G13A0218 copyDespite the turmoil currently roiling Afghanistan, Turkmen President Gurbanguly Berdymukhammedov, in power since December 2006, sees Afghanistan as a potential land of opportunity, as a trading partner, a market for electricity exports, and a transit nation for the long proposed but interminably delayed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline.

For such a grandiose project to succeed, Turkmen-Afghan relations need to be strengthened. Accordingly, during their fifth joint economic summit in Ashgabat Afghanistan and Turkmenistan agreed to expand bilateral economic relations. The Afghan delegation was represented by Finance Minister Eklil Hakimi, Energy and Water Minister Ali Ahmad Usmani, Transportation and Civil Aviation Minister Mohammadullah Batash, and president’s adviser on economic affairs Humayon Qayyumi.

Memoranda of Understanding (MOUs) were signed concerning agriculture, transportation, and telecommunications, one of which included future Afghan purchases of Turkmen wheat. These built upon on earlier MOUs on improving bilateral trade and economic relations, combatting money laundering, and coordinating activities involving energy, sports, and information technology.

There is certainly room for improvement, as currently neither country is a top trade partner. According to the Economic Complexity Index (ECI), Afghanistan is the 165th largest export economy in the world. In 2013 Afghan exports totaled $721 million, while imports were $7.97 billion, resulting in a negative trade balance of $7.25 billion. In 2013 the country’s GDP was $20.3 billion and its GDP per capita was $664. The top exports of Afghanistan are raw cotton ($127 million), fruit ($67.2 million), grapes ($65.3 million), spices ($57.3 million), and coal briquettes ($49.4 million.) Afghanistan’s top export destinations are Pakistan ($295 million), India ($240 million), Finland ($17.4 million), and Russia ($13.9 million). Afghanistan’s leading import partners are Pakistan ($2.32 billion), the United States ($587 million), India ($542 million), and China ($429 million).

Despite Afghanistan being rich in natural resources, up to now little has been done to develop them. Resources include extensive deposits of natural gas, petroleum, coal, copper, chromite, talc, barites, sulfur, lead, zinc, iron ore, salt, and precious and semiprecious stones. However, the country’s rugged terrain and lack of a significant transportation network restrict trade activities and opportunities.

In contrast, according to the ECI, Turkmenistan is the 93rd largest export economy in the world and the 123rd most complex economy. In 2013, Turkmenistan exported $10.3 billion and imported $7.28 billion, resulting in a positive trade balance of $3.06 billion. In 2013 the GDP of Turkmenistan was $41.9 billion and its GDP per capita was $7,990.

The top exports of Turkmenistan are natural gas ($8.07 billion), refined petroleum products ($1.08 billion), raw cotton ($298 million), gold ($263 million), and cotton yarn ($172 million.) Turkmenistan’s top imports in 2013 were Special Purpose Ships for use on the Caspian ($356 million), raw iron bars ($223 million), iron pipes ($217 million), iron construction materials ($200 million), and trucks ($179 million). The top export destinations of Turkmenistan are China ($7.97 billion), Turkey ($638 million), Italy ($457 million), Britain ($440 million), and Kazakhstan ($199 million). The top import origins are Turkey ($1.93 billion), Russia ($1.41 billion), China ($1.11 billion), Germany ($495 million), and Ukraine ($394 million).

The one area where economic interests align is energy; Afghanistan wants energy imports, Turkmenistan wants access through to the populous energy deficit markets of Pakistan and India. The TAPI pipeline satisfies both conditions.

For Turkmenistan, which has been hit by low energy prices and is now dependent on China for the vast majority of its gas sales, the 1,100-mile TAPI is a key opportunity to diversify its exports. With an annual carrying capacity of 33 billion cubic meters of Turkmen natural gas, the pipeline is projected to run from Turkmenistan’s Dauletabad gas field across Afghanistan and Pakistan and terminate at the northwestern Indian town of Fazilka.

On October 30, Turkmenistan’s state gas company Turkmengaz announced plans to start construction on its section of the TAPI pipeline in December. Turkmengaz, Afghan Gas Enterprise, Inter State Gas Systems (Pakistan), and GAIL (India) are all equal shareholders in the pipeline company, which will build, own, and operate the network.

How does Afghanistan stand to benefit from the TAPI? Projections suggest the country would receive nearly $400 million in annual transit fees as well as 14 million cubic meters (mcm) per day of Turkmen natural gas. Small wonder that Kabul is so enthusiastic about the project.

Turkmen optimism aside, uncertainty hangs over the TAPI project, whose cost is estimated at more than $10 billion and rising. The Turkmen portion of the pipeline is 125 miles, the Afghan section – 480 miles, and Pakistan to the border with India – 514 miles. The TAPI’s route traverses Afghanistan’s Kandahar province, the spiritual home of the Afghan Taliban and Pakistan’s Quetta region, traditionally the heartland of the Pakistani Taliban. It seems most unlikely that the militants in either region would look benignly on the construction of an energy facility that would enhance the revenue stream of the governments and their armed forces that they are combatting.

Because of these risks, the four-country consortium has yet to confirm the participation of a foreign commercial partner willing to help finance the project.

Last month Afghan officials stated that the Taliban pose a grave threat to seventeen of the country’s thirty-four provinces. These include Herat, Baghdis, Faryab, and Jowzjan provinces bordering Turkmenistan and to the south virtually every province along the Durand Line. If the Afghan armed forces control only half the country’s provinces, then it remains to be seen how, fourteen years after the Taliban were driven from power, the country’s security issues will be resolved anytime soon.

Accordingly, despite the best intentions in Ashgabat, Kabul, Islamabad, and New Delhi, it would seem that the TAPI pipeline will remain stalled at 125 miles for the foreseeable future.