Turkmenistan hopes for oil bonanza

Turkmenistan: hidden wealth under traditional society

By the BBC's Adam Kirtley

Very few people from the West have ever visited Turkmenistan, fewer still will know much about it. Yet this small country, situated between Iran, Afghanistan and Russia, is actually very significant, at least potentially. It has huge reserves of gas and oil.

Turkmenistan, a former Soviet republic, became independent in October 1991. The capital is Ashgabad, which nestles in semi desert just north of the Kopet Dag mountains which form the border with Iran.

Turkmenistan is still a tradtional society

The population is just over 4.5 million, mainly Turkmen. It is the 10th largest producer of cotton in the world, and pomegranate trees can be seen everywhere.

The most significant thing about Turkmenistan though is its natural resources - especially oil and gas. Indeed it is thought that it has the fourth largest gas reserves in the world.

The problem is that although it is sitting on a gold mine - or an oil and gas mine - there is little stability in the surrounding area and little chance of getting those reserves to the open market.

Russia's grip

The only pipeline at the moment is via Russia, controlled by the huge former state company Gazprom.

President Niyazov: balancing act between Russia and the West

Indeed, Turkmenistan's lack of economic development is mainly because Russia refused to allow gas exports to hard currency markets.

This was made worse by the fact that Turkmenistan's only customers were Russian ones that couldn't afford to pay.

Not surprising, then, that the government has hopes from the new situation in Afghanistan. A stable Afghanistan could provide a pipeline route to the coast in Pakistan.

However things are changing in Russia, and Turkmenistan, though it is officially neutral, is very careful to keep relations with Russia sweet.

Indeed Turkmenistan's president Saparmurat Nyazov was in Moscow in the middle of January for a meeting with President Putin. Much of the talking was about strengthening ties with Russia, and working out a plan to develop markets for its oil and gas.

Business potential

Western companies, conscious of this country's potential, have tried to see ways of investing, but the corruption and inefficiency of the economy has made progress difficult.

Still, even apart from the gas and oil, the incentive to "get in there" is strong because of Turkmenistan's location.

According to Peter Cooke, a professor of automotive transport at Nottingham Business school who knows Turkmenistan well, its location has a pivotal role to play.

About 40% of aid to Afghanistan goes through Turkmenistan, and it is at the heart of the old "silk route" between the Orient and the West.

Alexander the Great knew the importance of the area well, as his camel trains laden with goods crossed the desert.

Opening up the transport infrastructure, creating a rail and road "silk route" along with developing markets for its natural resources could be worth billions of pounds to Western business.

Big earner

Tourism could be a big earner for the country too. It has ancient archaeological sites, a coastline along the Caspian sea, and mountains with snow on them in the winter, ideal for skiing.

Its markets boast some of the finest and largest carpets in the world, as yet unseen and unsold to Westerners and the Turkmen are famous for their love of horses, and brightly coloured clothes.

Following the terrorist attacks in the United States, and the ensuing "war against terrorism", most of us have started to learn about the countries neighbouring Afghanistan.

Places like Uzbekistan, Kyrgyzstan and Tajikistan are on our TV screens, and even play host to US troops.

Not so neutral and potentially very rich Turkmenistan. It is that potential that both the West and Russia want to tap into.

Adam Kirtley presents the Financial World Tonight on BBC Radio 5Live.