] Hence, given absence of interdependence of Kazakhstan and Turkmenistan, the new railroad will not promote any closer cooperation than on the existing level between two states.

While Turkmenistan attempts to diversify its energy transportation routes, for Kazakhstan it becomes hardly possible to avoid China’s presence in country’s projects. The North-South transportation corridor is linked to East-West road project, which gives China wide opportunities to transit through Central Asia and now link not only to Russia but Iran as well. One can doubt it, but economic benefits will speak for themselves. The transit of goods through Central Asia takes about ten days comparing to 45 days via trans-Siberian railroad.[xii] Thus, it is also expected that the railroad will benefit more to the Chinese export business to Europe and ECO rather than boost regional cooperation.

Now, Kazakhstan’s integration into EEU clearly does not affect trade relations with Turkmenistan in terms of construction of new infrastructure to widen economic exchange and trade opportunities within the region. As stated in the EEU charter, its member states are able to establish bilateral relations with countries outside of the union.[xiii] Given low import-export exchanges between Kazakhstan and Turkmenistan, the possibility of high demand on the new infrastructural projects such as Iran-Turkmenistan-Kazakhstan is low and is needed for diversification of Turkmenistan’s energy export routes, as well as connecting Kazakhstan to the ECO and China rather than to the neighbouring Turkmenistan. In this case Turkmenistan benefits from the use of its territory for transit purposes and holds “integrational” discussions, but does not have to take proactive steps in actually implementing regional integration measures.

Migration

The government of Turkmenistan has not presented official data on the country’s census nor has there been made a statistics on the exact number of people immigrating abroad.[xiv] It is, however, remarkable that the percentage of Turkmen migrants abroad is lower comparing to its neighbouring CIS states with most of the people pursuing opportunities to travel to Europe, United Arab Emirates and Turkey, rather than CIS. Thus, according to the UN statistics, there are almost 250 000 immigrants from Turkmenistan worldwide in 2013 which is 6% less than in 1990.[xv] For comparison, it is 3 787 501 people from Kazakhstan abroad which is 23% more than in 1991.

An important aspect of the movement of Turkmen citizens abroad is the student body and their location. Thus, in 2006-2008, there were roughly 6000 students from Turkmenistan in Kyrgyzstan. In 2013, 10500 students from Turkmenistan studied in Ukraine,[xvi] 7 386 in Belarus[xvii] or 53% of the total foreign student body of Belarus, and more than 10000 in Russia[xviii]. No data was found on students in Kazakhstan, but one can expect a significant number of them as it is a neighbouring state with relatively affordable education. While the student body does not represent the migrating population, many of them bring families and consequently trade into the countries of their study. In addition, countries like Russia and Ukraine allow graduates of local higher educational institutions to apply for residence permits and citizenship. Thus, this creates a window of opportunity for Turkmen to immigrate into the countries of their studies for search of work placement in case they cannot find employment opportunities in Turkmenistan. While the regulations of EEU simplifies the process of entrance and obtaining work permits for its member states, the bilateral visa regimes with Turkmenistan remain in place. Therefore, Turkmen nationals are not expected to travel more frequently to Russia, Kazakhstan or Belarus than they currently do for educational and petty trade purposes.

Trade and drug trafficking

As one of the positive sides of opening of the country to regional cooperation, Turkmenistan actively promotes drug combat and supports initiatives on stabilization of Afghanistan. Country’s State Service for Drug Combat, now State Service for Protection of Security of Healthy Society of Turkmenistan conducts annual events of burning of the drugs seized by the service, and holds regular training and cooperative projects on regional and international levels.

With creation of the EEU, Turkmenistan’s borders will become the last frontier on the way of drug trafficking from Afghanistan and Pakistan to Russia and Europe. Given elimination of the border controls within EEU, the issues of drug trafficking from South Asia might become more pressing. In addition, weak border control in Kyrgyzstan will not serve as any protection from the smuggling of the illegal Chinese goods into the EEU space. Since Kazakhstan-Turkmenistan-Iran railroad is already in use, drugs and smuggled goods might end up in Turkmenistan via the regional transit routes. This will require increased security measures for Turkmenistan and extra customs control on the border with Kazakhstan.

Conclusion

While in general, the regional integration of Belarus, Kazakhstan and Russia with potential of joining by Kyrgyzstan, Tajikistan and Armenia, does not directly affect Turkmenistan, there is a limited number of implications that will not cause any change in the dynamics of regional trade or economics.

Most importantly, Kazakhstan’s participation in the regional integration process does not affect energy distribution routes within the region. While Turkmenistan used Soviet-era energy transit routes to transport its gas to Ukraine, the disagreements over gas supply occurred with the Russian government rather than with Kazakhstan which does not possess transit pipelines. Growing Chinese ownership of the energy transit lines in Central Asia eliminates conflict possibilities of Turkmenistan with its neighbours and members of EEU over share or use of the energy transit routes, but also creates a dependency of Turkmenistan on Chinese purchases, export and distribution in Central Asia. For these reasons, Turkmenistan aims to diversify its energy export routes. The country takes initiatives in increasing regional cooperation and incorporation of South Asia. Such initiatives include construction of the North-South transportation corridor, drafting and adoption of the UN Resolution on Reliable and Stable Transit of Energy, as well as multiple conferences and discussion on stabilization of Afghanistan.

Considering Kazakhstan’s performance within the Customs Union and now EEU, the World Bank suggested that Kazakhstan loses out on long-term productivity and development “as it trades less with the rest of the world and imports less technology from the more technologically advanced European Union.[xix]” With increased presence of Russian goods and services at Kazakh market, the country will want to diversify the list of its trade partners.[xx] Given weak economies of most of the EEU member states, neighboring Turkmenistan might become an option. In that case, the cooperation will grow on bilateral basis in the area of mutually beneficial export of energy and domestic production such as textiles and limited food stock, rather than within the EEU framework.

[i] Index Mundi, Turkmenistan International organization participation, http://www.indexmundi.com/turkmenistan/international_organization_participation.html

[ii] European Union Institute for Security Studies, Iana Dreyer and Nicu Popescu, The Eurasian Customs Union: The economics and the politics, http://www.iss.europa.eu/uploads/media/Brief_11_Eurasian_Union.pdf

[iii] Oil News, Железная дорога Казахстан-Туркменистан-Иран облегчит транспортировку энергоносителей в регионе, – президент Ирана, http://oilnews.com.ua/a/news/Zheleznaya_doroga_Kazahstan-Turkmenistan-Iran_oblegchit_transportirovku_energonositeley_v_regione_%E2%80%93_prezident_Irana/215481

[iv] Tehran Times, Iran-Turkmenistan-Kazakhstan railway to facilitate regional trade, http://www.tehrantimes.com/component/content/article/94-headline/119986-iran-turkmenistan-kazakhstan-railway-to-facilitate-regional-trade

[v] Ibid

[vi] News Central Asia, Energy Policy of Turkmenistan and the UN Resolution on Reliable and Stable Transit of Energy, http://www.newscentralasia.net/2013/05/23/energy-policy-of-turkmenistan-and-the-un-resolution-on-reliable-and-stable-transit-of-energy/

[vii] Ministry of Construction and Architecture of Turkmenistan, СОСТОЯЛАСЬ ЦЕРЕМОНИЯ ОТКРЫТИЯ ТРАНСНАЦИОНАЛЬНОЙ ЖЕЛЕЗНОЙ ДОРОГИ КАЗАХСТАН-ТУРКМЕНИСТАН-ИРАН, http://www.construction.gov.tm/ru/node/52

[viii] Silk Road Reporters, John C. K Daly, Central Asia Gets its First Access to the Sea, http://www.silkroadreporters.com/2014/11/18/central-asia-gets-first-access-sea/

[ix] IRNA, World trade share of Iran, Turkmenistan, Kazakhstan to grow, http://www.irna.ir/en/News/81412317/

[x] Startfor Global Intelligence, Iran: A Natural Gas Pinch, https://www.stratfor.com/analysis/iran-natural-gas-pinch

[xi] Observatory of Economic Complexity, http://atlas.media.mit.edu/profile/country/tkm/

[xii] Silk Road Reporters, John C. K Daly, Central Asia Gets its First Access to the Sea, http://www.silkroadreporters.com/2014/11/18/central-asia-gets-first-access-sea/

[xiii] Eurasian Economic Commission, Договор о Евразийском экономическом союзе, 01.01.2015.

[xiv] DemoSkope Weekly, http://demoscope.ru/weekly/2014/0581/barom06.php

[xv]  United Nations, Department of Economic and Social Affairs (2013). Trends in International Migrant Stock: Migrants by Destination and Origin (United Nations database, POP/DB/MIG/Stock/Rev.2013.)

[xvi] Censor.Net, Большинство иностранных студентов в украинских вузах – из Туркменистана, Китая и Индии, http://censor.net.ua/news/244395/bolshinstvo_inostrannyh_studentov_v_ukrainskih_vuzah_iz_turkmenistana_kitaya_i_indii

[xvii] Belta.by, Viktor Yakzhyk, Число иностранных студентов в Беларуси за 5 лет увеличилось вдвое, http://www.belta.by/ru/person/interview/Viktor-Jakzhik_i_0000514077.html

[xviii] Slon.ru, Douglas Bloom, Может ли Россия конкурировать с Западом за азиатских студентов? http://slon.ru/russia/mozhet_li_rossiya_konkurirovat_s_zapadom_za_aziatskikh_studentov-1111860.xhtml

[xix] Carnegie Moscow Centre, Jakob Muratov, A Cautiously Happy Kazakhstan: Eurasian Economic Union Implications, http://carnegie.ru/eurasiaoutlook/?fa=56273

[xx] Eurasian Economic Commission, http://www.eurasiancommission.org/en/Pages/ses.aspx

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