Turkey thought to seek $1b from Turkmen

AP News
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Posted: May 30, 2011 10:51 AM
Turkey thought to seek $1b from Turkmen

Turkish president held talks Monday with Turkmenistan's officials amid complaints by Turkish construction companies that they are owed about $1 billion in unpaid bills for their work in revamping the capital city.

Abdullah Gul's visit comes as 25 Turkish companies are preparing to take legal action against Turkmenistan over the nonpayments.

Turkish companies have played a leading role in transforming this old sleepy post-Soviet backwater into a city of soaring marble-clad government offices and apartment blocks.

Irfan Dolek, a spokesman for the 25 companies, said Gul and Turkmenistan's Foreign Trade Minister Zafer Caglayan are taking up the issue in their Monday meeting.

Gul himself was coy on the nature of the visit, but warned what was at stake before leaving Turkey earlier Monday.

"With my visit, we will be reviewing all aspects of our cooperation in the fields of economy, trade, energy, investments and education," Gul said.

"Turkmenistan is the country where Turkish businessman have undertaken the largest number of projects in Central Asia," he said, adding that Turkish companies have developed projects worth $21 billion since Turkmenistan gained independence after the collapse of the Soviet Union in 1991.

Dolek said that four of the 25 companies are seeking international arbitration, while the others are awaiting to see what comes out of Gul's visit. "If there is no agreement, they too are likely to go to arbitration," he said.

Dolek said the companies are seeking to recoup around US$1 billion, including outstanding payment and compensation for damages and losses.

Turkish media said that Gul's visit is aimed at recovering the debt and heading off complaints to the International Center for Settlement of Investments Disputes, or ICSID.

Turkey's daily newspaper Hurriyet reported last month that the Turkmen government was refusing to pay Turkish companies $1 billion owed for building work. It also said Gul, who is known to take a close interest in Turkish investors abroad, had scheduled a trip to discuss the issue with Turkmen officials.

Foreign companies based in Turkmenistan, run as an opaque and authoritarian fiefdom since independence, are normally highly reluctant to publicize problems with the government. Turkish builder Ickale Insaat Ltd. broke ranks late last year, however, when it filed a complaint against Turkmenistan with the ICSID.

"More are to follow," said Ozan Ickale, of the Ankara-based builder. "The Turkish companies are slowly all seeking their rights through arbitration."

He said a number of Turkish contractors have been jailed in Turkmenistan or are barred from leaving the country "for simply seeking their rights." Ickale itself is owed over $50 million, he said.

"Not only have we stopped our activities, but we were lucky to have come out of there," he said.

Ickale said the Turkish government has promised to help them and the Turkish Undersecretariat for Trade is following their case.

Ickale said three other companies had cases pending at the International Center for Settlement of Investments Disputes.

It is unclear what would have prompted a delay of payments by the Turkmen government, although revenues were reportedly badly hit in 2009, when Russia stopped buying the country's gas following a pipeline explosion for which both sides denied responsibility. China has since stepped in to buy large amounts of gas, but the Turkmen government will likely face straitened financial conditions over the next few years as its borrows and spends billions on developing its large energy reserves.

International energy majors have been actively courting Turkmenistan for access to its massive natural gas reserves, but complications experienced by mid-level investors have highlighted the dangers of committing financial resources in the country.

According to Turkmen government estimates, there are more than 600 Turkish companies operating in Turkmenistan in areas including the textile and construction sectors.

Turkmenistan has for more than a decade been using revenues from gas sales to finance a construction spree that has changed the face of the capital, Ashgabat. Much of the work there and in its fledgling Avaza tourist resort on the Caspian Sea coast has been completed by Turkish companies.

The problems reportedly endured by Turkish companies come in tandem with a high-profile and acrimonious dispute between Turkmenistan and Russian telecommunications company MTS, which served around 2.4 million mobile customers until it had its license pulled in December. That left the country's 5 million-strong population entirely reliant on inefficient state-owned mobile provider Altyn Asyr, which has struggled to meet popular demand.

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Suzan Fraser contributed to this report out of Ankara, Turkey.