When Turkmenistan was part of the USSR, the Soviet regime developed the republic to supply the raw materials of natural gas, oil, and cotton. These materials remain the foundation of Turkmenistan’s economy. The focus on raw material extraction left other sectors of the economy underdeveloped, as most of the raw materials were shipped to industries located outside the republic. Turkmenistan was the poorest republic of the USSR, and little has changed since freedom. The government retains tight control over many aspects of the economy. While various reforms have been announced, actual movement toward becoming a free-market economy has been limited.

Turkmenistan specializes in cotton growing and in the extraction of oil and natural gas. Turkmenistan's underground resources in the western plain and those underwater along the Caspian Sea include considerable reserves of oil and natural gas, as well as deposits of mirabilite, iodine, bromine, sulfur, potassium, and salt. The mountains and foothills contain dolomites and marl, which are used for fertilizing calcium-deficient soil.

Turkmenistan is largely desert nation with intensive agriculture in irrigated oases and huge gas (fifth largest reserves in the world) and oil resources. One-half of its irrigated land is planted in cotton, making it the world's tenth largest producer. 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. In 1994, Russia's refusal to export Turkmen gas to hard currency markets and mounting debts of its major customers in the former USSR for gas deliveries contributed to a sharp fall in industrial production and caused the budget to shift from a surplus to a slight deficit. With an authoritarian ex-communist regime in power and a tribally based social structure, Turkmenistan has taken a cautious approach to economic reform, hoping to use gas and cotton sales to sustain its inefficient economy. Privatization goals remain limited. In 1998-2000, Turkmenistan suffered from the continued deficiency of sufficient export routes for natural gas and from obligations on considerable short-term external debt. At the same time, total exports rose sharply because of higher international oil and gas prices. Prospects in the near future are discouraging because of widespread internal poverty and the burden of foreign debt. IMF assistance would seem to be necessary, yet the government is not as yet ready to accept IMF requirements. Turkmenistan's 1999 deal to ship 20 billion cubic meters (bcm) of natural gas through Russia's Gazprom pipeline helped alleviate the 2000 fiscal shortfall. Insufficient fiscal restraint and the tenuous nature of Turkmenistan's 2001 gas deals, combined with a deficiency of economic reform, will limit progress in the near term.