Index Trend Previous Quarterly Editions
Expropriation Risk: 77 ▼ Political Violence Risk: 48 ► Terrorism Risk: 46 ▲ Exchange Transfer and Trade Sanction Risk: 73 ► Sovereign Default Risk: 55 ►
Overall Risk Temperature TREND ►
Special topic: Protest intensity in 2022 and Q1 2023* 2022 Q1 2023 Low Low All protest: Low Low
Cost-of-living protest risk in 2023* - High
*Note: Protest intensity is calculated based on ACLED. Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of calculations, see the introductory essay.
Turkmenistan has consistently faced economic challenges throughout its short 30-year history. The combination of chronic mismanagement of the economy – which remains state-dominated and closed – and a personalized and corrupt regime has led to extremely poor economic outcomes for Turkmen industry and the population. The country’s leading industrial assets are dilapidated and in constant need of repair. Meanwhile, the agricultural sector is highly unproductive and lacks sufficient machinery. The public sector is starved of basic resources.
As a result, the Turkmen population consistently faces wage arrears as well as shortages of staple goods and hard currency. Long lines outside government-subsidized food shops are common and state employees are often forced to sacrifice their salaries to contribute to improvements at their places of work, such as schools and hospitals. For those with sufficient means, the black market has become the primary source of food and currency – albeit at prices at multiples of officially sanctioned price controls.
Since 2020, Turkmenistan’s economic difficulties have become far more acute. The collapse of gas exports to China in that year triggered a severe economic crisis in Turkmenistan, from which the economy still appears to be struggling to recover. There is no reliable economic data on growth or inflation, however, anecdotal reports suggest growth, if anything, is nominal, and consumers are experiencing severe price rises.
The government has made fleeting efforts to engage with the international financial community, in an attempt to upgrade its capital infrastructure and increase industrial and agricultural output. However, this has not extended much further than accessing certain trade credit facilities to import capital goods.
Further reform in the current climate is also unlikely given the over-riding political environment. In January 2023, former President Gurbanguly Berdymukhamedov appointed himself ‘National Leader’ of Turkmenistan, essentially usurping his son, Serdar Berdymukhamedov, whom he had elevated to the presidency in March 2022. This internal tension, combined with the difficult geopolitical situation, will likely ensure the Turkmen government does not pursue radical reform for fear of further instability.
Expropriation Risk 77 (High) TREND ▼
Amid a severe economic crisis that began in 2020, the Turkmen government has sought to engage with the international investment community in recent years, most notably international financial institutions, as noted above. The focus has been on securing capital investment to upgrade production capacity in key sectors such as energy and agriculture. However, these efforts are fitful at best. Despite applying for World Trade Organization membership in February 2022, Turkmenistan has not established a working party to begin negotiations on this.
Nevertheless, the Turkmen economy remains extremely closed to foreign investment, with most economic activity controlled by the state via state-owned enterprises. Decision-making processes remain extremely opaque and personalized, the rule of law is weak, and the judicial system remains subordinate to the executive branch. Investors also face pervasive corruption risks and the threat of expropriation at the behest of politically motivated government institutions.
Political Violence Risk 48 (Medium) TREND ►
Political violence and protest are largely unknown in Turkmenistan. There is no political opposition, nor independent media or non-governmental organizations that can organise against the government. Protest as it exists in Turkmenistan is largely atomized, usually involving small groups of individuals animated by a local grievance and seeking an intervention from local authorities. Nevertheless, they do not present a serious threat to the Turkmen government, which typically responds by a combination of picking out individuals for sanction while addressing elements of the grievance.
The return of Berdymukhamedov, Sr, to power in January 2023, after handing the presidency to his son less than one year earlier, clearly signalled tension within the ruling elite. Ultimately, however, the conflict appears to have been resolved peacefully behind closed doors and has not resulted in any form of political violence.
Terrorism Risk 48 (Medium) TREND ▲
The government has been typically extremely vigilant towards the threat of Islamic extremism, owing to Turkmenistan’s border with Afghanistan and concerns about the possibility of returning fighters from Islamic State. For this reason, terrorism has been one of the few areas where the Turkmen government has sought to engage with the international community.
Despite the government’s concerns, there is no evidence of a significant threat from terrorist organisations. With the collapse of Islamic State between 2017 and 2019, the Turkmen government became concerned about militants returning to Turkmenistan and Afghanistan. However, there has been no manifestation of this terrorist threat within Turkmenistan. Moreover, it is possible the Turkmen security services overinflate the risk to secure more resources from the budget and, potentially, Turkmenistan’s key ally, Russia.
Exchange Transfer and Trade Sanctions Risk 73 (Medium-High) TREND ►
The Turkmen national currency, the manat, is heavily regulated by the government to the extent that the official exchange rate has little bearing on the value that it is traded at informally within Turkmenistan. Recent analyst estimates suggest that the market rate for the manat is currently 30 manat to the US dollar – far below the official rate of 3.5 manat to the US dollar.
With the onset of the Russian war in Ukraine in February 2022, Western allies have increasingly focused attention on Russian allies, fearing they may be facilitating sanctions-busting activities. Throughout 2022 and into 2023, there have been a number of high-level visits of Russian officials to Ashgabat, all pursuing deeper economic cooperation.
As a very close ally of Russia, Turkmenistan could represent a conduit for the flow of illicit goods to Russia. The country could also become a destination for Russian outward investment, given the limited options Russian state-owned enterprises and private enterprises now have for investment.
Sovereign Default Risk 55 (Significant) TREND ►
data available to provide an independent assessment. One proxy for the government’s finances has been Chinese imports of Turkmen gas, which is a primary source of revenue for the country. In 2020, Turkmen gas exports to China collapsed, creating serious budgetary constraints which, while not discussed by officials in public, were acutely felt by the population in the form of austerity measures.
While gas exports have largely recovered, the population continues consistently to experience wage arrears and shortages of currency and consumer goods. While it is difficult independently to assess the risk of sovereign default, it is highly likely, in the event of a crisis, either Russia or China will step in to prevent default.
