The economy of Turkmenistan is heavily dependent on natural gas, petroleum, and cotton. Since independence in 1991, Turkmenistan has retained many features of the Soviet centrally planned system, with the state continuing to play a dominant role in economic activity through central planning, extensive state ownership, and regulation, thereby limiting private-sector development, foreign investment, and economic diversification. Although limited economic reforms have been introduced, the economy remains strongly influenced by government policy and hydrocarbon exports.
Turkmenistan has some of the world's largest natural gas reserves and is among the leading producers of cotton. Natural gas is the country's principal export commodity, while petroleum, petrochemicals, electricity generation, textiles, and irrigated agriculture also make significant contributions to the economy. Wheat is grown primarily for domestic consumption, whereas cotton is largely produced for export.
Economic performance has been strongly affected by fluctuations in hydrocarbon prices and shifts in export markets. China has become the principal destination for Turkmen natural gas exports, replacing Russia, while the government has sought to diversify export routes and develop domestic petrochemical industries.
History
From 1998 to 2005, Turkmenistan suffered from a lack of adequate export routes for natural gas and from obligations on extensive short-term external debt. At the same time, however, total exports rose by an average of roughly 15% per year from 2003 to 2008, largely because of higher international oil and gas prices. As in the Soviet era, central planning and state control is prominent in the system, and the Niyazov government (in power 1991–2006) consistently rejected market reform programs. The state subsidized a wide variety of commodities and services from the early 1990s to 2019. Following his election in 2007, President Gurbanguly Berdimuhamedow unified the country's dual currency exchange rate, ordered the redenomination of the manat, reduced state subsidies for gasoline, and initiated development of a special tourism zone (Awaza) on the Caspian Sea.
Since 2009, Turkmenistan has maintained a fixed exchange rate. In that year, the rate was set at US$1 to 2.85 manats. On 1 January 2015, the official exchange rate was changed to US$1 to 3.50 manats. However, the black-market exchange rate as of February 2021 was fluctuating around 29 to 30 manats to the dollar. As of mid-April, the black-market manat-dollar exchange rate had slid to 40 manat to the dollar.
Former President Gurbanguly Berdimuhamedow at a session of the Cabinet of Ministers on 11 March 2021, called the rate of GDP growth unsatisfactory. When discussing the 2021 government budget, he noted that 2021 would be "as difficult" a year as 2020 had been.
Fiscal policy
The government budget is developed and implemented in accord with the Law “On Budget System”. The law fixes the legal foundations of organizing management and operating the budget system, and regulates interrelations between budgets at all levels. The government of Turkmenistan discusses the state budget draft and submits it to the President of Turkmenistan. One month prior to the beginning of the fiscal year the President of Turkmenistan submits to the Assembly of Turkmenistan (Mejlis) the state budget draft for consideration and adoption. The Ministry of Economy and Finance is responsible for state finances.
Budget statistics are unreliable because the government spends large amounts of extra-budgetary funds. The 2021 budget of the Turkmenistan government totaled 79.5 billion manats of revenue, down from 84.39 billion manats in 2020, and 103.57 billion manats in 2017. The 2021 expenditure budget was set at 72.1 billion manats. In November 2023 state media reported the 2022 budget as 124.299 billion manats revenue and 117,601 billion manats expenditure.
The Central Bank of Turkmenistan controls the issue of money, but does not publish data on the money supply.
The Central Bank promotes cashless transactions. In the January–April period of 2020, the volume of cashless transactions using debit cards slightly more than tripled compared to the same period in 2019, to just under 1.9 billion manat. This shift from cash to electronic payments was not without problems; shortages of cash in automatic teller machines and inadequate availability of card payment facilities at points of sale were reported.
Industry In the post-Soviet era, Turkmenistan's industrial sector has been dominated increasingly by the fuel and cotton processing industries to the detriment of light industry. Between 1991 and 2004, some 14 new cotton-processing plants were opened, sharply increasing the capability of processing domestically produced cotton. The construction industry depends mainly on government building projects because construction of private housing is a low priority.
Natural gas
Turkmenistan's natural gas reserves are estimated at 50 trillion cubic meters.
Turkmenistan's major gas deposits were discovered in its central and eastern areas in the 1940s and 1950s, and in the 1980s the republic became the second largest producer of gas in the Soviet Union, behind the Russian SFSR. During the Soviet era gas was exported mainly to other Soviet republics, as Turkmenistan steadily increased delivery from about 9.2 million m³ in 1940 to about 234 million m³ in 1960 and about 51 billion m³ in 1975. This export was under centralised control, and most of the export revenue was absorbed into the Soviet central budget.According to a Turkmen college textbook published in 2010, "Between 1959 and 1965, the Derweze, Takyr, Shyh, Chaljulba, Topjulba, Chemerli, Atabay, Sakarchage, Atasary, Mydar, Goyun, and Zakli oil and gas fields were opened in the central Karakum Desert. The gas and oil layers are associated with sediments of the Jurassic and Mesozoic periods. The Bowrudeshik-Khiva gas field is located in the north-east of Turkmenistan. Here, natural gas is obtained from depths of 1700 to 3200 meters in the Ojak, Nayip, Kerpichli, and North Balguy wells. The Charjew gas play is located midway up the Amu Darya. The Gogurtly, Eljik, Farap, Kishtuwan, Samandepe, Matejan, Sakar, Bagaja, Baygushly, Khorezm and other gas fields were opened here. Gas is found at depths of 2300 to 2600 meters. In the Murgap gas play are the Dovlettabat, Donmez, Gummezli, Sandikgachy, Shatlyk, Bayramaly, May, Kelif, Sharaply, Yylan, Uchaji, Seyran, Tejen, Kulanly, Molaker, Mane, and Chache gas fields."
This changed in 1991, when Turkmenistan gained independence and established full control over gas export and export revenues. However, Soviet-era pipelines dictated that much of the gas go to the Caucasus, Russia and Ukraine. In the 1990s many of Turkmenistan's gas customers in the CIS failed to pay on time or negotiated barter deals. In the mid-1990s Turkmenistan stopped delivering gas to some CIS members, citing failure to pay and unprofitable barter deals. At the same time, the government tried to attract investments in building gas pipelines via Iran to Turkey and Western Europe via Afghanistan to Pakistan. Neither deal went through due to an unfavourable regional security environment and high costs; inflation and the budget deficit rose but privatisation was resisted.
In the late 1990s the government renegotiated its export and price arrangements with Gazprom and renewed deliveries to Georgia, Ukraine, and some other countries. It also opened its first pipeline not to pass through Russia, the Korpezhe-Kurt Kui Pipeline.
On 14 December 2009, the Central Asia–China gas pipeline was opened, and Turkmenistan began delivering large volumes of natural gas to the China National Petroleum Corporation. Combined design capacity of Lines A, B, and C of this pipeline system is 55 billion cubic meters per annum (bcma), of which Turkmenistan's quota was initially 35 bcma. In 2023, the Turkmenistan Ministry of Foreign Affairs stated that Turkmenistan's quota on this pipeline system was 40 bcma. By 2015 Turkmenistan was delivering approximately 35 bcma to China, counterbalancing declining exports to Russia, which ended on 1 January 2016. Russia had earlier restricted its imports to about 10 bcma, and then 5 bcma. Russian purchases resumed, albeit in smaller quantities, in 2019.
Small-volume sales of an estimated 12 bcma to Iran halted on 1 January 2017, when Turkmenistan unilaterally cut off supplies over payment arrears. Ashgabat claimed Tehran owed some $1.8 billion for supplies delivered nearly 10 years before. In March 2025 Turkmenistan began selling natural gas to Turkey via a Turkmenistan-Iran, Iran-Turkey swap with the goal of shipping 1.3 bcm by the end of the year.
In January–November 2020, Turkmenistan extracted 62.3 billion m3 of natural gas, of which, according to one source, it exported 31 billion. The state-controlled official media reported in February 2024 natural gas production in calendar year 2023 as 80.6187 billion cubic meters.
One observes in the table below that production and exports peaked in 2008 and dramatically decreased in 2009. This was due an explosion in the Central Asia–Center gas pipeline system in April 2009 for which Turkmenistan blamed Gazprom. Natural gas exports include pipeline gas directly to China and Russia, and to Azerbaijan via a swap with Iran, plus liquid petroleum gas shipped by rail and truck to Afghanistan.
+ Turkmenistan Production, Consumption, and Exports of Natural Gasbillion cubic meters per annum (bcma)Source: BP Statistical Review Year Production Consumption Exports Exportsto Russia Exportsto China Exportsto Iran 2005 57.0 16.1 40.9 35.1 0 5.8 2008 66.1 20.5 45.6 39.1 0 6.5 2009 36.4 19.9 16.7 10.7 0 5.8 2010 42.4 22.6 19.7 9.7 3.5 6.5 2011 59.5 25.0 34.5 10.1 14.3 10.2 2012 62.3 23.3 41.1 9.9 21.3 9.0 2013 62.3 22.3 40.1 9.9 24.4 4.7 2014 63.5 20.0 n/a n/a n/a n/a 2015 65.9 25.4 n/a n/a n/a n/a 2016 63.2 25.1 n/a n/a n/a n/a 2017 58.7 24.8 n/a n/a n/a n/a 2018 61.5 28.4 n/a n/a n/a n/a 2019 63.2 31.5 n/a n/a n/a n/a
Methane emissions In February 2022, Turkmenistan was identified as an ultra-emitter of methane by the European Space Agency's satellite-based TROPOspheric Monitoring Instrument, with the value of lost methane equalling about US$6 billion per year.
In 2025 most of the worlds largest leaks of methane, a greenhouse gas which causes climate change, were from the country, and included the Darzava gas crater. In 2026, Turkmenistan had responded to about 20% of reported leaks with plans for repairs, and completed eight repairs, which experts called "a genuine breakthrough for climate action."
Natural gas to gasoline production On 28 June 2019, a US$1.7 billion factory for producing gasoline out of natural gas was commissioned in Ovadandepe. Built by Rönesans and Kawasaki using technology from Haldor Topsoe, the factory has a design capacity of 600,000 tonnes of gasoline, 12,000 tonnes of diesel fuel, and 115,000 tonnes of liquefied petroleum gas per year, produced from 1.7 billion cubic meters of natural gas. According to opposition media, as of January 2023 the plant had halted production of export-grade ECO-93 gasoline due to a lack of catalyzers, and was producing only lower-quality gasoline for domestic consumption.
Oil
Turkmenistan's major oil-producing area is in the west, mainly in Balkan Province, and is part of the South Caspian Basin, an intercontinental depression noted for oil production. Commercial oil production on the Turkmen side of the Caspian Sea began in the early 1900s, in the environs of the Cheleken Peninsula, and modern oil drilling began in the 1930s near Balkanabat. The Gumdag field was developed in 1949, then Goturdepe (1958), Ekerem (1962), and others. Offshore drilling began in the 1970s.