beyondbrics

Don’t expect any surprises at Turkmenistan’s presidential election this weekend. Gurbanguly Berdymukhammedov, who has ruled the gas-rich country since 2007, will almost certainly win a landslide victory at the poll that is shaping up to be a charade even by central Asian standards.

Seven candidates are standing against Berdymukhammedov, but all are members of the slavishly loyal Turkmen elite. Campaigning for the country’s top job, they have not breathed a word of criticism about the incumbent president. The Organisation for Security and Co-operation in Europe has decided not to deploy an observer mission. After a recent mission to Turkmenistan, the 57-country human rights watch dog said it could not add value to the poll, citing a lack of freedom and competition.

In his manifesto Berdymukhammedov pledged to promote democratic reforms and diversify Turkmenistan’s economy away from oil and gas. Turkmenistan, ranked as one of the most repressive countries in the world and among the riskiest places to do business, has a long way to go to achieve the president’s goals.

Berdymukhammedov has launched tentative reforms since succeeding the dictatorial former president, Saparmurat Niyazov, who died of heart failure in 2006. Hospitals, closed by Niyazov on grounds that Turkmens never ailed, have reopened and pensions have been restored. Opera is no longer banned.

Unlike the reclusive Niyazov,  Berdymukhammedov has travelled widely, courting foreign governments for investment. In most capitals he has received a warm welcome – Turkmenistan sits on the world’s fourth biggest gas reserves and is a big spender on grandiose development projects.

European and Turkish firms are taking advantage of a construction boom to compete for contracts to rebuild Turkmen cities. In Ashkabad, the capital, huge sums have been spent on new government buildings, a concert hall and a lavish new presidential palace. On Turkmenistan’s Caspian coast Berdymukhammedov has ordered construction of a $4bn luxury resort.

China has scooped the biggest energy deals in Turkmenistan – winning a contract to develop a vast gasfield in the east of the country in exchange for billions of dollars of loans. International oil majors are jostling for rights to explore for oil in the Caspian Sea shelf, although few deals have yet materialised.

Although more open to foreign investment than Niyazov, Berdymukhammedov has done little to clean up Turkmenistan’s murky business environment. In diplomatic cables revealed by WikiLeaks, US officials complained that foreign businessmen were being charged ever higher bribes to secure contracts and permits.

Most investors are secretive about their dealings in Turkmenistan. But MTS, Russia’s biggest mobile telephone operator, is gearing up for a fight after losing the right to operate in Turkmenistan where it was, until last year, one of the biggest, non-oil investors. “The tone, course and timing of talks have led us to the conclusion that Turkmenistan does not seriously intend to resume our operations or provide any compensation for the loss of our business,” said Joshua Tulgan, MTS director of investor relations. “Our only choice at this point is to pursue our claims in international arbitration.”

Turkmenistan was ranked together with Myanmar, North Korea and South Sudan among the world’s most risky countries to do business in a listing compiled by Maplecroft, the UK-based risk analysis consultancy. Publishing the Rule of Law Index 2012, Maplecroft warned that energy investors in Turkmenistan needed to be “extremely cautious.”

Related reading:
Turkmenistan gets closer to China, beyondbrics
Turkmenistan to end personality cult, FT
Turkmenistan caught behind the times, as ‘frac’ reshapes the global gas industry, beyondbrics