Executive Summary

Between March 17^th-19^th, 2025, Turkmenistan is hosting a series of events in Ashgabat, including an exhibition and the “Investments in the Future of Turkmenistan” international forum.

These events reflect the growing prominence of the private sector in the country’s economy. Despite this, Turkmenistan continues to face challenges such as a reliance on hydrocarbons, limited private sector growth, and significant governance issues.

The international forum seeks to attract foreign investment; however, apprehension persists regarding state control and the nation’s economic fragility.

Key Events & Analysis

Political & Geopolitical Developments

• International Investment Forum (IFT-2025): The forum, set to occur from March 18^th, 2025, is a major step for Turkmenistan to showcase its efforts in economic diversification and modernisation, particularly within the private sector. Public sector programs have sought to enhance export volumes and global competitiveness. The participation of high-level delegates highlights Turkmenistan’s strategic importance in Central Asia from countries, including the United States, Russia, and China. The event highlights a shift towards a more market-oriented approach in a traditional state-dominated economy.
• Domestic Politics: President Serdar Berdimuhamedov’s administration continues to merge power, with his father, Gurbanguly Berdimuhamedov, maintaining influence through his title of National Leader. The concentration of power and absence of democratic reforms continue to be significant characteristics of the political environment. This autocratic governing system presents obstacles to sustained political stability and economic transparency.

Security & Conflict Updates

• Geopolitical Position: Turkmenistan occupies a strategically important position between China, Russia, and Europe, offering potential for regional influence, particularly in the energy sector. The successful implementation of projects such as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline will lead to a diversification of energy exports, lessening dependence on China and improving regional stability. The porous nature of the border with Afghanistan, however, constitutes a significant vulnerability with implications for regional security.
• Internal Security Concerns: Turkmenistan’s heavy reliance on state security apparatus, combined with limited military resources, poses challenges in terms of internal stability.

Economic & Financial Trends

• Economic Structure & Dependence on Hydrocarbons: Turkmenistan’s economy is heavily reliant on hydrocarbons, which account for 89% of exports, with natural gas constituting 66% of this. This dependency makes the country vulnerable to fluctuations in global energy prices. Although possessing the world’s fourth-largest proven natural gas reserves, Turkmenistan’s production ranks only 13^th, highlighting inefficiencies within its extraction and export sectors.
• Private Sector & Economic Reforms: While the government has been making strides in promoting private sector growth, there are ongoing challenges. While Ashgabat has undertaken initiatives to improve the business environment, the prevailing influence of the state continues to impede economic reform, which is further hampered by issues of transparency, currency overvaluation, and underdeveloped banking. Infrastructure remains underdeveloped, and public sector mismanagement persists.
• Sovereign Wealth & Fiscal Policy: Turkmenistan benefits from a substantial fiscal stabilisation fund and sovereign wealth fund, which provides buffers against external shocks. However, this economic structure depends on maintaining high oil and gas revenues. Governmental initiatives to broaden and augment foreign investment via platforms such as IFT-2025 are essential for sustained long-term economic growth.

Implications & Forecast

Short-term Consequences

• Increased Foreign Interest: Foreign investors might show heightened interest in the IFT-2025 forum, especially in sectors beyond hydrocarbons like technology and agriculture. The success of these initiatives, however, hinges on the government’s ability to ease private sector constraints and articulate clearer investment terms.
• Continued Economic Vulnerability: The country remains highly exposed to global energy price fluctuations, and without significant economic diversification, Ashgabat’ financial stability could face challenges in the event of energy price declines.

Long-term Consequences

• Political & Economic Reform Challenges: Turkmenistan’s lack of democratic reforms and ongoing authoritarian control might hinder its ability to modernise politically and economically in the long run. Economic restructuring, especially in governance and business regulation, is crucial for achieving sustainable growth.
• Regional Influence & Security Risks: the country’s strategic position offers opportunities for increased influence in regional trade, especially in the energy sector. However, mitigating security risks from the porous Afghanistan border and internal instability is necessary to ensure long-term stability.

Possible Scenarios

• Best-case Scenario: More diversified economic growth could result from continued foreign investment in non-hydrocarbon sectors, the successful completion of the TAPI pipeline, and gradual improvements to the business environment.
• Worst-case Scenario: Neglecting infrastructure and governance, coupled with external shocks like volatile energy prices or regional instability, could worsen existing economic weaknesses and hinder government reforms.

Recommendations

1. For Policymakers: Policymakers should increase their focus on strengthening transparency in economic policies and governance structures to foster sustainable growth. Prioritising a reduction in hydrocarbon dependence and greater private sector engagement is crucial for policymakers. Bolstering security along the Afghan border is crucial to reducing potential threats.
2. For Clients: Firms looking to invest in Turkmenistan should proceed with caution, particularly because of governance challenges and the potential volatility in the energy market. A diversified approach focusing on sectors outside of hydrocarbons may offer more long-term opportunities for growth.

Geopolitical Report ISSN 2785-2598 Volume 52 Issue 10
SpecialEurasia OSINT Unit

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