What If Ashgabat Implemented Different Gas Revenue Policies?

The Actual History

Following the collapse of the Soviet Union in 1991, Turkmenistan emerged as an independent nation with vast natural gas reserves—currently estimated to be the fourth-largest in the world. The capital city, Ashgabat, became the center of a new government led by Saparmurat Niyazov, who had previously served as the First Secretary of the Communist Party of the Turkmen SSR. Rather than transitioning to democracy, Niyazov quickly consolidated power and established an authoritarian regime, adopting the title "Turkmenbashi" (Leader of all Turkmen) and developing an extensive personality cult.

Turkmenistan's economy has been overwhelmingly dependent on its natural gas resources, which account for over 80% of exports and approximately 35% of its GDP. Despite this natural wealth, the country failed to develop a diversified economy or transparent resource management policies. Under Niyazov's rule (1991-2006), gas revenues were notoriously mismanaged, with significant sums directed toward grandiose construction projects in Ashgabat, including gold statues of the president, palatial government buildings, and artificial lakes in the desert. The Darvaza gas crater, often called the "Door to Hell"—a natural gas field that collapsed into a cavern and has been continuously burning since 1971—became an ironic symbol of the country's resource abundance and mismanagement.

The gas export strategy remained heavily dependent on Russia, as the Soviet-era pipeline infrastructure limited Turkmenistan's ability to diversify its customer base. Gazprom maintained a near-monopoly on Turkmen gas exports until the mid-2000s, allowing Russia to purchase Turkmen gas at below-market prices and resell it to European customers at significant markups. This arrangement severely limited the revenue potential of Turkmenistan's most valuable resource.

After Niyazov's death in December 2006, his successor, Gurbanguly Berdimuhamedow, initially promised reforms but largely continued similar policies of authoritarian control and resource mismanagement. While Berdimuhamedow did attempt to diversify gas export routes, eventually establishing the Central Asia-China gas pipeline in 2009, the fundamental approach to resource revenue management remained unchanged. The government maintained tight control over the gas sector through the state company Türkmengaz, with limited transparency regarding revenue flows or expenditures.

Despite its vast gas wealth, Turkmenistan has experienced recurring economic crises, including currency devaluations and shortages of basic goods. The state-controlled economy, coupled with widespread corruption and a lack of economic diversification, has prevented the country from translating its natural resource wealth into broad-based prosperity. Foreign investment has been limited by the difficult business environment, legal uncertainty, and the regime's unpredictability.

By the 2020s, Turkmenistan remained one of the world's most isolated and repressive states, with minimal political freedoms and a stagnant economy despite its enormous gas reserves. The country ranks among the worst in global indices for press freedom, corruption, and civil liberties. When Serdar Berdimuhamedow succeeded his father as president in 2022, effectively establishing a political dynasty, there were no significant changes to the country's resource management policies or governance approach.

This trajectory represents a classic case of the "resource curse," where natural resource wealth, rather than fostering development and prosperity, enables authoritarian governance, corruption, and economic mismanagement—ultimately failing to benefit the broader population.

The Point of Divergence

What if Ashgabat had implemented fundamentally different gas revenue policies in the critical early years of independence? In this alternate timeline, we explore a scenario where Turkmenistan's leadership, whether through internal reform impulses, international pressure, or strategic foresight, chose a dramatically different approach to managing its vast natural gas wealth beginning in the mid-1990s.

The point of divergence might have occurred through several plausible mechanisms:

First, international financial institutions could have played a more influential role during Turkmenistan's transition from Soviet republic to independent state. In our timeline, Turkmenistan largely rejected IMF and World Bank advice, but there was a brief window from 1992-1994 when the country engaged with these institutions. In this alternate timeline, these early engagements could have resulted in the adoption of transparent resource revenue management policies as a condition for international integration and support.

Alternatively, the divergence might have emerged from within the Turkmen leadership itself. In the early post-independence years, there were competing visions for Turkmenistan's development. While Niyazov's personalistic authoritarian approach prevailed in our timeline, a different balance of power within the government might have led to the ascendance of technocrats who recognized the long-term benefits of establishing a sovereign wealth fund and more transparent resource governance.

A third possibility involves external examples. By the mid-1990s, Norway's Oil Fund (established in 1990) was already showing promising results as a model for responsible resource management. In this alternate timeline, Turkmen officials might have been particularly impressed during state visits or international conferences by the Norwegian approach, leading them to adopt similar principles adapted to their context.

The most concrete expression of this divergence would have been the establishment of a Turkmen Sovereign Gas Fund around 1996-1997, with constitutional provisions ensuring transparency, professional management, and strict rules against political interference. Such a fund would be tasked with investing a significant portion of gas revenues abroad to prevent Dutch disease, save for future generations, and provide a stabilizing economic mechanism separate from day-to-day government operations.

This divergence would not necessarily have immediately transformed Turkmenistan into a liberal democracy, but it would have created institutional constraints on the arbitrary use of resource revenues, potentially setting the stage for more gradual political and economic liberalization in subsequent decades.

Immediate Aftermath

Institutional Development (1997-2000)

The establishment of the Turkmen Sovereign Gas Fund (TSGF) in 1997 would have necessitated the development of new institutions and expertise that Turkmenistan lacked as a newly independent state. In this alternate timeline, the government entered into partnerships with international financial institutions and established sovereign wealth funds from countries like Norway and Singapore to develop the necessary governance structures and investment capabilities.

The TSGF would likely have been structured with several key features:

A constitutional mandate requiring all gas export revenues to flow through transparent accounts
An independent governing board including both government officials and independent experts
A requirement that only a fixed percentage (perhaps 3-4%) of the fund could be withdrawn annually for budget support
Strict investment guidelines focusing on international diversification
Regular public reporting requirements

These institutional developments would have immediately altered the relationship between the Turkmen state and its resource wealth. While President Niyazov would still have maintained significant political power, his ability to direct gas revenues toward personal projects would have been constrained by these new institutional guardrails.

Economic Policy Shifts (1998-2002)

With a more structured approach to resource revenue management, several immediate economic policy shifts would have followed:

Currency stabilization: Unlike our timeline, where the Turkmen manat experienced volatile fluctuations, the new policies would have created a more stable currency environment by breaking the direct link between gas export earnings and government spending.
Reduced vanity projects: The infamous gold statues, artificial lakes, and marble palaces that characterized Ashgabat's development in our timeline would have been significantly scaled back as funds were directed into the sovereign wealth fund rather than being immediately available for presidential pet projects.
Gas contract renegotiation: With professional management overseeing gas revenues, Turkmenistan would likely have taken a harder line in negotiations with Russia's Gazprom around 1999-2000, potentially securing better prices for its gas exports several years earlier than in our timeline.

During the 1998 Russian financial crisis, Turkmenistan's sovereign wealth fund approach would have demonstrated its first major benefits. While other post-Soviet economies (including our timeline's Turkmenistan) were severely impacted by Russia's economic troubles, the alternate Turkmenistan would have had a financial cushion that allowed it to weather the regional economic storm with significantly less disruption.

Political Dynamics (1999-2006)

The institutional constraints on gas revenue usage would not have immediately transformed Turkmenistan into a democracy, but they would have altered the nature of Niyazov's rule in several important ways:

Emerging technocratic class: The necessity of managing a sovereign wealth fund would have required the development of a class of financially sophisticated officials and professionals who would have constituted a new elite group alongside the traditional security and tribal power centers.
Reduced patronage networks: With stricter controls on resource revenues, the elaborate patronage networks that cemented Niyazov's power in our timeline would have been somewhat constrained, potentially creating space for more independent political actors.
International engagement: The more responsible resource management approach would have gradually improved Turkmenistan's international standing, leading to greater engagement with global financial and diplomatic institutions. This would have slowly reduced the country's isolation compared to our timeline.

By 2003-2004, these dynamics would have produced a Turkmenistan that was still authoritarian but with more internal constraints on executive power and a growing professional class interested in further economic liberalization. When Niyazov's health began to deteriorate around 2005, the existence of the sovereign wealth fund and its associated institutions would have created an important power center somewhat independent from the president himself.

Regional Position (2000-2006)

Turkmenistan's different approach to gas wealth management would have affected its regional position in Central Asia:

Relations with Russia: The more assertive stance on gas pricing and export routes would have created earlier tensions with Moscow, potentially accelerating Turkmenistan's pivot toward developing alternative export routes.
Investment destination: With more predictable economic policies and transparent resource management, Turkmenistan would have become a more attractive investment destination than in our timeline, particularly for energy sector development and associated infrastructure.
Pipeline diplomacy: The country would have been better positioned financially to advance pipeline projects bypassing Russia, potentially moving forward with trans-Caspian pipeline discussions several years earlier than in our timeline.

By the time of Niyazov's death in December 2006, Turkmenistan in this alternate timeline would have had a substantial sovereign wealth fund (perhaps $15-20 billion), better developed economic institutions, and a somewhat more diverse economy, setting the stage for a significantly different trajectory under the next leadership.

Long-term Impact

Economic Transformation (2007-2015)

Following Niyazov's death in 2006, the presidential succession in this alternate timeline would still likely have resulted in Gurbanguly Berdimuhamedow taking power. However, the institutional context he inherited would have been markedly different from our timeline, profoundly influencing his governance approach.

Diversification Initiatives

With the sovereign wealth fund functioning as both a stabilization mechanism and investment vehicle, Berdimuhamedow's government would have had both the resources and the institutional framework to pursue meaningful economic diversification:

Infrastructure development: Rather than the marble-clad and underutilized showpieces of our timeline, infrastructure investment would have been more strategically directed toward transportation networks, telecommunications, and utilities that could support broader economic development.
Education and human capital: The fund would have allocated significant resources to upgrading Turkmenistan's educational system, particularly in fields relevant to economic diversification such as engineering, finance, and management.
Strategic sectors: Beyond gas, investments would have targeted agriculture modernization, textile manufacturing, and tourism—all areas where Turkmenistan has natural advantages but failed to develop in our timeline due to institutional weaknesses and resource misallocation.

By 2010-2012, these investments would have begun showing measurable results. GDP growth would have been more sustainable than in our timeline, with non-hydrocarbon sectors growing from approximately 20% of the economy to perhaps 35-40% by 2015.

International Economic Integration

The alternate Turkmenistan's economic policies would have facilitated greater international integration:

WTO accession process: Unlike our timeline, where Turkmenistan remains one of the few countries outside the World Trade Organization, the alternate timeline would have seen Turkmenistan begin its accession process around 2008-2009, with potential membership by 2015.
Banking sector development: The need to manage sovereign wealth fund assets would have accelerated banking sector reforms, creating a more robust financial system capable of supporting private sector growth.
Foreign investment: With clearer property rights and more predictable regulations—both byproducts of the institutional development surrounding the sovereign wealth fund—foreign direct investment would have diversified beyond the extractive sector.

Between 2007 and 2015, Turkmenistan would have become increasingly integrated into regional and global economic structures, reversing the isolation that characterized our timeline.

Political Evolution (2007-2020)

While the establishment of a sovereign wealth fund would not have automatically created democracy, it would have set in motion political dynamics that gradually modified Turkmenistan's authoritarian system:

Institutional Constraints

The Norwegian-inspired gas fund model would have created meaningful checks on executive power:

Separation of powers: The fund's independent management structure would have established a precedent for institutional independence that could gradually extend to other government functions.
Transparency requirements: The constitutional provisions requiring public reporting on fund activities would have created expectations for government transparency more broadly, making it more difficult to maintain the extreme secrecy that characterizes Turkmen governance in our timeline.
Rule of law: The legal framework governing the fund would have strengthened the concept of rule-based governance rather than personal rule, potentially influencing other areas of governance.

Emerging Civil Society

The economic diversification and educational investments would have created more space for civil society development:

Professional associations: The growing professional class would have formed associations representing their interests, initially focused on technical and economic matters but gradually expanding their scope.
Media development: While still restricted compared to Western democracies, media outlets would have gained some independence, particularly in covering economic and business matters related to the sovereign wealth fund's activities.
Educational exchanges: The improved international relations resulting from responsible resource management would have facilitated more educational exchanges with foreign institutions, exposing more Turkmen citizens to alternative governance models.

By 2020, Turkmenistan would likely still have been classified as authoritarian, but with significantly more pluralism and constraints on executive power than in our timeline. The personalistic dictatorship model would have evolved toward something closer to a managed developmental state on the Singapore or Kazakhstan model.

Regional Geopolitics (2010-2025)

Turkmenistan's different developmental path would have altered Central Asian geopolitics in several important ways:

Energy Diplomacy

Diversified export routes: The financial stability provided by the sovereign wealth fund would have allowed Turkmenistan to more confidently pursue pipeline projects independent of Russian control, likely resulting in the earlier completion of not just the China pipeline (completed in 2009 in our timeline) but also potential routes through Afghanistan to South Asia and across the Caspian to Azerbaijan and Turkey.
Pricing power: With multiple export options, Turkmenistan would have gained significant leverage in price negotiations with all customers, potentially doubling its gas export revenues compared to our timeline.
Regional energy hub: By the 2020s, Ashgabat could have developed into a regional energy diplomacy center, hosting international conferences and serving as a forum for energy cooperation agreements.

Strategic Positioning

Balanced foreign policy: The economic success and institutional stability would have allowed Turkmenistan to pursue a more confident foreign policy, balancing relations between Russia, China, the United States, and Europe rather than shifting from Russian to Chinese dependency as in our timeline.
Regional cooperation: Economic success would have positioned Turkmenistan as a more constructive participant in regional organizations like the Shanghai Cooperation Organization and potentially even as a mediator in regional disputes.
Democratic pressure: By the 2020s, Turkmenistan's growing middle class and more developed institutions would have created internal pressure for further political liberalization, potentially allowing the country to begin transitioning toward a more participatory political system.

Global Implications (2020-2025)

By the present day in our alternate timeline, Turkmenistan's different developmental path would have had several global implications:

Resource governance model: Turkmenistan would have joined Norway and Botswana as case studies in effective management of natural resource wealth, providing an alternative model for other resource-rich developing nations.
Central Asian stability: The more successful development model would have contributed to greater regional stability, potentially helping address challenges like extremism and drug trafficking that flourish in conditions of economic hardship.
Energy security: The more diversified export infrastructure would have enhanced global energy security by providing multiple supply routes for Central Asian gas resources.

Perhaps most significantly, Turkmenistan would have avoided the "resource curse" that has afflicted so many natural resource-dependent economies, demonstrating that with the right institutional arrangements, even countries emerging from authoritarian Soviet systems could translate resource wealth into sustainable development.

In this alternate 2025, Turkmenistan would likely have a sovereign wealth fund worth over $100 billion, a significantly more diversified economy, moderate political liberalization, and a much higher standard of living for its citizens—all stemming from that critical decision in the late 1990s to manage its gas wealth differently.

Expert Opinions

Dr. Annette Bohr, Senior Research Fellow at Chatham House's Russia and Eurasia Programme, offers this perspective: "The establishment of a sovereign wealth fund in Turkmenistan during the late 1990s would have fundamentally altered the relationship between state power and resource wealth in the country. While it wouldn't have immediately created democracy, it would have introduced crucial institutional constraints on executive authority. The most significant impact would have been the development of a professional class with international connections and technical expertise who would have constituted a counterweight to the security apparatus that dominates in our timeline. By 2025, we might have seen Turkmenistan evolve toward something resembling Kazakhstan's managed system rather than the extreme personalistic dictatorship that has persisted."

Professor Johannes Linn, former World Bank Vice President for Europe and Central Asia, suggests: "The economic implications of Turkmenistan adopting a Norwegian-style resource management approach would have been profound. Beyond the obvious benefits of macroeconomic stability and inflation control, the most transformative aspect would have been the potential for genuine economic diversification. In our timeline, Turkmenistan's economy remains overwhelmingly dependent on hydrocarbons with limited development of human capital. An alternate approach featuring strategic investments in education, infrastructure, and institutional development could have positioned Turkmenistan as a Central Asian success story rather than a cautionary tale of the resource curse. The timing would have been particularly fortunate, as it would have allowed Turkmenistan to benefit fully from the commodity boom of the 2000s while insulating it from the subsequent volatility."

Dr. Luca Anceschi, Professor of Central Asian Studies at the University of Glasgow, provides a more cautious assessment: "While different gas revenue management policies would certainly have improved Turkmenistan's economic outcomes, we should be careful not to overstate the political transformation that might have resulted. The entrenched power structures inherited from the Soviet period, combined with regional authoritarian norms, would have presented significant obstacles to democratization. Nevertheless, even modest institutional constraints on presidential power would have meaningfully improved governance. The key difference by 2025 would likely have been the emergence of a more technocratic authoritarian system with greater regime legitimacy derived from economic performance, as opposed to the dynastic personalistic dictatorship we observe today. This would have created a foundation for more substantial political liberalization in subsequent decades."