Engagement with #Turkmenistan: A step too far?

German businessmen have always been more inclined than their counterparts elsewhere in Western Europe to look East for trade opportunities.

Recent EU tensions are linked to Germany’s staunch support of the Nordstream-2 gas pipeline that will supply Russian gas to Germany (avoiding Ukraine), and in 2017 former Chancellor Schroeder was appointed to the board of Rosneft, Russia’s state-owned oil company.

The country’s entrepreneurs are often the first to explore opportunities in Ukraine, the Caucasus and Central Asia.

During February Berlin hosted a trade forum with Turkmenistan, in which the Central Asian country showcased its natural resources and supposedly friendly investment climate. The Turkmen-German Business Forum was attended by a reported 70 interested German companies and regional operators including high-profile names such as Claas and Siemens.

A keynote speech was delivered by Michael Harms, head of the German Eastern Business Association (OAOEV). OAOEV host a variety of bilateral investment events pertaining to the post-Soviet space, including the upcoming 'Legal Conference Russia' and 'Economic Forum Latvia'. Harms and his chairman, chemical industrialist Wolfgang Büchele, were even invited to Putin’s presentation to German businesses in 2018.

Nevertheless, the establishment of a Turkmen focused investment forum in Berlin is somewhat surprising.

In contrast to Russia’s deeply sophisticated economy, Turkmenistan has been one of the poorest and most corrupt regimes on earth since its independence in 1992. Every summer the country forces thousands of adults to harvest cotton in one of the world’s largest demonstrations of state orchestrated slave labour. Torture is widespread, exit visas are difficult to come by and citizens have no rights to property. Turkmenistan’s isolationism means poverty data is not available however it is thought to soar above other Central Asian states. And while Saudi Arabia finally lifted a ban on female drivers in 2018, sources say Turkmen police have started withdrawing driving licences from women en-masse.

This takes place while the comic President Berdimuhamedov gains YouTube fame as he showcases his weightlifting during cabinet meetings, raps in videos with his grandson, and shows off his gun skills and poetry on national television. Black cars are reportedly banned from entering the capital, Ashgabat, for fear that it will ruin the effect of the billions of dollars of white marble palaces built with public funds. The President claims to have won 97.7% of the vote in 2017.

Accusations of human rights abuses and the behaviour of the country’s leadership have done little to deter emerging market investors in the past. However, Turkmenistan combines this with a remarkable talent for attacking these investors by expropriating their assets, not paying their debts and chasing them out of the country.

Most recently, Turkmenistan cut access to its telecommunications lines for MTS, Russia’s largest telecoms company, despite the fact the company had built them. This prompted a $750 million arbitration claim launched in the World Bank’s International Centre for the Settlement of Commercial Disputes (ICSID) in 2018.

A Belarussian company, Belgorkhimprom, has been blocked from accessing a potash plant it built on a government contract. The company has still yet to be paid in full. In recent years flurry number of arbitrations have been filed by Turkish construction companies who have millions of dollars of unpaid debts.

Turkmenistan’s greed has also hit German investors; In October 2018, ICSID registered a claim by German engineering company Unionmatex Industrieanlagen against Turkmenistan after state obstruction forced the company into administration.

Turkmenistan is in one of the greatest economic crises in its history. As ever-increasing agricultural output is reported on state television, the queues for flour become progressively longer as the Government axes both public services and ministries to save costs.

Russia and Iran have yet to restart gas imports. The country is in desperate need of international finance, and yet exposes itself as an unreliable partner to anyone that invests.

There is something deeply engrained in the German psyche to turn and look east towards exciting investment projects. Yet as Harms and his friends heap praise on representatives of this terrible regime, any investor engagement is futile.

Countless human rights reports have done little to curtail abuses carried out on citizens by an egotistic and insecure leader who has mismanaged the economy into the ground. With no positive investor climate to justify it, engaging with the Turkmen Government is a step too far.

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