Turkmenistan demands $911 million from Belarusian state company

The government of Turkmenistan via state company Turkmenhimiya has gone to international arbitration in a dispute with a Belarusian company Belgorhimprom. It is the latest development in a row over the construction of a potash mining and fertilizer plant in Turkmenistan. Turkmenhimiya calculates its losses from cooperation with Belgorhimprom on construction of the plant at 911 million U.S. dollars. The figures are given in confidential documents that are in turkmen.news’ possession. One of the world’s leading law firms, Squire Patton Boggs, is representing the Turkmen side at the Arbitration Institute of the Stockholm Chamber of Commerce. The Turkmen authorities hired the firm for $9 million.

The documents say that on May 28, 2018 the agreement between Turkmenhimiya and Belgorhimprom was terminated unilaterally by Turkmenistan, and in December a suit was filed for consideration in the Stockholm Arbitration Institute. On the basis of a technical and financial audit conducted by SRK Consulting and PricewaterhouseCoopers, lawyers from Squire Patton Boggs lodged a claim against Belgorhimprom for $911 million.

The contract for construction of the Garlyk mining and processing plant by Belgorhimprom was worth one billion dollars.

According to the documents, the Belarusian side dismissed the Turkmen claims and on December 21, 2020 brought a counter claim for $418 million. It was reported previously that Belgorhimprom is owed $150 million by Turkmenistan.

Arbitration proceedings should have taken place in February 2022, but as yet there is no report about them on either the law company’s website or the Arbitrage Institute site.

Squire Patton Boggs did not reply to a written enquiry sent by turkmen.news on July 4. We were trying to find out the current status of proceedings and the basis for this major claim by the Turkmen side. Company partner Sabrina Aïnouz, who has previously represented the interests of Turkmenistan, did not respond promptly to turkmen.news’ questions.

According to the documents in turkmen.news’ possession, Turkmenistan paid the law firm $9 million for their work on this case.

Squire Patton Boggs has a wealth of experience defending the interests of Turkmenistan in arbitrage proceedings. In the past couple of years the company represented Turkmenistan in proceedings against Turkish construction firms Visor Mühendislik Insaat (the case was closed in February 2022), Setta Insaat (the case was closed in November 2021), and Imeks Insaat (as of May 2022 the case was continuing). It’s not known how the first two cases concluded and there is nothing about them on the website of the International Centre for Settlement of Investment Disputes.

Heavy equipment of Belgorhimprom still in Turkmenistan

Previously Squire Patton Boggs successfully represented Turkmenistan in the case of Turkish businessman Muhammet Çap and his company Sehil Insaat against Turkmenistan. The Stockholm Arbitrage Institute wholly rejected the claim for almost $500 million against Turkmenistan.

Belgorhimprom did not reply to turkmen.news’ written questions either, and on July 7 we were told by telephone that the director was away on business and that the company did not work with the press at all.

“We generally do not deny and do not confirm anything. We do not work with journalists,” reception said.

A potash ore deposit was discovered in the 1960s near the village of Garlyk in Turkmenistan, but the technology was not available at the time to develop it. Only in 2009 did the authorities of independent Turkmenistan sign an intergovernmental agreement with Belarus on construction by Belgorhimprom of the Garlyk mining and processing plant. In March 2017 the presidents of Turkmenistan and Belarus, Gurbanguly Berdimuhamedov and Aleksandr Lukashenko, attended the ceremonial opening of the plant.

In May that year Belarusian Deputy Prime Minister Anatoliy Kalinin said the contractor had not been paid for the work. At the same time independent journalists learnt that the plant was working far short of full capacity. This was confirmed by Berdimuhamedov in an official speech in November 2018. He promised that the country would go to international arbitration. Soon after this Lukashenko said that Turkmenistan had yet to pay its debt to Belgorhimprom.

In January 2019 the Belarusian company voiced its demands in the Arbitrage Institute of the Stockholm Chamber of Commerce. The debt for construction of the plant was valued at 150 million dollars at that time. It was emphasized that the plant had been “built in accordance with the requirements.” The contractor said that problems in the operation of the plant were the result of the Turkmen side’s attempt to start production themselves without the help of Belarusian specialists. It was also noted that Turkmenistan was unlawfully withholding construction equipment belonging to Belgorhimprom.

“When operating correctly the Garlyk mine and processing plant is capable of giving Turkmenistan a significant share of the regional market for mineral fertilizers. Mistakes in the operation of the plant mean that only a tiny part of its potential is being realized,” the claimants said.

In 2021 Belgorhimprom published its report for 2020, which said that the auditors BDO had referred to “significant uncertainty over continuing activity in connection with the significant losses, debts, negative net assets, and the legal proceedings with Turkmenistan.”