ADB IN TURKMENISTAN: OUT OF TOUCH BUT LOOKING FOR

UNCLAS SECTION 01 OF 02 ASHGABAT 001221 SIPDIS SENSITIVE SIPDIS STATE FOR SCA/CEN, EEB PLEASE PASS TO USTDA DAN STEIN ENERGY FOR EKIMOFF/THOMPSON E.O. 12958: N/A TAGS: PREL EPET EAID EFIN EINV TX SUBJECT: ADB IN TURKMENISTAN: OUT OF TOUCH BUT LOOKING FOR A NEW MISSION ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) SUMMARY: The Asian Development Bank (ADB),long dormant in Ashgabat, especially after the Government of Turkmenistan failed to respond decisively to the bank's initial feasibility study for a Turkmenistan-Afghanistan-Pakistan (TAP) pipeline, is seeking to revive its mission in Turkmenistan. ADB officials told the Charge in a November 8 meeting that they want to expand their operations in Turkmenistan, and to that end are currently conducting a seminar on ADB operating policies and procedures in order to promote closer ties with government officials. However, ADB personnel so far seem ill-informed about the country they are proposing to assist. END SUMMARY. ADB ORGANIZES SEMINAR ON OPERATIONAL POLICIES AND PROCEDURES ¶3. (SBU) In a November 8 meeting with the Charge, Asian Development Bank (ADB) Country Economist Xuelin Liu and Head of ADB's Central Asia Regional Economic Cooperation Unit (CAREC) Craig Steffensen said they are conducting a seminar on ADB operating policies and procedures for Turkmenistani government officials. ADB had originally hoped for a three-day, high-level seminar, but scaled it back after a tepid response from the government. The seminar, hosted by the Central Bank and primarily attended by heads of departments across all ministries, covers project preparation instructions and provides an overview of CAREC. Although Turkmenistan joined ADB in August 2000, ADB has not provided loans for any major projects and has provided only very limited technical assistance in recent years. Following President Niyazov's death, however, ADB decided to explore new development project opportunities. TURKMENISTAN-AFGHANISTAN-PAKISTAN PIPELINE: NO ACTION ¶4. (SBU) Liu said that ADB has carried out two feasibility studies for a Turkmenistan-Afghanistan-Pakistan (TAP) pipeline, as well as a market research project. However, to date, Turkmenistan has not given a green light to move forward with the TAP (now the TAPI, given India's inclusion in the project). She expressed some frustration that "sometimes the government gives no response...to suggested dates." ADB is "pushing hard for a contract," but Liu and her colleagues have the impression that TAP is at the bottom of Turkmenistan's list of pipeline priorities, following the Caspian littoral pipeline to Russia, the China project, and notional interest in a Trans-Caspian pipeline. ¶5. (SBU) Liu was quite surprised to hear about the expanded Turkmenistan International Oil and Gas Exhibition (TIOGE) that will take place November 13-15. She said that because it was not important in the past, ADB had not planned to attend this year, but she would like to attend if possible. (NOTE: Currently, over 3,000 people have registered to attend TIOGE, and conference organizers have taken names for a waiting list for weeks. At this point, there is no possibility for anyone new to register for the conference. END NOTE.) ADB SAYS CENTRAL BANK IS LOOKING FOR LOANS ¶6. (SBU) Steffensen said the Central Bank is considering borrowing around $1 billion from an international financial institution to build hospitals and schools. If Turkmenistan agrees to enter into lending programs with ADB, Steffensen said that, from ADB's perspective, transportation and energy are the most likely sectors for loans. Previous to January, Turkmenistan did not participate in CAREC meetings, but since ASHGABAT 00001221 002 OF 002 President Niyazov's death, Turkmenistan has attended all CAREC meetings. Steffensen asked that the Embassy mention CAREC in its meetings with officials, adding that other countries in the region want Turkmenistan to join. The Charge explained that Turkmenistan does not so far join regional organizations and is not likely to join CAREC because regional powers would then pressure Turkmenistan to join other organizations, like CSTO AND SCO, threatening their policy of neutrality. ¶7. (SBU) COMMENT: Liu's underestimation of the importance of TIOGE -- and hence the changing landscape of the oil and gas sector -- as well as Steffensen's misunderstanding about Turkmenistan's reticence to join CAREC suggest a surprising lack of knowledge about today's Turkmenistan. ADB maintains a locally staffed office in Ashgabat but does not have a resident representative. ¶8. (SBU) COMMENT CONTINUED: The report that Central Bank Chairman Abilov is interested in a $1 billion loan for schools and hospitals is consistent with November 2 comments of European Bank for Reconstruction and Development Resident Office Head Tony Myron, although Myron quoted a figure of $2 billion. Myron posited that Abilov might feel that he needs to keep a certain amount of funds in reserve since many ministries are pressuring him to fund projects, "especially the Ministry of Textiles." And it should not be forgotten that Berdimuhamedov has pledged $1 to his pet project, the Avaza tourist zone on the Caspian coast. It's clear better coordination and information sharing among multilateral lenders is needed. END COMMENT. HOAGLAND