Marina Gruzer | 30 October 2024

Summary

• Turkmenistan is set to sign a memorandum of understanding with Pakistan regarding access to the Gwadar port in Pakistan’s Balochistan region under the China-Pakistan-Economic Corridor (CPEC) project. 

• Not only will this make Turkmenistan the first Central Asian country to have access to the port, but Pakistan also hopes this will bolster Gwadar port’s role as a key international trading hub. 

• Despite economic opportunities, crucial for Turkmenistan’s gas export diversification, infrastructural challenges at Gwadar port and security risks in the Balochistan province persist.  

Under Pakistan’s Special Investment Facilitation Council (SIFC), Pakistan and Turkmenistan are set to sign a Memorandum of Understanding (MoU) which would provide Turkmenistan access to Gwadar port. A key aim of this policy is to strengthen international movements of goods and establish stronger capabilities for both countries’ ports. So far, the Pakistani government ‘formed a committee to review the draft agreement between Gwadar and Turkmenbashi ports’. Turkmenistan has been seeking to bolster its economic relations with Pakistan via other initiatives such as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, a natural gas pipeline developed by the Galkynush gas field. As an export-oriented economy focusing on petroleum gas, nitrogenous fertilisers and crude petroleum, access to the Gwadar port would provide significant opportunities for Turkmenistan to diversify its trading partners. However, limited infrastructure at Gwadar port and continuous security challenges posed by Afghan-Pakistani cross-border violence and attacks from the Baloch Liberation Army in Balochistan, are likely to limit Pakistan’s efforts to enhance Gwadar port’s role in global trade. 

Having access to the Gwadar port would significantly improve both export destination and export transit route diversification. As one of the world’s key gas producers, Turkmenistan’s economy is partially dependent on its exports of natural resources. Currently, China and Turkey are the largest importers of Turkmenistan’s gas and Turkmenistan remains reliant on Russian and Iranian transit routes for conducting overseas trade. Turkmenistan’s recent agreements to develop the North-South Transport Corridor, with Kazakhstan, Russia and Iran, and the Caspian Sea- Black Sea Corridor, with Georgia, Azerbaijan and Romania, demonstrates a broader effort to diversify trading partners and opportunities. Gwadar port would offer streamlined maritime access to European, African and Middle East markets. 

However, while Pakistan hopes that this development can help enhance the role of Gwadar port in international trade, infrastructural and security drawbacks in the region pose significant risks that may limit the port’s success. Twenty years after its completion, Gwadar port still is yet to realise the ambitious potential that Pakistan originally aimed for. This is partly due to limited port facilities such as a lack of operational Liquified Natural Gas (LNG) terminals and limited berth capacity. Additionally, security challenges arising from Balochistan’s separatist movement and cross-border violence with Afghanistan may be disruptive to supply chains and the already limited road and railway infrastructure around the port. 

Forecast

• Short to Medium-term

  • Despite potentially enhancing trade diversification, Turkmenistan is highly unlikely to gain immediate short-term benefits from trade via the Gwadar port due to limited port infrastructure, especially in relation to LNG terminals which are crucial for Turkmenistan’s main gas exports. 

• Long-term

  • As a traditionally isolated country, Turkmenistan’s access to Gwadar and involvement in regional trade corridors is fairly likely to increase its integration into the global economy and establish broader trade linkages. This would facilitate a diversification of trade routes and potentially expand Turkmenistan’s gas export destinations while reducing the country’s reliance on gas pipeline routes. For example, countries that have the infrastructure to import LNG such as Vietnam, could seek to import Turkmenistan’s gas to meet growing energy demands.