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06ASHGABAT162 2006-02-02 11:37:00 UNCLASSIFIED Embassy Ashgabat
Cable title:  

Lights Out in Energy-Rich Balkan Welayat

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DE RUEHAH #0162/01 0331137
P 021137Z FEB 06
					  UNCLAS SECTION 01 OF 04 ASHGABAT 000162 




E.O. 12958: N/A
SUBJECT: Lights Out in Energy-Rich Balkan Welayat

Ref: 2005 Ashgabat 1108


1. (SBU) During a January 30-February 1 visit to Balkan
Welayat DCM witnessed some of the bureaucratic
inefficiencies that make the Government of Turkmenistan a
problematic business partner. Turkmenbashy, formerly
Krasnovodsk, a hydrocarbon rich Houston of Central Asia, has
been without water for ten days, and brownouts have caused
the schools to operate on reduced hours with students in
freezing non-heated classrooms for six hours a day. The
situation is the same for energy-rich Balkanabat City
(formerly Nebitdag). Nevertheless, Turkmenistan continues
to export electricity to Iran, Afghanistan and other
customers. Turkmenistan's oil and gas reserves are likely
substantial, but without reliable data and with world-class
inefficiencies on the ground, Turkmenistan remains a
problematic trading partner. End Summary.

Mayor and Governor Prevaricate


2. (U) On January 20, DCM met with Mayor of Turkmenbashy
City Ashyrniyaz Pomanov and on February 1 with Balkan
Welayat Governor Tachberdi Tagyev. Though on the surface
both were competent intelligent bureaucrats, Pomanov showed
a curious lack of knowledge of the city's history -- he
claimed the city was founded in 1891 (10 years after the
battle of Goktepe and 12 years after official city records
cite its establishment); and both outright lied about a
number of current issues including energy outages ("there
are none in Balkan Welayat"), pensions ("everyone's getting
his/her full pension here"), and the destruction of Awaza
holiday village ("it was just a slum anyway/the people will
have a whole new complex"). In fact, local sources told us
there has been no water for ten days in Turkmenbashy,
schools were operating at reduced hours for lack of heat
throughout the welayat, and children hardly could work at
all in the freezing classrooms. Heating and water for
residences also is out at least in Turkmenbashy and
Balkanabat. In response to DCM's question, Pomanov said
that he had gathered a group ("a couple hundred") of
pensioners together with representatives of the Social
Welfare Department and explained the "incorrectly
calculated" pensions. Pomanov said this did not affect his
city's citizens, however, because they all were on
government salaries and their pensions had been correctly
calculated. Tagyev concurred that the pension
"recalculation" did not affect Balkan Welayat's citizens.
Local sources told us many city teachers' and other
government employees' pensions had been cut and that the
cuts were the main topic of conversation around the welayat.

3. (U) In response to reports that a major swathe of
holiday dachas had been destroyed to make way for government-
constructed holiday complexes, Pomanov said, "that depends
on your definition of dacha, mostly what was out there was
just trailers and junk, it was a slum." DCM drove to the
community and witnessed a scene reminiscent of Bosnia after
two years of war, an area consisting of approximately 10
square kilometers and thousands of homes was reduced to
rubble. Owners/scavengers were driving away with what they
could salvage -- bricks, window frames, doors, etc. Still
obvious, though, was the quality and care of many of the
dachas. Gardens, balconies, Greek columns, attractive
architecture, etc., still were visible. Anyone in
Turkmenistan who can afford a vacation goes to Turkmenbashy,
and these dachas were their destination. Not only is income
from these properties gone, but there will be no place to
stay this summer except for the unaffordable and badly-
serviced government-run Serdar and Turkmenbashy hotels.
Pomanov himself said approximately 30,000 tourists visited
Turkmenbashy every summer. In response to DCM's question
about vacation opportunities for low to mid-income
Turkmenistanis, Pomanov said, "if they save all year, they
should be able to afford a week or two out here." DCM
responded, if there were a few nice bed-and-breakfasts, the
embassy would be frequent customers, but that neither the
Serdar nor the Turkmenbashy had any appeal for western
travelers. According to Tagyev, "the people needed new
complexes," (Comment: yes, that's actually what he said.

ASHGABAT 00000162 002 OF 004

End Comment.)

4. (U) Referring to the upcoming local elections, Pomanov
noted he was chairman of the welayat election committee, and
said the etrap elections were scheduled for June; city
elections were scheduled for December, he said, and conceded
it was possible he could lose his seat. Pomanov said the
local elections were a big step forward but did not go into
further details. He did not respond to DCM's question about
the possibility for multi-party elections but said every
position would be contested by at least two candidates.
Tagyev confirmed elections on the welayat level would take
place in 2007 and that his position would be up for
election; he ignored DCM's question about the possibility of
multi-party elections.

5. (U) In response to DCM's question about unemployment,
Pomanov admitted it was a problem, but insisted, "anyone who
wants to work can find work." Pomanov said Turkmenbashy's
population was 65,000, but said the population was growing
because other provinces' workers were flocking to
Turkmenbashy in search of low-paying jobs (vice
unemployment) with international oil companies. Tagyev
agreed with Pomanov's assessment and said that farmers from
other welayats also were coming to Balkan to farm previously
non-arable land. He noted that Balkan had met both the
wheat and cotton quotas in 2005 and said mechanization,
specifically Caterpillar and John Deere tractors,
contributed to the welayat's success. Tagyev stated that
the new law on State Agricultural Joint Stock Companies
(Reftel: 2005 Ashgabat 1108) was perfectly understood and
had contributed to the welayat's agricultural successes.

6. (U) According to Pomanov, approximately 40% of
Turkmenbashy's population was non-ethnic Turkmen. He said
"all who left wanted to leave," and said many of the
remaining ethnic Russians, Armenians, Azeris, and Kazakhs
had been in Turkmenbashy for three generations. In response
to DCM's question about minority language education, Pomanov
insisted Russians still could study in Russian and said
there were Kazakh classes. But, he said, most "begged' to
learn Turkmen.

7. (U) In response to DCM's curiosity about President
Niyazov's comments on tribalism during the January 12 events
in commemoration of the Battle of Goktepe, in particular his
appeal to the Teke to forgive the Yomut for their role in
renting camels to the invading Tsarist troops, Pomanov said,
"yes, I heard this speech," and after avoiding any
discussion, his Mary Teke assistant said, "the president
talked about this so people don't misinterpret what happened
and hold it against the Yomut." Both Pomanov and his
assistant laughed nervously when DCM pointed out that the
mayor's office was decorated exclusively in Teke carpets,
"our carpets are that much more precious and rare," was all
they could offer.

Oil and Gas Officials Bullish on Turkmenistan


8. (U) On January 30 DCM met with Turkmenbashy Oil Refinery
Chief Amangeldy Pudakov and toured his massive complex; on
January 31, she traveled to truly one of the world's least
known "holidays in hell" Hazar (formerly Cheleken), home to
the very profitable Dragon Oil and a dismal outpost of
Soviet exploitation of Central Asia's resources; and on
February 1 she met with TurkmenNebit State Concern Chief
Garyagdy Tashliev.

9. (U) Pudakov's dissembling about attributing his lack of
knowledge to being "new to the job" was notable in that he
had been demoted from the position of Minister of Oil and
Gas in September 2005, at which time he had been responsible
for the production statistics of all of Turkmenistan's oil
and gas industries. He could not tell DCM the complex's
total revenue, refused to comment on the company's future
plans and seemed greatly relieved to hand off DCM to a
senior technician for a tour of the plant.

10. (U) The plant is truly impressive, covering a vast plot
of land in the middle of town and comprised of facilities
for refining oil into a multitude of products including
liquefied natural gas, lube oils, gasoline, diesel, laundry

ASHGABAT 00000162 003 OF 004

detergent and polypropylene. The complex even included an
electricity substation which supplied energy from excess oil
products to the regional Turkmenbashy grid, which was then
sold to Iran and Turkey. State of the art refining
equipment included investment from Japan, Germany and

11. (U) In spite of his pedigree from Turkmen Polytechnical
Institute, Pudakov's Russian was bad and he insisted on
having the majority of DCM's questions translated into

12. (U) After a 3.5 hour drive from Turkmenbashy down a
sand-swept road through a landscape devoid of any life, DCM
arrived at the Dragon Oil Camp in Hazar. Dragon Oil Site
Manager Abdel Hamid Bassiouni (Egyptian citizen) treated DCM
to a gourmet's feast of shrimp and other delicacies imported
from Dubai and provided her with a tour of Dragon Oil's
facilities. Dragon Oil remains the most successful of
Turkmenistan's foreign oil concerns. Bassiouni listened
attentively to DCM's presentation about the possibility of
renewed U.S. interest in investing in the hydrocarbon
industry but offered little in the way of highlighting
potential problems to investment, or more importantly, how
Dragon Oil navigated the government.

13. (U) A Dragon Oil representative provided DCM with a
tour of the neighboring neighborhood of Hazar, a formerly
predominately Russian settlement established to supply the
Soviet war effort during World War II. Hazar is a city-size
dump of dilapidated Stalin-era public buildings and parks
joined with abandoned uniquely Soviet-era rusted hulks of
industrialization. Garbage, rust and broken beer and vodka
bottles are everywhere. The houses are straight out of some
permafrost settlement and the cemeteries are full of Russian
Orthodox crosses. If Dragon Oil or the GOTX has made any
profit from the vast oil reserves off Hazar, the only
economic rise in Hazar has been in the number of prostitutes
living in Hazar to service the oil workers. (Note: during a
previous embassy visit to Hazar, a Dragon official insisted:
"these girls are not prostitutes, they just have sex for
money." End note.) DCM passed a monument to the oil workers
rising out of the rust with a plague quoting Lenin saying,
"let me know what's going on with Cheleken's oil and oil in
general;" according to local wags, this was the only time
Moscow paid any attention to Cheleken.

14. (U) In response to DCM's curiosity as to why Dragon
Oil's successes had not translated into economic prosperity
at least for Hazar but in general for Balkan Welayat, Tagyev
responded, "we'll get there." TurkmenNebit Director
Tashliev also noted that rehab of Hazar was in the grand
plan, but that Hazar mostly had been a Russian community
that had exported Turkmenistan's natural resources north,
"and we have nothing to show for it," he said.

15. (U) Segueing into the future of Turkmenistan's
hydrocarbons industry, Tashliev said, "eventually it will
all be run and managed by Turkmen." According to Tasliev
Turkmenistan only was willing to offer Production-Sharing
Agreements to international companies off-shore,
"nothing/nothing will be offered to foreign companies on-
shore, we now can do all that ourselves." Tashliev did not
see the contradiction in proclaiming Turkmenistan's ultimate
aim to nationalize all GOTX's hydrocarbons while encouraging
foreign investment. His eyes lit up, however, when DCM
asked about Chinese involvement, "they're happy with a
service agreement, vice a PSA, which we'll give them if they
build a pipeline to China," and in terms of oil production
in the Caspian, "certainly the Chinese are no worse than
anyone else, we'd be happy to develop PSAs with them." In
response to DCM's question about the feasibility of a Trans-
Caspian Pipeline, Tashliev said, "Forget about it, our
future is with Russia."



16. (SBU) The main focus of DCM's visit to Balkan Welayat
was to keep the pressure on the GOTX to show the USG was
watching its hydrocarbon industry. Not only is the industry
inefficient and paranoid, but it is equally obvious that
profits will not go toward improving the standard of living

ASHGABAT 00000162 004 OF 004

of Turkmenistan's citizens. End Comment.