United States Investment in Turkmenistani Developments


Emily Rodgers

  

Copyright 2019 by Emily Rodgers

  
 

Photo of Turkmenistani city.

What came first: the Soviet Union, or the treasure trove of natural gas? That question might be a little more complicated to answer than it seems. In the Russian Revolution of 1917, Turkmenistan began its transformation to a totalitarian Leninist society. As its status as an Autonomous Soviet Socialist Republic dissolved, Turkmenistan became a republic of the Soviet Union, and its modern borders were formed. After the dissolution of the Soviet Union in 1991, Turkmenistan gained independence and Saparmurat Niyazov claimed the title of Absolute Ruler of the Turkmen for Life, until his death in 2006. During the leadership of Gurbanguly Berdimuhamedow, Niyazov’s successor, the South Iolotan natural gas field was discovered. As the second largest natural gas field in the world, the South Iolotan field provides an incredible source of revenue and resources for both market creation and potential trade partnerships. Sharing borders with both Iran and Afghanistan, Turkmenistan lies in an interesting location in the heart of the Middle East and Central Asia. This treasure trove of natural gas is in the middle of a region in which America has very little ties. However, would pursuing a trade partnership with a country in a politically unstable region cause America unnecessary national stress? How has Turkmenistan’s history impacted its potential in future relationships? In what ways would the United States benefit from bilateral relations with Turkmenistan?

Before briefly outlining the complex answers to these questions, the following point must be addressed: both the United States and Turkmenistan would profit greatly in forming a trade partnership. The United States currently suffers from a rapid depletion of natural resources, and severe environmental impacts that come alongside it. The oil and gas imported from Canada are charged much more than their true value, causing the U.S. to squander unbelievable amounts of money on a yearly basis. Turkmenistan, though in a seemingly inopportune geographical location and an unlikely candidate as a political ally, maintains an incredible trade deal with China, charging a fraction of what the United States pays Canada for less gas. There are many reasons that a trade relationship between America and Turkmenistan would be advantageous, especially economic, as using Turkmenistani gas as the country’s main source of energy would save billions of dollars every year, environmental, as importing gas harvested in Turkmenistan saves the United States from thousands of tons of pollution produced yearly, and geopolitical, as Turkmenistan provides an importantly neutral territory in the center of Iran and Afghanistan.

Burdened with a constant and high demand for natural gas, the United States consumes about 27.5 trillion cubic feet per year, and produces only 28.4 trillion cubic feet (Electric Power Monthly, 2019). The U.S. Energy Information Administration predicts that America only has enough natural gas to last the next 90 years. In addition to this, natural gas consumption levels are consistent year-round. In spite of the fact that 46% of marketed gas was distributed to commercial and industrial companies, 33% was utilized by electrical power generators and 21% by residential consumers. Natural gas sold directly to common citizens is typically expended in winter months, but as the popularity of electricity produced by natural gas rapidly grows, this resource is depleting in incredible quantities without break (Electric Power Monthly, 2019).In the November of 2018, the Energy Information Administration states that 1.5 billion megawatts of electricity were generated using natural gas, compared to the 1.1 billion megawatts produced by coal. In 2008, .8 billion megawatts were manufactured with natural gas, while 2 billion were generated with coal (Electric Power Monthly, 2019). Although increasing the consumption of natural gas would create a minimal amount of pollution and carbon dioxide emissions, especially in respect to coal, and provide a more environmentally efficient source of energy, American gas reserves produce considerably less resources than are utilized, so there will soon be a shortfall. As the exhaustion of the United States Gas Reserve is coupled with increasing natural gas demand, immediate action needs to take place.

Turkmenistan houses the world’s second largest natural gas field, the South Iolotan field, after the privately owned South Pars field in Iran (Turkmen Gas Field to Be World's Second-Largest, 2011). This reserve has an estimated 21 trillion cubic meters, or 741.61 trillion cubic feet (Turkmenistan, 2019). Natural gas production in Turkmenistan exceeds domestic consumption exponentially, especially with little internal market, allowing the country to export the remaining production for an incredibly large revenue. In recent years, discovery and initial cultivation of this natural gas field has rendered Turkmenistan as one of the world’s fastest growing economies. Production and exports have steadily improved since 2010, mainly because of the development of the Central Asia—Center Gas Pipeline System. This system of natural gas pipelines, running from Turkmenistan to Russia, provides resources for almost all of Uzbekistan and Kazakhstan. Another major revenue source for Turkmenistan is the Central Asia — China Gas Pipeline. Not only benefiting the Turkmenistani economy, the transportation of gas aids China in meeting national energy demands and protecting the overall consumption structure. Because of the boost in natural gas consumption, China’s smoke, dust, and carbon dioxide emissions have been greatly reduced. The Chinese National Petroleum Corporation stated that because of this business agreement, pollution has decreased by over 133 million tons. Turkmenistan’s vast resources attract a multitude of foreign companies seeking business in natural gas operations (Central Asia Pipeline to Secure Gas for China, 2016). Just as the utilization of Turkmenistani gas has helped China, importing these resources can help the United States. America would be able to reap the same benefits, both environmentally and economically.

The Government of Turkmenistan, however, has not established much-needed reforms to foster an inviting investment climate. As an incredibly closed society, the authoritarian political system and centralized economy have caused progress towards improvements to be sporadic and ineffective. For example, onshore natural gas production sharing agreements have cycled through the bureaucratic system for decades, prohibiting any long-term trade relations. Due to this, many foreign companies and investors feel unwelcome and refrain from forming business agreements with the Turkmenistani Government. The United States Government, nevertheless, has been able to form an amicable and generally favored trade agreement with Turkmenistan (U.S. Relations With Turkmenistan, 2018). Before Turkmenistan gained independence in the dissolution of the Soviet Union, the United States established a dual-taxation convention, which is still upheld between the two countries today (U.S. Relations With Turkmenistan, 2018). This helps in maintaining a positive trade relationship for future business endeavors.

A bilateral trade relationship with Turkmenistan would benefit the United States economically as well as physically. Canada, from where the United States imports majority of its foreign natural gas, has been consistently raising the price of natural gas and crude oil in an attempt to reduce its trade deficit. In the past two years, cost of these resources has nearly doubled, rising 9.4% in the past July alone. Natural gas imports from Canada average at about 8 billion cubic feet per day, making up close to 97% of all U.S. natural gas imports. As the United States depletes its own natural resources, reliance upon Canadian imports increases. According to the U.S. Energy Information Administration, the value of American energy imports from Canada is a staggering 53 billion dollars (Canada is the United States’ Largest Partner for Energy Trade, 2017). 

                                       


The chart above, titled U.S. Imports by a Country of Origin, shows how the quantity of Canadian oil and gas imports has rapidly increased in the United States over the past two decades. This is measured in thousands of barrels.


The chart above, titled Landed Costs For US Foreign Oil Imports, shows the landed costs for U.S. foreign oil imports, meaning that it does not take transportation costs into consideration. America spends an average of 42 dollars per barrel, between two Canadian oil companies: Cdn Light Sour, and Cdn Bow River. This coming year, Turkmenistan is scheduled to supply China with 1412.59 billion cubic feet of oil, averaging at almost 4 billion cubic feet per day. Trade with Turkmenistan will cost China only 5.4 billion dollars in 2019, around 20% of the amount that America pays Canada for the same amount of gas. Even comparing the costs of transportation of gas between the United States and Canada, and the United States and Turkmenistan, Turkmenistani gas would cost a fraction of the price of what we currently pay.

Because the cultivation and combustion of natural gas would take place in Turkmenistani territory, the United States would reap the benefits of these resources while Turkmen suffered the environmental toll. Although the emissions from natural gas production are miniscule compared to those of coal and oil, it is still a fossil fuel and capable of extreme environmental damage. The extraction and transportation of natural gas causes massive leakages of methane, a naturally occurring gas that is 34 times stronger than carbon dioxide. Unconventional gas development poses many health risks to nearby communities with the contamination of drinking water during the drilling, fracking, and refinement processes. Naturally occurring radioactive gases, methane, and other underground materials can leak into drinking water supplies during these processes as well. Though this sounds unethical, Turkmenistani president, Gurbanguly Berdymukhamedov, has been quoted stating, “The South Iolotan field is so big that it can sustain several developments in parallel”. In addition to this, the Iolotan gas field is relatively isolated from major cities and infrastructure, though many people live and work on-site.
 On this map, a red mark shows where the gas field is located.
On this map, a key explains that most of the densely populated cities are few in number and a far distance away from South Iolotan. There is, however, a large population living on or adjacent to the field’s vicinity, as the natural resource industry is Turkmenistan’s largest employer. This dilemma raises a very difficult question: Are the environmental damages significant enough to cease interest in Turkmenistani natural gas? Do they affect a large enough population of people to end investment in this otherwise mutually beneficial deal? With these ideas in mind, one must also consider the environmental damages faced by the United States in domestic gas production.
This map depicts every location in which the United States holds domestic energy resources, such as onshore oil and gas, offshore oil and gas, and coal.
On this map, a key shows that there are many densely populated cities throughout the entire country, but mainly on the East Coast. The area in which the United States holds the largest Oil and Gas fields, stretching through New York, Pennsylvania, Ohio, West Virginia, Virginia, Maryland, New Jersey, Kentucky, and Tennessee, expands through the most populated parts of the country. Along the West Coast, a large amount of offshore oil surrounds one of America’s most populated states: California. Oil production not only affects Californian marine life, but also the quality of life on land. From air pollution to water pollution, all populations are affected by the process of constantly producing an incredible amount of domestic energy. If the United States were to continue fracking oil and gas and mining for coal at the rate it currently is, not only would its natural resources quickly be depleted, but also its environment would face even more strain. Though increased Turkmenistani development of the South Iolotan gas field would have severe environmental impacts, importing natural resources protects American domain.


An effective solution to this problem would be for America to pursue trade with Turkmenistan only if environmental safety, infrastructure, and development are improved. The United States, with a history of demanding both fracking and labor improvements before continuing international trade, would refuse to further their relationship with Turkmenistan unless environmentally sound developments were established.

What Turkmenistan has in natural resources, it severely lacks in infrastructure. The country continues to utilize outdated Soviet-era technology, such as dilapidated railway cars, insufficient road signalling, and extremely limited communication lines. In order to solidify the United States’ already strong relationship with Turkmenistan, the U.S. could easily loan money, labor, or materials needed to help advance Turkmenistani infrastructure. Already, change for the better is occurring in this Central Asian nation. With the recent development and repair of many transportation systems, Turkmenistan is quickly working out of its infrastructural deficit. If the United States were able to contribute even a minute amount in the expansion of transportational means, international ties between the two countries would be greatly reinforced. At the moment, the United States is perfectly situated to form these relations. The sole government-managed airline of Turkmenistan is Turkmenistan Airlines, composed only of American Boeing aircraft. As air transport carries over two thousand Turkmen passengers per diem, America is creating incredibly necessary, however underrated, relationships with every-day Turkmenistani life. Not only benefiting them, the United States is maintaining a positive position for future trade deals. In the past few years, Turkmenistan has also been attempting to develop a stronger railway system, but finding major trouble establishing passenger lines. As of now, Turkmenistan has five railway links: three cargo lines, one passenger line, and one line that has been halted indefinitely. The lack of an efficient passenger transport system for national travel not only leads to economic problems, but many social issues as well. The major cities of Turkmenistan (shown on the population map) are separated by large expanses of desert, making short distance travel nearly impossible. Though certain carrier systems have rapidly evolved to consider international and material transportation, the primitive state of Turkmenistan’s railway system suppresses its growing economy. The United States, which has all of the necessary means to help Turkmenistan and more, would be able to solve these problems with little consequence. Whether it be by selling the Turkmenistani government the required materials to repair and improve these dilapidated infrastructures, or loan the money to further develop the transportation projects in place, the United States would be able to insert itself into Turkmenistan’s economy by helping societal advancements. Another benefit to these contributions towards improving Turkmenistani infrastructure and economy would be to increase their capitalist incitement. Third world countries with a rapidly improving economy are proved time and time again to generate more trade and a larger market for their international partners.

Turkmenistan’s location, nestled above Iran and Afghanistan, creates substantial security concerns regarding diplomatic relations between it and the United States. However, as one of the most strictly censored and politically isolated countries in the world, Turkmenistan retains a neutrality between opposing sides in the War on Terror. Officially declaring neutrality and abstinence from foreign military aid, Turkmenistan is successful in maintaining internal peace in an extremely geographically challenging location. Saparmurat Niyazov, Berdymukhamedov’s predecessor, used revenue from the country’s vast natural resources to finance internal security, to instill extensive and unfaltering propaganda, and to distribute necessities such as food, clean water, medical care, and electricity to Turkmen for no cost. As Berdymukhammedov closely follows the path that Niyazov had paved, Turkmenistan remains as an incredibly secure environment. If America follows in China’s footsteps, pursuing offshore trade relations with Turkmenistan, America would not be put in a position of danger or threat. Though this system of extreme oppression may negatively impact Turkmen, rendering them citizens of an intensely authoritarian society, it helps create a positive diplomatic environment for a country in an extremely perilous location. As Turkmenistan claims neutrality, it also provides a uniquely safe territory, close to Iran and Afghanistan, for the United States to be able to monitor happenings in the Middle East and Central Asia. An ally in this region would give the United States a stronger foothold in an area where they currently have no relations.

This area of the globe could give rise to political problems, which is why the United States would very clearly benefit from a diplomatic relationship with the nation of Turkmenistan. Because of both lack of internal natural resources and the high prices of imported Canadian oil, America is not currently in an ideal position, hemorrhaging tens billions of dollars every year. Considering the logistics of China’s current trade partnership with Turkmenistan, even with the costs of transportation, prices of Turkmenistani gas would cost a fraction of the prices that America currently pays. Though Turkmenistan exudes an unwelcoming investment environment, the United States have already established a level of mutually favorable economic and social agreements. The United States provides Turkmenistan with the entirety of its airline aircrafts, helping develop Turkmenistan’s much-lacking infrastructure. However, in order to truly initiate amicable relations, America needs to aid Turkmenistan in further advancing its Soviet-era technology. Geopolitical challenges may seem to make all of these efforts futile, but when taking Turkmenistan’s neutral position as a safely authoritarian country into account, its location between Iran and Afghanistan has little to no impact on domestic occurrences. Trade relations between the United States and Turkmenistan would not only save the U.S. from its looming resource crisis, it would also help the U.S. gain a powerful ally in Central Asia, and Turkmenistan one as a global superpower.

Works Cited

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Emily Rodgers is a high school senior with a passion for political nonfiction. She has an  interest in journalism and international relations, and hopes to pursue those subjects in college. 



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