Global Witness: It’s a Gas. Funny Business in the Turkmen-Ukraine Gas Trade

I wanted to take the opportunity to introduce all of my readers to what I consider to be one of the more important anti-corruption NGOs currently operating in Europe, Global Witness. I have had some very positive contact with this organization, and I highly recommend visiting their website and checking out some of their reports for high quality information on the role of the natural resources trade in international conflict and corruption.


Below I attach the beginning of a summary introduction of last year’s report “It’s a Gas. Funny Business in the Turkmen-Ukraine Gas Trade.” I strongly support GW’s calls for greater transparency and corporate governance in the energy trade.

Summary This is the story of a trade that brings natural gas from the Central Asian country of Turkmenistan through Russia and Ukraine to the European Union (EU). Far from being open to scrutiny by the citizens of these countries, this trade has long been controlled by a handful of people and a series of mysterious intermediary companies. Although the business is worth billions of dollars a year, it is still unclear where much of this money goes. The EU is increasingly reliant on gas supplies from the former Soviet Union. The gas price dispute between Russia and Ukraine in the winter of 2005/6 sent shivers of anxiety across Europe that, in the depths of winter, the continent might not get enough fuel to keep warm and power its industries. Yet the dependence of EU countries on gas from Russia and Central Asia is only likely to grow. This report poses a difficult question for the EU and its neighbours: can they meet their energy needs without funding corruption and undermining good governance in the countries that supply or transport this energy? The time has come for transparency in the natural gas trade, to the benefit of citizens across the region. The dictator and Deutsche Bank The story starts in the Central Asian country of Turkmenistan, a former Soviet republic that is crumbling under the tyranny of its president, Saparmurat Niyazov. Turkmenistan is thought to earn more than US$2 billion per year from natural gas but its citizens have no information as to where that money is going because the revenues are managed in a completely opaque way. It is clear that the money is not being spent on them: standards of health, education and living quality have plummeted since independence in 1991. Political freedom is non-existent, censorship is total and over half the population is unemployed. Despite its gas wealth, Turkmenistan’s citizens are worse off than in Soviet times. Global Witness has discovered that President Niyazov keeps most of the gas revenues under his effective control in overseas and off-budget funds. Indeed, a horrifying 75% of the state’s spending also appears to take place off-budget. Global Witness has received several credible estimates that the total money under Niyazov’s control and held overseas is likely to exceed US$3 billion, some US$2 billion of which appears to reside in the Foreign Exchange Reserve Fund (FERF) at Deutsche Bank in Germany. Global Witness has discovered that, according to a 2001 contract, gas revenues from 2002 to 2006 were intended to be paid into Central Bank of Turkmenistan account no. 949924500 at Deutsche Bank, Frankfurt, but little else can be determined about exactly how Niyazov is managing Turkmenistan’s money. Most worrying of all, it seems that no money from the sale of Turkmen gas even makes it into the national budget. Niyazov appears to use these revenues to fund an increasingly bizarre personality cult replete with golden statues and lavish palaces. His picture is everywhere in Turkmenistan: on public buildings, on packets of salt and tea, bottles of vodka and even floats eerily in the corner of television broadcasts. ‘Turkmenbashi the Great’ (Niyazov’s appointed name, meaning ‘the great leader of the Turkmen’) has gone as far as to rename days and months of the calendar in an attempt to assert his hold over the Turkmen psyche. Schoolchildren are compelled to study his spiritual book, the Rukhnama, which is described on its official website as being ‘on par with the Bible and the Koran’.

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