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Expropriation Risk: 70 68 68 68 Political Violence Risk: 34 34 34 36 Terrorism Risk: 44 45 44 42 Exchange Transfer and Trade Sanction Risk: 72 72 74 75 Sovereign Default Risk: 58 57 60 62
TREND ► OUTLOOK ▲
Turkmenistan is one of the few countries in the world to claim that it has not been impacted by the COVID-19 pandemic. By early July 2020, it had yet to report a single case of COVID-19 within its territory and the government has defiantly organised multiple mass gatherings of citizens to mark national holidays and festival days. It has been aided in projecting this untroubled image by sealing off its already tightly controlled land borders and airports so that international coverage is even more difficult. Since March 2020, the World Health Organisation has been trying to send an official delegation to Turkmenistan to assess the situation but the government in Ashgabat has consistently avoided committing to dates for the visit. However, there is growing circumstantial evidence that the country does have cases of COVID-19. Doctors interviewed by foreign media say the disease is prevalent, but hospitalisations are being recorded as pneumonia. The US embassy reported in June 2020 that citizens in the capital with symptoms consistent with COVID-19 were being tested and, if positive, involuntarily sent for quarantine in infectious diseases hospitals for at least fourteen days and sometimes longer. The global COVID-19 pandemic arrived as Turkmenistan was in the midst of a longstanding and deep economic crisis. A drop in Chinese natural gas imports and the closure of Turkmenistan’s borders have only made this worse by creating food shortages. Independent reports suggest that Turkmenistan is experiencing a small but unprecedented level of popular unrest as hunger becomes a concern in some areas. A major protest took place in the city of Turkmenbad, near the border with Uzbekistan, after a series of storms devastated the region, leaving people homeless and without basic amenities. There have also been more politicised protests held by Turkmen expatriates in Europe and North America. While the government has taken the unusual step of admitting that the country is set to experience an economic crisis, it has made no change to its management of the economy, which remains opaque and highly dependent on the president. While President Gurbanguly Berdymukhammedov has demonstrated a new appetite for foreign investment during the last two years, even making trips abroad, there is no evidence of any attempt to improve the investment environment and business climate. Domestically, he has done little other than admonish ministers and replace them at an ever-accelerating pace. Growing controls over foreign currency have also made an already complicated investment-environment even more difficult for any potential investors to navigate. Questions also remain about Berdymukhammedov’s health even though he only turned 63 in June 2020. Following an unexplained absence of more than a month in summer 2019, he has set about converting the parliament into a bicameral institution and promoted his son, Serdar, to the position of Minister of Industry. Serdar is widely perceived to be Berdymukhammedov’s chosen successor. However, he is not yet 40 years old and is considered inexperienced. Questions remain as to what extent the Turkmen elite is prepared to accept, such a dynastic transition of power, in the near future.
In the last year, there have been signs that the Turkmen government has been making efforts to approach investors from Europe, Russia, and Asia in the hopes of boosting the struggling economy. However, with no attempts to reform the discouraging investment environment, only investors with long-established and strong relationships at the highest level will consider Turkmenistan as an investment destination. Although the COVID-19 pandemic has deepened the economic crisis to critical levels, not least by enabling China to cite force majeure as it cuts back gas purchases, this may not be enough to encourage the government to take a more welcoming approach to foreign investors. Instead, it is more likely to result in draconian and ill-thought-out short-term measures to secure greater revenue. This could increase the possibility that it considers expropriation measures.
TREND ▲ OUTLOOK ▲
Independent reports suggest that hunger is now a real concern for the population. As a highly repressive state, popular unrest is virtually unknown in Turkmenistan and is using plain-clothes police to arrest people for discussing COVID-19 in public. However, there are growing signs of discontent, such as small demonstrations outside local administration offices over food shortages. In May 2020, Turkmenistan witnessed its largest ever domestic protest in the Eastern Lepab region, when approximately 1,000 people came out to demand government assistance after a series of storms produced flooding that left many homeless. There is little doubt that the Turkmen government is prepared to use force against further protest, but this now carries the risk of triggering further demonstrations if the economic situation has reached the point where people feel that they have little left to lose.
TREND ▼ OUTLOOK ►
There is little evidence of a domestic terror threat in Turkmenistan. However, given the country’s land border with Afghanistan, the government continues to view terrorism as a potential threat to national security. In particular, with the defeat of Islamic State in Syria and Iraq, the government views the movement of fighters to northern Afghanistan as a serious threat. For this reason, terrorism has been one of the few areas where Turkmenistan has been willing to engage with the international community. However, the government has often exaggerated this threat in order to justify its repressive law enforcement measures at home.
The COVID-19-related reduction in Chinese purchases of natural gas, which account for 85% of Turkmen exports, has the potential to push the economy deeper into an irreversible crisis. While other major energy exporters including Russia and Kazakhstan have seen their currencies fall in line with the drop in energy prices, the Turkmen government has opted to retain the manat at the overvalued level of 3.5 to the US dollar. This has exacerbated already extensive foreign exchange shortages, causing the government to implement even more drastic currency controls. In May 2020, the government stated that all foreign exchange income from state-owned enterprises will be diverted to a state fund. The government has also introduced tighter restrictions on currency transfers and withdrawals for individuals.
The Turkmen government has taken the unusual step of admitting to its population that the country is set to experience economic difficulties but there is no reliable data with which to understand the depth of the crisis. Ministers continue to report that spending targets will be met and that economic growth will remain at more than 6% for 2020, which is a highly unrealistic figure. One sure sign that the government has considerable concerns is that it appears to be making overtures to Russia for economic support, despite having kept Moscow at arm’s length as much as possible in recent years.
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