U.S. Company Loses Heart over Dispute that Attracts Turkmen

UNCLAS ASHGABAT 000984 SIPDIS DEPT FOR SCA/CEN (PERRY),EB/CBA (WINSTEAD/WALTERS),EB/IFD/OIA (ROSELI),L/CID (DAUGHTRY) ALMATY FOR SCHAAG SENSITIVE, SIPDIS E.O. 12958: N/A TAGS: BEXP BTIO ETRD EINV KIDE TX SUBJECT: U.S. Company Loses Heart over Dispute that Attracts Turkmen President's Attention REFS: ASHGABAT 607 Summary -------------- ¶1. (SBU) Amcom, a US company with a long-standing contract dispute with "Turkmendokun" State Company over carbon black (a pigment commonly used in automobile tires) supplies, advised embassy not to advocate on its behalf. As Turkmenistan President Niyazov reportedly was made aware of Amcom's contracts in conjunction with an embezzlement case, Amcom's former local representative saw "no chance to win the dispute." While Amcom may simply want to avoid harming future business opportunities in Turkmenistan by dropping the issue, the dispute further tarnishes Turkmenistan's image as a reliable business partner. End Summary. History of Amcom Advocacy Cases -------------- ¶2. (U) In December 2005, embassy began its advocacy work on behalf of Amcom LLC, a firm incorporated and based in New York state, by requesting the "Turkmendokun" ("Turkmen Fertilizers," formerly known as "Turkmen Fertilizers and Chemistry") State Company to expedite the delivery of 3,000 tons of carbon black contracted to Amcom in November 2004 at a price of $320.00 per ton (contract #B-008830). By early 2006, the seller provided all but 333.5 tons of carbon black for which payment had not yet been made (see reftel). (Note: Many contracts in Turkmenistan require pre-payment. End Note.) Amcom paid the additional funds in early 2006, but the remaining 333.5 tons were never delivered. Amcom's advocacy case for the remaining 333.5 tons was pending as of August 2006. ¶3. (U) In June 2006, Amcom filed another advocacy case for a different contract (#B-007459) with Turkmendokun in December 2005 for the purchase of 250 tons of carbon black at a price of $955.00 per ton. Turkmendokun, without any explanation, refused to release the carbon black to Amcom. Post received the case in August and has not taken any action on it. Problems Arise with Dismissal of Turkmendokun Chief -------------- -------------- ¶4. (U) At an August 28 Cabinet session, the National Security Minister reported to President Saparmyrat Niyazov about embezzlement activity at a carbon black-producing chemical plant in the western coastal town of Hazar (formerly Cheleken). The plant falls under the aegis of Turkmendokun. Suleyman Hanov, Turkmendokun Chairman, was implicated. Niyazov strongly criticized Hanov, but said he would not fire him as long as he repaid "embezzled" money. On September 4, official media reported a presidential decree firing Hanov and a report detailing Hanov's numerous crimes. The two Amcom contracts, which were described as "not in the interest of the [Turkmen] state" were among the accusations against Hanov. The report claimed the state suffered losses of $640,000 as a result of these contracts, but did not blame Amcom representatives for illegal acts. Amcom's Reaction -------------- ¶5. (SBU) On August 29, a day after the carbon black embezzlement cases were announced, Amcom's former local representative told embassy that, due to President Niyazov's attention, "Amcom has no chance to win the dispute." He also requested that the embassy not pursue the case any further, because "it could lead to repercussions" for him. After learning of the August 28 and September 4 reports, Amcom President Alexei Shehovsov stressed to the embassy that the contracts "were duly negotiated and registered" and that Amcom did not agree with claims that the contract prices were low. Instead, the Amcom President noted that "the [Turkmen] state authorities failed to take into account the substantial added costs incurred by Amcom to bring their carbon black to market in a marketable condition." Nevertheless, Shehovsov saw "no point to embassy's further intervention on Amcom's behalf in pursuing any unfulfilled contracts." Comment -------------- ¶6. (SBU) Amcom's points justifying its paying a fair market price for carbon black seem reasonable. And it is not uncommon for Turkmenistan's investigative bodies to add ungrounded charges in its incriminations. While Amcom seems to have given up easily, the company either did not want to burn bridges in this country or simply figured it had slim chances of winning this fight. Once again, the Turkmenistan government's actions contribute to its image as an unreliable business partner, but post expects a certain number of small-scale risky U.S. businessmen to keep coming to Turkmenistan looking for niche and high-margin business opportunities. End Comment. BRUSH