What Erdogan and Aliyev agreed on in Karabakh

The presidents of Turkey and Azerbaijan signed a declaration in Shusha

Turkish President Recep Tayyip Erdogan, together with the head of Azerbaijan Ilham Aliyev, arrived in Nagorno-Karabakh. In Shusha, which was declared the “cultural capital of Azerbaijan” after last year’s war, the parties signed a declaration of cooperation

“Today is a historic day. Today we are receiving the President of Turkey, my brother Recep Tayyip Erdogan, in the liberated Shusha, ”Azerbaijani President Ilham Aliyev began the press conference after the signing ceremony.

Erdogan flew to Azerbaijan immediately after the NATO summit held the day before. In Nagorno-Karabakh, he stopped in two cities – Fizuli and Shusha, which after the recent conflict received the status of the “cultural capital of Azerbaijan”.

It was in Shusha that the sides signed a declaration on allied relations in various spheres. It also touches upon the issues of mutual assistance in the military sphere. The document contains a clause on the Zangezur corridor. The corridor will connect Azerbaijan and Turkey by road and rail (while Armenia lying between them opposes it).

According to Aliyev, the declaration has historical significance. It raises the relations of the countries to the highest level and guarantees the unity of the “closest countries on a global scale” in the future.

In particular, Turkish TV channel TRT reports, Turkey and Azerbaijan have agreed to conduct joint actions in case of threat or aggression from third states against the independence, sovereignty, territorial integrity, inviolability or security of the internationally recognized borders of any of the parties.

Erdogan said at a joint press conference that it is planned to open a Turkish consulate in Shusha as soon as possible. On the eve of the visit, various media outlets, citing sources, reported that the parties would discuss the implementation of joint reconstruction and construction projects in Karabakh.

After the official part, Aliyev decided to conduct an excursion around Shusha for Erdogan. 

“Remind about Turkey’s role in victory”

Interestingly, the Day of National Salvation is celebrated in Azerbaijan on June 15. It is believed that Heydar Aliyev, who headed the Supreme Council on this day in 1993, saved the country from a coup and separatism.

Erdogan is expected to address the Azerbaijani parliament on June 16.

According to experts, with his visit, Erdogan, first of all, is trying to consolidate his role in the region. This opinion was expressed in an interview with Gazeta.Ru by a senior researcher at IMEMO RAN , turkologist Viktor Nadein-Raevsky .

“He wants to show that Turkey’s actions, which made it possible to win this victory, are not an accident, but fit into the framework of a common pan-Turkist policy. Erdogan sought to eliminate the Armenian wedge that divides the Turkic world. And this policy should not be confused with elements of the policy of neo-Ottomanism, which is spreading on the territory of the former Ottoman Empire – the Arab countries, Syria, Iraq, and partly Libya.

Here we are talking about the creation of a supranational community in a new area. The goal is to unite the Turkic-speaking peoples. During the war, Turkish generals took part in the command at the fronts, officers were in each military unit, the Turks also trained Azerbaijani special forces. And this visit is another confirmation of the policy that Erdogan has adopted, ”the Turkologist is sure.

At the same time, the expert points out that Russia “did not allow Turkey to develop in full force.” Thus, only 60 Turkish officers are employed in the joint Russian-Turkish observation point.

At the same time, not all experts are inclined to believe that the application of the term “pan-Turkism” to Turkey’s foreign policy is appropriate.

What are Erdogan goals?

“Rather, it refers to political philosophy, ideology and journalism. And if we talk about the attempts of the cultural influence of Turkey, then it extends far not only to the Turkic countries. After all, Georgia has a Turkish university, and Germany has Turkish mullahs, ”recalls Nikolai Silaev, a leading researcher at the MGIMO Institute for International Studies .

At the same time, the expert identified three goals that Erdogan pursued during his visit to Nagorno-Karabakh. “Firstly, he was traveling with the aim of strengthening political ties with Azerbaijan. Secondly, it was necessary to remind once again about the role of Turkey in the Karabakh war, since without it Baku either would not have won, or, at least, not with such results. Third, it is the exploitation of the political capital that Erdogan acquired by providing military assistance to Azerbaijan. Erdogan came to celebrate the victory with Aliyev , they will do it for many years to come. The trip also has great symbolic meaning, ”says Silaev.

Vadim Mukhanov, senior researcher at the MGIMO Center for Eurasian Studies, agrees that Erdogan’s visit to Shusha is also important for the Azerbaijani leadership headed by Ilham Aliyev against the backdrop of an incompletely resolved conflict with Armenia, including over the issue of the transit corridor.

“In general, Erdogan has repeatedly spoken about Turkic unity. Close relations between Baku and Ankara fit well into this framework, ”the expert said.

Nadein-Raevsky is sure that

Azerbaijani President Aliyev is not ready to share power with anyone, and therefore is not interested in a significant strengthening of Turkish influence in his country.

The role of Shushi and the road through Armenia

“This is evidenced by the fact that Turkish military bases have not appeared in Azerbaijan. He also suspended the settlement of territories by Turkomans, who traditionally cover the faces of women. The Azerbaijani population is still not ready to accept such a return to the Middle Ages, they are Europeanized. The role of religion in this country was significantly reduced during the Soviet era, and Azerbaijan became largely secular, ”reminds the Turkologist.

Shusha is a key city in Nagorno-Karabakh with a population of 4.5 thousand people. In Armenia and Karabakh there is an expression “who owns Shushi, he owns Karabakh”. During the 1992-1994 Karabakh war, victorious for the Armenians, the Azerbaijani population left the city.

Shusha is a key city in Nagorno-Karabakh with a population of 4.5 thousand people. In Armenia and Karabakh there is an expression “who owns Shushi, he owns Karabakh”. During the 1992-1994 Karabakh war, victorious for the Armenians, the Azerbaijani population left the city.

During the operation on November 8-9, 2020, the city was again under the control of Azerbaijan. And it was the date of November 8 that was chosen by Aliyev for the Victory Day holiday in the whole war.

Later, he laid the foundation for the construction of a new mosque in Shusha, citing the fact that allegedly “at one time there were 17 mosques”, and began restoration of the Cathedral of Holy Christ the All-Savior, which had suffered during the war. A number of Armenian observers are suspicious of this initiative, seeing the possible motives of the Azerbaijani authorities in the desire to destroy the Christian heritage.

The corridor

The Syunik (or Zangezur, as it is called in Azerbaijan) automobile corridor through the territory of Armenia, which is mentioned in the Shusha Declaration, existed in the Soviet years until the early 1990s – the message was interrupted due to the events of the first Karabakh war.

Under the terms of the peace treaty concluded with the participation of Moscow in November 2020, it is envisaged to build a road linking the main territory of Azerbaijan with its exclave – the Nakhichevan Autonomous Republic, surrounded by the territories of Armenia, Turkey and Iran.

“By agreement of the Parties, the construction of new transport communications linking the Nakhichevan Autonomous Republic with the western regions of Azerbaijan will be ensured,” says the 9th clause of the agreement without specifying a specific route for the future road.

At the end of April, the head of Azerbaijan already said that in case of Armenia’s refusal to voluntarily agree to the construction of the corridor, Baku could use force again. Yerevan is in no hurry to agree on the construction of infrastructure, calling Aliyev’s threats a provocation.

As earlier Vadim Mukhanov from MGIMO explained to Gazeta.Ru, now in the Armenian society revanchist sentiments are gaining popularity. At the same time, they are not completely satisfied with the results of last year’s war in Azerbaijan, where they just want to unblock old and create new communications. “This is a very interesting attempt on the part of Aliyev. Therefore, we can in this regard Erdogan’s visit to Karabakh as support for the expansion of Azerbaijan, ”the expert said.

China turns to Turkmenistan for gas

By Chris Gill and Jim Pollard

 

Australian exports of LNG look set to tighten amid tension between Beijing and the Morrison government over multiple issues. It is despite big investments by Chinese oil majors in recent years. Beijing looks to source more natural gas from Turkmenistan via a new pipeline

(AF) Turkmenistan may have a golden opportunity to supply Beijing with more natural gas via a new pipeline, following the slump in relations between China and Australia.

Senior Turkmen officials were in China recently and are said to have discussed further cooperation on natural gas.

But such a move in Central Asia could ruffle feathers with Russia, which is also piping gas to China. It is a bad news for Australian firms exporting liquefied natural gas (LNG) to the same destination. Australian LNG shipments are worth 64-billion-yuan a year (about US$10 billion).

Recently two Chinese LNG importers were told to immediately suspend LNG imports from Australia. Trade with Chinese oil majors that have invested billions in gas projects Down Under has not been affected so far. And given just these two smaller natural gas importers have received the notice, some US media outlets have suggested that this is only a ‘test’ by the Chinese government.

Deteriorating relationship with Australia

It is another shot across the bow at Canberra as ties with Beijing continue to deteriorate. The bilateral relationship is clearly in bad shape. The lowest point in decades for sure.

The Labor Party’s Shadow Foreign Affairs Minister Penny Wong said on Tuesday Prime Minister Scott Morrison was so focused winning a domestic political advantage he did not seem to “fully comprehend Australia’s interests in relation to China. The first job of national leaders is the safety of their citizens. Our leaders do not make us safe by beating the drums of war with China,” Wong said.

Part of the problem stems from the fact a Federal election will be staged late this year or in early 2022.

Chinese media kept the needle at Morrison’s belly. They are reporting that there will be a “smooth transition” when the country abandons Australian natural gas, while China and Turkmenistan cement ties with an US$8 billion pipeline and more plans afoot.

Turkmenistan is the second largest country in Central Asia and has a population of 5.6 million. A landlocked country that shares borders with Iran, Afghanistan, Uzbekistan, and Kazakhstan. It is playing a key role in China’s Belt and Road scheme.

Data from China’s Ministry of Commerce shows the country imported about 101 million tons of natural gas for an estimated 231.4 billion yuan (about US$36 billion) last year. Imports rose by 5.3% year-on-year, while the money spent decreased by 19%, mainly because natural gas prices fell during the Covid-19 pandemic. Of the LNG imported by China last year, the proportion of imports from Australia accounted for 46%. It is valued at about US$10 billion (about 64.3 billion yuan).

China regards Turkmenistan as a long term partner in the natural gas field

On May 10, the two deputy prime ministers of Turkmenistan visited Xi’an for talks with Foreign Minister Wang Yi, who emphasized that “China regards Turkmenistan as a long-term partner in the natural gas field”. This little-known landlocked state is the world’s fourth-largest in terms of its proven natural gas reserves. Later, the two parties agreed to consolidate and expand cooperation in the natural gas field.

Work has been continuing on the D line – a fourth line linking to the Central Asian pipeline. The high-level meeting between China and Turkmenistan likely means that it will come online soon.

Expert’s view

Professor K Paik, an expert on Sino-Russian oil and gas cooperation, said China had made a big effort to boost the economics of the natural gas supply from Central Asia. The academic, who is in the process of setting up a Sino-Russian Energy Forum, told ATF China wanted Turkmenistan gas to enable a total of 85 bcm/y of gas to be sent via Uzbekistan and Kazakhstan – with 15 bcm/y via Pipeline A, the same amount via Pipeline B, plus 25 bcm/y via Pipeline C and 30 bcm/y via Pipeline D.

CNPC paid all the bills for the latest pipeline development. Together with its three domestic trunk pipelines (West-East Pipelines 1, 2 and 3).
“China had difficulty in getting full capacity of pipeline gas from Turkmenistan a couple years ago when the gas supply shortage became a serious problem in China. The core point was Turkmenistan was not happy about the low gas price for their exports. On the other side China was not happy about the burdensome gas price for their imports.

Paik said Turkmenistan is introducing a new gas market by accelerating the TAPI Line. It is with their own investment for 85% of the line’s construction.
“In my view, this is the mistake Turkmeni authority made with regard to construction of the D Line. A pipeline passing through Afghanistan without a proper security protection will be a huge liability. Consequently, Russia saw the opportunity to accelerate its own initiative by promoting a Mongolian route. From Gazprom’s view, Russia’s west Siberian gas supply to China via the Xinjiang route has to compete against Turkmen gas. But the Mongolian route will enter into China’s Bohai Bay gas market at a stroke.”

Reasons for worry in Australia

China’s three big national oil companies – PetroChina, CNOOC and Sinopec – have all invested in the LNG industry in Queensland in northeastern Australia. CNOOC is a partner in Shell’s Curtis LNG project. Sinopec buys the bulk of the LNG from Origin Energy’s Australia Pacific LNG.

PetroChina is a 50-per-cent partner with Shell in the $10 billion Arrow gas venture. It started its first phase about a year ago.

So, with big long-term deals a fair proportion of Australia’s LNG trade with China would appear to be relatively steady.

Natural gas, like iron ore, is one of Australia’s cornerstone industries. Australia’s annual LNG exports account for about 10% of total exports. So, if China, as the largest importer of Australia’s natural gas, only stops importing 30% or so, it could cause some hair pulling.

The writing seems on the wall that Australian LNG exports to China will see diminishing demand.

India has key first-mover edge on China in Iran

India doubling down on Iran’s Chabahar port project as strategic counter to China’s Belt and Road gains trade traction

By FM SHAKIL

When China clinched a massive $400 billion bilateral investment pact with Iran, few noted that India was already well-engaged.

By the end of May, India will begin full-scale operations in its first foreign port venture at Iran’s Chabahar. That is facility that opens on the Gulf of Oman that will aim to facilitate more South Asia, Central Asia and Middle East trade while bypassing Pakistan.

India’s US$500 million investment represents a clear and potent commercial challenge to China’s massive port investment in neighboring Pakistan’s Gwadar. Gwadar is a key component of Beijing’s Belt and Road Initiative (BRI).

The 10-year lease agreement, a deal first clinched by Prime Minister Narendra Modi in Tehran in 2016, has until now been hobbled by US sanctions imposed under the Donald Trump administration.  

Indian suppliers and engineers, some with interests in the US, were reluctant to deliver essential machinery and services to Iran on fears they could somehow be sanctioned, despite clear exemptions on Chabahar in Trump’s sanction order. That led to certain speculation that China may take over the project from India.

New Delhi has doubled down and accelerated the project with the shift from Trump to Biden. It is banking like others on a new breakthrough on the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement and a broader US-Iran warming trend.

Aerial view of Iran’s Chabahar port. Image: Twitter

India has supplied two large cargo-moving cranes. It will deliver two more in the coming weeks before the facility’s expected ceremonial opening.

New Delhi is already promoting the port’s potential humanitarian role, noting it was used to send emergency shipments of wheat to Afghanistan during the Covid-19 crisis and pesticide to Iran to deal with a recent locust infestation.

Pakistan is getting worried about losing regional trade

India’s renewed commitment to Iran via Chabahar is already setting alarm bells ringing in neighboring Pakistan, which is already losing regional trade mainly from Afghanistan to Iran despite US sanctions.

India and Pakistan recently announced a renewed commitment to an existing 2003 ceasefire over contested Kashmir. That move that should allow both to focus more on economic linkages than strategic rivalry.

Chabahar has seen limited operations since 2019, a result of US restrictions imposed on Iran’s energy exports. The port handled a mere 123 vessels with 1.8 million tons of bulk and general cargo from February 2019 to January 2021. It is well below its operating capacity, according to reports.

That’s set to change. New Delhi ultimately aims to link Chabahar to its International North-South Transport Corridor (INSTC). It is a project initially proposed by India, Russia and Iran in 2000 and later joined by 10 other Central Asian nations.

Some see the INSTC as a less-monied rival to China’s BRI. Belt-Road-Initiative has invested heavily in Pakistan’s road, power and trade infrastructure. And including huge multi-billion dollar investments at Gwadar port some critics have likened to a debt trap.

Security concerns sparked by armed groups in Pakistan’s Balochistan province, where Gwadar is situated, have hindered progress on various BRI projects and pushed Pakistan to recently ramp up security at the Beijing-invested port.

From India to Europe – cheaper and faster

INSTC envisions a 7,200 kilometer-long, multimode network comprised of shipping, rail and road links. It is connecting India’s Mumbai with Europe via Moscow and Central Asia. Initial estimates suggest INSTC could cut current carriage costs by about 30% and travel times by half.

That means more trade and port activity for Iran and less for Pakistan. Last year Iran has already usurped 70% of Pakistan’s recent transport business at Karachi port.

Landlocked Afghanistan has traditionally relied on Pakistan as its gateway to international shipping routes. However, recent trends indicate that as much as 70% of Afghan transit trade is now handled by Iran.

If India presses ahead as planned with INSTC, Pakistan would be the ultimate loser as Afghan and Central Asian transport business diverts increasingly to Chabahar and away from Karachi and Gwadar.

“Iran had already started working on a 600-kilometer-long railway line connecting Chabahar port to Zahedan, the provincial capital of Sistan-Baluchestan province close to the Afghan border,” he said.

India has already lined up $1.6 billion for the project to facilitate the movement of goods to and from Afghanistan via Iran. India also plans to invest $2 billion to develop supporting infrastructure including the Chabahar-Hajigak railway line in Afghanistan.

Many Afghan traders are plugging into Chabahar

Many Afghan traders still rely on traditional transit routes through Pakistan. However, many are plugging into Chabahar’s comparative cost-effectiveness and speed in handling transit cargo, analysts say. The same is true for Uzbekistan, Tajikistan and other landlocked Central Asian countries looking for alternatives to Pakistani ports.      

Pakistan-Afghanistan trade has recently fallen from around $2.5 billion to $1 billion annually due to wide-ranging differences over the now expired transit agreement.

“Afghans want Pakistan to allow Afghan wheelers to enter into Indian border areas through Wagah for transportation of Afghan export goods and on return upload import consignments from India,”

“Pakistan on the other hand argues that the APTTA is a bilateral arrangement between Pakistan and Afghanistan and not a trilateral agreement to facilitate mutual trade between India and Afghanistan,”.

Chabahar is Iran’s only oceanic port and so far consists of Shahid Kalantari and Shahid Beheshti terminals. Each of which has five berth facilities. The port is located in Iran’s Sistan and Baluchestan Province. It is about 120 kilometers southwest of Pakistan’s Balochistan province, where the China-funded Gwadar port is situated.

In May 2016, India, Iran and Afghanistan signed a trilateral agreement for the strategically-located Chabahar to give New Delhi access to Kabul and Central Asia without having to travel through Pakistan.

Chabahar is regional project unlike Gwadar which is China oriented

The original plan committed at least $21 billion to the so-called Chabahar–Hajigak corridor, which then included $85 million for Chabahar port development, a $150 million credit line to Iran, an $8 billion India-Iran MoU for Indian industrial investment in a Chabahar special economic zone, and $11 billion for the Hajigak iron and steel mining project awarded to seven Indian companies in central Afghanistan.

Unlike Chabahar, which is designed more to serve the economic and trade interests of the wider region, Gwadar is more tilted toward Beijing’s ambitions, analysts and traders say.

Gwadar port’s planned capacity will accommodate a massive 300 to 400 million tons of cargo annually, comparable to the combined annual capacity of all Indian ports. It also dwarfs the 10-12 million tons of cargo handling capacity now planned for Chabahar.

In another comparison, the largest US port at Long Beach, California, handles 80 million tons of cargo, about a quarter of what Gwadar could handle upon completion of a project that is designed largely to receive and move China’s, not the region’s, trade.

Is the Turkish Economy going ‘bankrupt’?

Authored by: Georges Gritsis

Is Turkey already bankrupt?

Countries do not “go bankrupt”.

They can however default.

A default occurs when the Treasury can no longer service (pay the interest due on) its debts.

Japan’s gross government debt ratio stands around 230% of GDP but interests are negative : -0.091% for its 5 year bond. In other words investors pay the Japanese Treasury to park their money in Japanese bonds.

Japan Current Account (government revenue minus expenses) recorded a surplus of 14.5 USD bn in Jan 2021, compared with a surplus of $20.0 bn in the previous month. Yearly this represents 3% of GDP.

France’s gross government debt ratio stands around 118.74% of GDP but interests are equally negative : -0.524% for its 5 year bond.

Due to the pandemic France recorded 0,7% to GDP current account deficit.

Turkey’s gross government debt ratio stands at a very moderate 57.1 % of GDP but interests rates now are 19.10% for its 5 year bond.

At these 19.10% rates, the treasury will need to fork out US $82,6 bln to service its debt from a total revenue of $147 bln, in other terms spend 56% of its yearly revenue. Obviously should rates spike, this percentage will increase accordingly.

Reference: Turkey’s 2020 current account deficit at $36.7B: CBankEconomy of Turkey

“A longstanding characteristic of the economy of Turkey is a low savings rate, compared to mature economies.

Reference: “How Turkey fell from investment darling to junk-rated emerging market”The Economist. 19 May 2018.

Millionaires leaving

Turkey’s labour force participation rate of 56.1% in 2018 was by far the lowest of the OECD states which have a median rate of 74%. For 2019 participation decreased to 44.56%, probably reaching 40% (or less) in 2021. In comparison France’s labour force participation rate stood at 71.40% and unemployment at 8,5%.

While some 160,000 Turkish nationals qualify as US$ millionaires, according to New World Wealth estimates, since 2016 more than 6.000 high net-worth individuals (HNWIs, defined as holding net assets of at least US$1 million) have left the country every year, reasons given being government deterring investment and loss of currency value against the U.S. dollar.

Since under the government of R.T. Erdogan, Turkey has been running huge and growing current account deficits, reaching $51.6 billion in 2018, one of the largest current account deficits in the world.

Due to the pandemic, current account deficit reached $36.7 billion in 2020.

The economy has relied on capital inflows to fund private-sector excess. Turkey’s banks and big firms borrowing heavily, often in foreign currency. Under these conditions, US$ 200 billion a year must be found to fund the wide current account deficit and maturing debt, always at risk of inflows drying up.”

Basically Turkish economic policy makers are now between a rock and a hard place

In order to fight inflation and attract foreign investors to purchase Treasury bonds, interest rates need to be higher than inflation. This in turn also appreciates local currency, an important factor when a country imports more than it exports.

On the other hand, high interest rates cool the economy by decreasing available money mass, increase unemployment (always a hot potato for politicians with an eye on polls) and increase the cost for servicing debt.

It’s precisely the IMF’s job to provide low interest loans and break the vicious circle. However in the current political climate, it is unlikely to happen.

Foreign Exchange Reserves were fully depleted in a futile attempt to support the T. Lira. These reserves now rely solely on short term borrowing (aka Swaps). “As everyone tries to exit at the same time, it causes spikes in lira rates,” said Onur Ilgen, the head of treasury at MUFG Bank Turkey in Istanbul.

Renaissance Capital predicts the currency could slide a further 12% by year-end, while Commerzbank AG expects it to reach 10 per dollar.

Reference: Lira Plunge Squeezes Traders as Swap Rates Surge to 1,400%

More worryingly, CDS spiked too:

This value reveals a 7.45% implied probability of default, on a 40% recovery rate supposed. CDS value changed +47.19% during last week, +50.69% during last month, +7.73% during last year.

Will Turkey destroy its own economy?

Compared to other major “Emerging Markets”, that’s a lot better than Argentina (17.18%) but worse than South Africa (5.23%), Brazil (3.63%) or Mexico (1.80%).

Will Turkey Destroy Its Own Economy? Now that there is a political lightweight at the central bank’s helm, Erdogan believes that he will be able to get the central bank to do his bidding and to cut interest rates ahead of the next Turkish election.

“For an emerging market economy, it is generally not a good idea to engage in highly unorthodox economic policy even when global liquidity is plentiful. This makes the timing of Erdogan’s move all the more surprising. He is choosing to move at precisely the time that global liquidity conditions for the emerging market economies are tightening and are likely to continue tightening.

Indeed, as a result of the largest U.S. peacetime budget stimulus on record and growing inflation concerns, ten-year U.S. Treasury bond yields are now rising at a more rapid pace than they did during the 2013 Bernanke Taper Tantrum. For similar reasons, the dollar is beginning to strengthen. Those conditions are bound to put a sudden stop in the flow of capital to the emerging market economies in general and to Turkey in particular.

It is also not a good idea to wave a red flag at the markets by pursuing unorthodox policies at a time that one’s country is as vulnerable to speculative attack as is Turkey. Not only has the central bank depleted its international reserves in the past unsuccessful defence of the currency. Its corporations are saddled with a mountain of U.S. dollar-denominated debt and its all-important tourist industry is on its knees as a result of the ongoing coronavirus pandemic.

Warning to other emerging markets

Turkey’s economic vulnerabilities have not been lost on the markets. Turkish lira has lost more than 10 % in its value as investors have rushed to the door. The country’s stock and bond markets have been pummeled. Investors now fret about the direction of economic policy under an erratic and increasingly powerful president.

Having defiantly rolled the economic policy dice and totally undermined the central bank’s independence, it is doubtful that Erdogan will make a humiliating policy U-turn without a further intensification of the country’s currency crisis. The only good thing that might come out of the country’s economic troubles is that it might serve as a warning to other emerging market countries not to play with economic policy fire especially at a time of a less forgiving international financial market environment. “

In conclusion meeting targets looks fraught with danger, even for expert economists

This article is from Quora.

Turkmenistan tries to stop Turkish expansion

Foreign Minister of Turkmenistan Rashid Meredov visited Moscow on March 30. He held talks with Russian Foreign Minister Sergei Lavrov. And he also took part in a meeting of the Council of CIS Foreign Ministers on April 2.

According to Zakharova, Meredov and Lavrov will discuss key topics of bilateral cooperation. And also current topics of regional and global security, as well as interaction in interstate organizations. 

“The Russian side views the visit as an important component of comprehensive measures to deepen the bilateral strategic partnership in accordance with the strategic partnership agreement between the two countries, which was signed at the initiative of the President of Turkmenistan,”

Zakharova stressed.

“The main purpose of Meredov’s visit is to eliminate the imbalance in foreign policy orientation. The imbalance has developed as a result of Turkey’s powerful activity immediately after the Karabakh war. Turkey is strengthening its position in Central Asia. As “NG” wrote earlier (see issue from 03/14/21), under the direct patronage of Turkey, an epoch-making agreement was reached between Azerbaijan and Turkmenistan on the division of a disputed oil and gas field in the Caspian, a dispute over which had been going on for almost 30 years. 

Ankara want to expand the Cooperation Council of Turkic speaking States (CCTS)

Despite the fact that the field itself has relatively modest reserves, the precedent paves the way for other cross-border projects, first of all, the laying of the Trans-Caspian gas pipeline connecting the huge gas reserves of Turkmenistan with the ready-made transport infrastructure of Azerbaijan for transporting gas to Turkey and Europe.

The next goal of Ankara is to expand the Cooperation Council of Turkic-speaking States (CCTS, Turkic Council) through the entry of Turkmenistan into the organization. Ashgabat is still hesitating with a final decision, citing its status of permanent neutrality. To speed up the process of Turkmenistan’s accession to the Turkic Council, in addition to bilateral pressure, a whole campaign was launched with the involvement of the Foreign Ministries of the member countries of the organization, which held talks with the Turkmen side. At them, the refrain voiced the advantages of strengthening the Turkic Council and the opening prospects both for this structure and for Turkmenistan itself after the latter joined the CCTS.

Pressure from Turkey

In addition to the obvious “carrots”, Turkish diplomacy did not fail to use the “stick” in relation to Turkmenistan. It is known that, according to a number of experts, there are more than a million Turkmen labor migrants on the territory of Turkey and Northern Cyprus. Most of them have expired documents. It is simply impossible to return to Turkmenistan for new passports and go back to work during the quarantine period. Protest activity against the Turkmen authorities is growing among the émigré community, which cannot but worry Ashgabat.

“The Turkmen authorities fear the mass entry of this critical group of citizens. Aware of this weakness, the Turkish authorities are making quite public hints that they may send migrants to Turkmenistan at any time. They even demanded the resumption of air communication between the countries. Ashgabat took the threat seriously and urgently began the construction of quarantine and filtration camps in the east of the country, where citizens arriving from Turkey will be checked not only for the presence of coronavirus, but also for loyalty, having prepared equipment for hacking personal computers and arriving phones, ”Aytakov said. According to him, the Turkmen side was forced to make some concessions and accepted the invitation to participate in the summit of the heads of state of the Turkic Council on March 31 in an online format.

Turkmenistan is firmly resisting the pressure

Turkmen authorities are well aware of all possible aspects of the concern of the Russian side regarding Turkey’s next attempt to penetrate into Central Asia and create a pro-Turkish bloc in the form of the Turkic Council and its political or military reincarnation in the near future. The Turkmen authorities themselves have very great fears in connection with the increasing activity of Turkey and its attempts to dominate the region. And hence the possibility of at least adjusting or influencing domestic and foreign policy, ”Aitakov said.

It is clear that the agenda of Meredov’s visit to the meeting of the CIS Foreign Ministers had been prepared for a long time. The subject of the bilateral program is becoming very relevant and valuable for the Turkmen side. It is a clear demonstration to both the Turkish authorities and its companions on the Turkic Council that Turkmenistan should not be driven into a corner. There are other footholds that the Turkmen authorities can use in case of more open pressure. “

“Of course, there is no talk of any“ Russian ”turn in Turkmen politics. Right now the Turkmen leadership urgently needs to demonstrate not only adherence to the obligations of an associative member in the CIS, but also the presence of dynamics in bilateral relations with Russia. And at the same time demonstrating to the Russian authorities the intention not to delve into Turkey’s integration projects. And also to other pro-Turkish structures that are planned for implementation in the near future.

According to the expert, despite the great temptation to bring Turkmen gas to European markets, the Turkmen authorities are well aware that in this case they will instantly become hostages in a big Turkish intrigue in relations with Europe, automatically turning from a subject into an object whose opinion will be taken into account in last but not least, the haste of Turkish diplomacy leaves no doubt about that. This is already seriously hurting the pride of the Turkmen leadership. They are trying not to resort to the services of intermediaries. Especially such dominant ones as President Recep Erdogan.

Time for Russia to determine its position on Turkey’s penetration into the Central Asia

“In the end, it is time for Russia to determine its position on Turkey’s penetration into the Central Asian and Caspian regions. Turkey’s ambitions already extend not only to Central Asia, but also to Afghanistan.

With regard to the Caspian region everything looks even more serious. “The mantras that the norms of the Caspian Convention, defining the status of the Caspian Sea, protect the region from the intervention of third forces, which repeat the policies of the Russian Federation, are not worth a damn. Iran has not even begun to ratify the convention, claiming to articulate the principles of dividing the water area. That means that the document will not come into force soon, and all its norms, including the non-accessibility of non-regional countries to the policy-making process, remain only good wishes.

Turkish authorities are in a hurry to take advantage of this – to stake out their participation in the Caspian regional policy and actually devalue the principles of the Caspian Convention. That, in turn, is a direct threat to regional security. Process which has been built with such difficulty for almost 30 years.

Interests of all countries involved must be respected

Both the Turkmen and Russian sides will have to rethink the newly formed configuration. And also to formulate a mutually acceptable position that takes into account not only all aspects of bilateral relations. And also the interests, ambitions and claims of other regional and world players, including Iran and China. If from the point of view of the“ struggle for resources ”now Turkmenistan does not play a decisive role for Russia, then in the moment the“ struggle for territories ”comes to the fore, in which it is Turkmenistan that is the key subject, on whose position the outcome of the next phase depends (after South Caucasus – Nagorno-Karabakh) rivalry between Turkey and Russia, ”Aitakov believes.

In his opinion, we must pay tribute to the Turkmen side, over the past year it has sent signals to the Russian authorities more than once – on the day of the Victory Parade, May 9, with the invitation of a high-ranking Russian delegation, various initiatives for economic cooperation, almost instant registration of two Russian vaccines against coronavirus is far from a complete list of curtsies towards Russia, which, in turn, began to suppress all manifestations of protest activity of the Turkmen emigration and students studying in Russian universities on its territory (one was even sent to Turkey without being granted asylum). But all this remains only ritual signs of mutual attention and disposition. 

“But the fundamental challenges that are capable of defining and changing the configuration of the entire region, so far, they remain unanswered or are again at the mercy of “quiet diplomacy”, the effectiveness and efficiency of which often raises serious doubts. The history of Russian-Turkmen relations, like no other, is a good illustration of this, ”the expert concluded. 

Turkey becomes the center of the region’s railway communication

The railway will go directly to Baku, Tehran and Islamabad

The ambitious project of the Turkish authorities can revive business activity in almost the entire Turkic region.

It is not the first time that Turkey has been demonstrating its intentions to seize absolute leadership in its region. After the end of the Karabakh conflict in favor of Azerbaijan, the integration of economies may become even closer.

One of the points of the peace agreement assumes that Armenia will allocate a strip of its territory in the south for the construction of a railway line between Nakhichevan (an Azerbaijani exclave in Armenia) and the main territory of Azerbaijan. For Turkey, this may be a chance to establish direct rail links with Azerbaijan. In particular, with the capital of the republic, Baku.

Turkey is now connected by rail with Azerbaijan – but it passes through Georgia 

The fact is that back in 1993 the direct road through Armenia was closed. The new Baku-Tbilisi-Kars branch was completed in 2017. In fact, a section of about 100 kilometers was completed. It was planned to run passenger trains on it in 2020.

Now Kars can be connected to Baku via a new branch – Turkey directly borders on Nakhichevan (the border is about 11 kilometers). The construction of the 230-kilometer road Kars – Igdir – Nakhichevan will begin this year. It will cost 2 billion Turkish lira. In fact, Turkey will receive a faster railway route with Azerbaijan, and without entering the territory of other countries (as in the case of a branch through Tbilisi). For this, Azerbaijan must build a road from Nakhichevan to its main territory.

The Turkish authorities are already close to launching a larger railway route. Trains are expected to start soon from Istanbul via Tehran to Islamabad. It is planned to connect the capital of Turkey with the “rising star of Asia” Pakistan via a 6443-kilometer railway. Of these, 1,850 kilometers will pass through the territory of Turkey, 2,603 ​​kilometers through Iran and 1,900 kilometers through Pakistan.

Due to the fact that in Iranian Zahedan it will be necessary to reload cargo (change of track gauge), the whole journey will take about 14 days. However, this is much faster than the existing sea route from Istanbul to Islamabad. That takes an average of 21 days. The acceleration of the route by a week will increase the volume of trade between the countries. Road connection with Nakhichevan will contribute to the economic growth of the republic.


ITI Corridor

The Istanbul-Tehran-Islamabad, or ITI corridor, was launched in 2009 within the Economic Cooperation Organization (ECO) framework, an Asian political and economic intergovernmental organisation. Various test journeys were carried out, but it has not become a stable regular service since then. A year ago, rumours concerning the service’s re-operation made the news, but they remained a theory.

Earlier this year, Turkey, Iran and Pakistan initiated discussions aiming to start anew and finally launch the long-awaited service. The three countries did not specify the time frame for the outset of operations, and they implied that this would happen at some point during 2021. However, it seems that approximately a month later, the trilateral coalition is ready to realise what it has been visioning for ten years now.

Part of the New Silk Road

Pakistan wants to connect the ITI corridor with China’s Belt and Road network through its ML-1 railway line. It is the largest component of the China-Pakistan economic corridor (CPEC). Despite the potential, the realisation of this project still faces some infrastructural and financial hurdles.

The ML-1 railway project was still unfinished when discussions concerning the route restarted. Without it, running trains through the Balochistan Province in Pakistan is impossible. Infrastructure in this region cannot handle the same trains as in Turkey and Iran. Tracks are over a century old, and natural conditions do not make the situation easier since sand dunes cover them in many parts. The finalisation of the ML-1 project was critical to connect ITI with BRI since it seemed to be the prerequisite for the re-opening of the line.

The North-South corridor and the Eurasia canal

From Russian point of view

The accident of the container ship Ever Given in the Suez Canal, which blocked this important transport artery for almost a week, sparked discussions on alternative routes for the delivery of goods from Asia to Europe. One such alternative is the so-called North-South corridor and the associated Eurasia Canal project. They are able to connect the center of the continent and the Gulf region with the markets of Europe.

At the same time, the implementation of these logistics projects is impossible without Russia. Why are both routes interesting for world trade?

Nursultan, move the sea!

The agreements on the implementation of the North-South International Transport Corridor (ITC) project – from the Indian port of Mumbai (Bombay) through the Persian Gulf, Iran, the Caspian Sea and further through our country up to the ports of the Baltic Sea and western borders – were signed by Russia. India and Iran in St. Petersburg back in 2000. The 7200 km route avoids the passage of the Suez Canal and the roundabout route around all of Europe, transporting goods from India and the Persian Gulf countries through Russian territory directly to the markets of Northern and Western Europe.

In turn, the Eurasia canal adjoins the North-South corridor and brings it to the countries of Eastern and Southern Europe. This navigable canal should connect the Caspian and Azov Seas and pass through the bitter-salt lake Manych-Gudilo and the Manych depression. The maximum height of depression is only 20 meters above sea level.

The idea of ​​”Eurasia” arose much earlier, in the 1930s, even before the construction of the Volga-Don Canal. Such a deep-water channel would allow not only river-sea vessels to enter the Caspian, but also large sea-going ships. For the first time in modern times, the idea of ​​building a canal was returned at the interstate level in 2007. It was during a meeting between Russian President Vladimir Putin and the head of Kazakhstan Nursultan Nazarbayev.

Both projects are not purely maritime transport routes. Rather, they are similar to China’s Belt and Road Initiative, which uses Eurasian connectivity across inland seas, roads, and railways. So-called “combined” transport corridors. Such corridors include not only port-to-port maritime transport. They also include significant land sections that complement maritime transport.

Benefits for Kazakhstan

In the usual comparison, of course, road and rail transport lose out to sea transport. In case of combined transport, direct comparison often does not work. Take Kazakhstan: this country is located in the very center of Eurasia – and in one way or another it is forced to rely on roads and railways to trade with the world. And the closer the conditional sea comes to the borders of Kazakhstan, the easier and cheaper it will be for Astana to send its goods for export and receive imported goods from abroad.

By itself, the Caspian Sea is unsuitable for this: it is an isolated seawater that does not communicate with the World Ocean by deep-water transport. But if you connect the Caspian with the Black Sea, which already has access to the ocean routes through the Bosphorus, and provide rail transportation to the Persian Gulf region, then Kazakhstan’s entry into the world market will be much easier.

Ukrainian rake

At first glance, Russia’s interest in the North-South corridor and the Eurasia channel is not so obvious. After all, let’s say, cargo from Central Asia, which today goes to Europe on our railways, will then be sent directly by sea vessels from the Caspian ports belonging to Kazakhstan or Turkmenistan. After that, the sea vessel will transport them either to the ports of Iran, or straight to Europe through “Eurasia”.

However, there is a certain flaw in this logic. The geographical advantage should not be abused. This is clearly shown by the example of Ukraine. Ukraine, being a practical monopoly on the transit of Russian gas to Europe in the mid-1990s, completely squandered this unique potential in less than 30 years. Russia simply built bypass routes around Ukraine.

The development of the future logistics of the Caspian region can follow the same logic. There is an alternative version of the shipping channel between the Caspian and the Black Sea. That should pass through Azerbaijan and Georgia, along the valleys of the Kura and Rioni rivers. The British even tried to dig such a canal in the early 1920s. However, the annexation of Menshevik Georgia to Russia closed the possibility for its construction. Today such plans are cherished by Turkey. Turkey wants to link Central Asia with its territory through Azerbaijan and Georgia, and in the future through Armenia.

Iran as counterweight to Turkey

If Russia retains control over important sections of the North-South corridor in cooperation with Iran and provides a deep-water sea route to the Caspian through its territory, this will not only reduce the cost of logistics for a number of Asian countries, but also reliably “tie” them to Russia. In addition, Iran is a natural counterweight to Turkey in the region, which was clearly demonstrated during the recent aggravation of the Karabakh conflict.

As for our railways, you don’t have to worry about them. There is quite enough work for Russian Railways within the framework of the increased trade turnover along the North-South corridor. The decrease in trade turnover due to sea vessels passing through Eurasia will be offset by canal fees collected from them.

The main effect of the implementation of both projects may be the creation of two Russian transport corridors at once. They will compete with all the “southern” routes from Asia to Europe. Including the route through the Suez Canal and around the Cape of Good Hope. Russia becomes not only a transport hub, but also a guarantor of stability for many countries of Eurasia. Such an intracontinental transport corridor is much less dependent on unexpected changes in the geopolitical situation. Or the West’s desire to grossly interfere in world trade through sanctions, embargoes and other restrictions.

Author: Alexey Anpilogov


On June 15, 2007, at the 17th Foreign Investors’ Council Meeting in Ust-Kamenogorsk, President Nursultan Nazarbayev of Kazakhstan proposed the Eurasia Canal project to build a canal connecting the Caspian and Black Seas. The project was estimated to cost US$6 billion and take 10 years to complete.[7][8]

Wikipedia

If built, the nearly 700 km (430 mi) Eurasia Canal would be four times longer than the Suez Canal and eight times longer than the Panama Canal. President Nazarbayev stated that the canal would make Kazakhstan a maritime power and benefit many other Central Asian nations as well.[7] Russia has proposed an alternative plan to upgrade the existing Volga-Don Canal.

Wikipedia