Turkmenistan is largely desert country with nomadic cattle raising, intensive agriculture in irrigated oases, and huge gas and oil resources. One-half of its irrigated land is planted in cotton, placing the country in the top 10-15 producers. It also possesses the world's fifth largest reserves of natural gas and substantial oil resources. Until the end of 1993, Turkmenistan had experienced less economic disruption than other former Soviet states because its economy received a boost from higher prices for oil and gas and a sharp increase in hard currency earnings. As in the Soviet era, central planning and state control pervade the system, and the Niyazov government (in power 1991–2006) consistently rejected market reform programs. The state subsidizes a wide variety of commodities and services.
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.
Turkmenistan's major gas deposits were discovered in its central and eastern areas in the 1940s and '50s, 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.
This changed in 1991, when Turkmenistan gained independence and established full control over gas export and export revenues. However, Soviet-era pipelines dictate that much of the gas goes 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.
Official estimates indicate that Turkmenistan is still the second largest gas producer in the CIS, after Russia, and a 2004 official estimate places reserves at about 23 trillion m³. Government statistics projected extraction of 75.4 billion m³ of gas in 2004, and 120 billion m³ in 2010.
The Turkmen Government claims to have placed great emphasis on foreign economic relations and foreign trade and an "open door" trade policy, as declared by the President. At present 73 countries are partners of Turkmenistan, including the republics of the NIS. The most prominent trade partners of Turkmenistan are the United States, Turkey, Switzerland, Hong Kong, Germany, the United Kingdom, Cyprus, Iran, and the United Arab Emirates. Turkmenistan is a member of the Economic Cooperation Organization (ECO).
Export of industrial and agricultural raw materials remain the most important goals of the Turkmen Government. Price controls on most goods, the stabilization of reproduction processes, the creation of stable economic growth, and flexibility to innovations and a socially oriented economy also are very important. The government is attempting to strengthen state regulation of foreign trade and create a state system of insurance to expand and consolidate foreign economic relations. Because of considerable growth of foreign investments, improvements are taking place in the economy. Privatization of medium and large enterprises are proceeding slowly.
In January 2006, Saparmurat Niyazov ordered to stop paying pensions to ⅓ (more than 100,000) of elderly people, cutting pensions to another 200,000, and ordering to pay the pensions received in the past two years back to the State. This has resulted in a huge number of deaths of old people, who may have had their pension (ranging from $10 to $90) as the only source of money.