Turkmenistan’s Gas Crossroads: Sanctions Block East, Push West

Ashgabat’s ambitious plans to diversify its crucial natural gas exports are facing significant headwinds, as a series of US-imposed sanctions effectively block key routes to the East and South, simultaneously steering the Central Asian nation towards a Western-oriented energy strategy. The latest casualty is a substantial gas supply agreement with Iraq, which crumbled under the weight of Washington’s warnings against secondary sanctions.

Iraq had been poised to import 9 billion cubic meters of Turkmen gas, crucial for offsetting dwindling Iranian supplies and bolstering its power grid by over 2000 megawatts. The proposed deal involved a ‘SWAP’ arrangement, where Turkmenistan would deliver gas to Iran, and Iran would, in turn, supply equivalent volumes to Iraq through existing pipelines. This innovative solution aimed to bridge Iraq’s energy deficit, which had seen Iranian gas imports plummet. However, according to Reuters, the US signaled that processing payments for such a scheme through Iraqi banks could trigger severe financial penalties, forcing Baghdad to abandon the deal and seek alternative suppliers. This setback represents a considerable blow to Turkmenistan’s strategy of expanding its export portfolio beyond its dominant Chinese market.

Further east, the much-touted TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipeline project continues to languish. Initiated by Ashgabat in the early 1990s as a state-controlled venture to safeguard its political independence from foreign private investors, TAPI has seen limited progress. Despite the Turkmen authorities establishing the TAPI Pipeline company, 90% owned by the state concern “Turkmengaz,” and unilaterally commencing construction on the initial 153-kilometer segment known as the “Bright Path of Arkadag” towards Afghanistan’s Herat province, the project faces an insurmountable hurdle: US sanctions against the Taliban-led Afghan government.

Even a direct appeal from Ashgabat to Washington in 2023 to ease these sanctions for TAPI’s sake, and national leader Gurbanguly Berdymukhamedov’s emphasis on adhering to international standards for its realization, have yielded no discernible results. The challenges were starkly highlighted by a recent investment forum held in Kuala Lumpur in April 2025, intended to attract funding for TAPI. Just days before the event, a terrorist attack in India’s Jammu and Kashmir region, precisely along TAPI’s hypothetical route, escalated into a full-scale military confrontation between India and Pakistan. This incident, which some observers interpret as a deliberate act of sabotage against TAPI’s prospects, undoubtedly dampened investor enthusiasm and cast a long shadow over the project’s future.

Similar US sanctions against Iran are also stalling projects designed to leverage Iranian infrastructure for Turkmen gas transit to the West. Initial intentions for Iran to invest in and build a transit corridor from Turkmen fields were announced earlier, but the status of this venture is now unclear, seemingly falling victim to the same geopolitical pressures.

Puzzlingly, there appears to be one highly specific exception to this sanctions regime. In 2024, the US Ambassador to Turkmenistan, Matthew Klimow, explicitly stated that ‘SWAP’ sales of Turkmen gas to Azerbaijan via Iran would not incur American sanctions. This arrangement facilitates Azerbaijan’s fulfillment of its gas supply commitments to Europe through the TANAP-TAP pipelines, with volumes ranging from 1.5 to 2 billion cubic meters annually. This selective allowance reinforces the perception among experts that Washington is actively, albeit indirectly, pushing Turkmenistan towards a singular “correct” energy route: the Trans-Caspian Pipeline, delivering gas across the Caspian Sea directly to Europe.

This strategic pivot is creating new geopolitical alignments. Azerbaijan, through its state oil company SOCAR, is positioning itself as a central player in this potential Trans-Caspian corridor. SOCAR has already signed a memorandum with XRG, the international investment arm of ADNOC (Abu Dhabi National Oil Company), concerning investments in the “Southern Gas Corridor.” While details remain sparse, ADNOC and XRG also inked a significant deal with Turkmenistan in April 2025 for joint oilfield development, alongside Malaysia’s Petronas, signaling growing interest in the region’s energy resources. However, a critical remaining obstacle for the Trans-Caspian route lies in securing long-term gas purchase contracts from European buyers.

Rovshan Najaf, President of SOCAR, has been vocal on this point, noting Azerbaijan’s 60% increase in gas supplies to Europe without European funding. He stressed that further expansion of the pipeline, necessary to accommodate Turkmen gas, hinges on long-term contractual guarantees from European consumers and financial backing from EU institutions. Political analyst Darya Karayev observes that with rapidly improving relations between Baku and Ashgabat, SOCAR is now not only advancing its own strategic interests but also effectively lobbying for Turkmenistan’s in the crucial European transit market. This evolving dynamic underscores the complex interplay of energy needs, geopolitical realities, and the powerful influence of sanctions shaping the future of Central Asian gas.