SECRETARY OF ENERGY SAMUEL W. BODMAN'S MEETING

C O N F I D E N T I A L SECTION 01 OF 04 ASHGABAT 001256 SIPDIS SIPDIS STATE FOR SCA/CEN, EUR/CARC, EEB PLEASE PASS TO USTDA DAN STEIN ENERGY FOR EKIMOFF/THOMPSON E.O. 12958: DECL: 11/21/2017 TAGS: PGOV PREL EPET EINV AF AJ IR KZ RS TX SUBJECT: SECRETARY OF ENERGY SAMUEL W. BODMAN'S MEETING WITH TURKMENISTAN'S PRESIDENT BERDIMUHAMEDOV (11/15/07) Classified By: CHARGE RICHARD E. HOAGLAND FOR REASONS 1.4 (B),(D) ¶1. (U) U.S. PARTICIPANTS: Secretary of Energy Samuel W. Bodman SIPDIS Senior Adviser Molly Williamson Assistant Secretary Karen Harbert Public Affairs Director Andrew Beck Charge d,affaires Richard Hoagland TURKMENISTAN PARTICIPANTS: President Gurbanguly Berdimuhamedov Deputy Prime Minister/Foreign Minister Rashit Meredov Deputy Prime Minister for Oil and Gas Tachberdy Tagiyev ¶2. (C) SUMMARY: Secretary Bodman encouraged President Berdimuhamedov to consider what is necessary to sell Turkmenistan,s natural gas to the West and to gain the benefits of participating in full-stream infrastructure profits. He said he would encourage U.S. energy majors to cooperate with Turkmenistan. Berdimuhamedov reiterated Turkmenistan, by law, sells its gas at its border, but said he would consider the Secretary,s views. While saying he supports "Caspian delimitation for specific projects," he added firmly after a whispered consultation with Foreign Minister Meredov, "Any unified work between Turkmenistan and Azerbaijan is not on the agenda." Without elaborating, Berdimuhamedov noted he has told Russia and China Turkmenistan will start selling its gas "at the world market price and according to international standards." Berdimuhamedov emphasized Turkmenistan,s desire to develop its petrochemical industry and sell more refined products on the world market. END SUMMARY. ¶3. (C) During a one-hour meeting on November 15, Secretary Bodman briefed President Berdimuhamedov on his just-concluded breakfast with U.S. businessmen. He said they had made a lot of suggestions but, by and large, are pleased with their prospects. The President responded he might not know all the details but is pleased with recent developments. When he was in New York in September, he met with many business people and understood more clearly than ever that Turkmenistan needs high-quality business partners. He added he knows Turkmenistan needs improved legislation to create the conditions to attract foreign investment. The President speculated the Secretary had heard complaints about visas and the difficulty of securing office space. The Secretary resoundingly replied, "Yes!" The President laughed and said, "We,ve heard the problems and are working on them." ¶4. (SBU) Berdimuhamedov listed Turkmenistan,s priorities: upgrade and enlarge the Saydi Refinery at Turkmenabat, begin to produce liquefied natural gas (LNG),stop wasting the six million cubic meters of natural gas currently being flared off, and develop the petrocheical industry for greater production and sales of refined hydrocarbon products. He said, "We have to use our resources properly." SELLING GAS TO THE WEST ¶5. (C) Secretary Bodman said he was concerned how Turkmenistan would sell its natural gas abroad, noting that nearly all currently goes north to Russia and that within several years there will be sales east to China. The Secretary said, "I encourage you to look at a Trans-Caspian SIPDIS Pipeline to sell your gas to the West. Although this is ASHGABAT 00001256 002 OF 004 sensitive vis--vis Russia, we believe it is in your best interest to move in that direction to diversify your customers and income." ¶6. (C) The Secretary suggested to Berdimuhamedov the importance of working with Azerbaijan and Kazakhstan. "The world sees you as an inseparable group of countries that can work together." He noted Kazakhstan,s President Nazarbayev is "very elegant" in dealing with Moscow, and might be a model Turkmenistan could consider. ¶7. (C) Berdimuhamedov thanked the Secretary for his words. He clarified it is incorrect to believe Turkmenistan is under Russian political control simply because Turkmenistan currently sells the vast majority of its gas to Russia. That,s an inevitable leftover from the Soviet Union when all pipelines went northward. "We will always be a reliable partner for Russia, but our door is open. We understand the value of diversification. We want more partners. But you (the United States) have been sleeping for 16 years. Our door is open, but you have to come through it. We want high-quality companies from the United States and Europe as partners, not those that come simply to fill their pockets." The President specifically named as positive examples Shell, ConocoPhillips, Chevron, and ExxonMobil. He added, "Mobil was here once before but ran away., We have learned from this experience we have to be careful choosing our partners." ¶8. (C) Berdimuhamedov added his standard points and reinforced his previous comments: -- Investment opportunities off-shore in the Caspian are wide open. -- For export, we sell our gas at the border -- that,s our law. -- The United States was sleeping earlier this year, and so we agreed on the Prikaspiskyy Pipeline, but Russia didn,t force us to do so; it was simply in our interest. -- We have common political understandings with Azerbaijan and Kazakhstan, but each has its own way of development -- every nation should profit in its own way. -- If you (the United States) would start speaking seriously with Azerbaijan about a Trans-Caspian Pipeline, that would be helpful. IRAN, AFGHANISTAN ¶9. (SBU) Explaining relations with its southern neighbors, Berdimuhamedov said Turkmenistan sells gas to Iran at "friendly rates," mainly because of the large number of "Turkmen brothers" living in northern Iran. "Our interest is economic, not political. We are neutral and do not interfere in the internal affairs of other countries." ¶10. (C) Noting the large number of ethnic Turkmen in Afghanistan, Berdimuhamedov characterized Afghanistan as a more difficult neighbor than Iran. Without elaborating, he said, "Afghanistan needs to change its mentality." He also lamented the danger of Afghanistan,s narco-business. He commented Afghanistan,s President Karzai has pressed him to move forward on the Trans-Afghanistan Pipeline so that Afghanistan could earn up to $300 million per year in transit fees. Berdimuhamedov said he told Karzai, "Get you country ASHGABAT 00001256 003 OF 004 under control first, then we can talk about the pipeline." "WE SELL OUR GAS AT THE BORDER" ¶11. (SBU) Secretary Bodman told Berdimuhamedov, "I don,t manage our major energy companies, but they pay attention to what I think. I will encourage them to make available to Turkmenistan what they are uniquely qualified to offer." He noted they offer high-class training in conjunction with technology, and can help Turkmenistan benefit "all the way along the value chain," not just from selling gas at the border. ¶12. (SBU) Berdimuhamedov concurred that U.S. companies represent highest quality. He recounted that when he was in Brussels November 5-7, the Europeans had asked, "What help do you need?" Laughing but showing his irritation, Berdimuhamedov said, "We don,t need help! We,re not a weak country begging. We,re a country that cooperates so that our partners become our long-term friends. But we sell our gas at our border; it,s up to you to get it out." He added, "Turkmenistan is eager to develop its petrochemical industry to be able to sell more finished products on the world market." ¶13. (C) The Secretary noted, "If you sell your gas at the border, you can,t participate in the profit after that." Berdimuhamedov said firmly, "It,s our law!" The secretary suggested Turkmenistan might consider changing that law. There is a great deal of precedent for the owner of resources, like Turkmenistan, to claim part ownership of the full-stream infrastructure to add to the profit. "But it,s up to you to decide." ¶14. (C) Berdimuhamedov replied, "We will consider your ideas. We do pay attention to what you say." He then noted Turkmenistan has been selling its gas at "old pricing." However, starting in 2008 with Russia and 2009 with China, "We have informed them we will now sell only at the world market price and according to international standards." CASPIAN DELIMITATION WITH AZERBAIJAN ¶15. (C) Secretary Bodman noted Azerbaijan would welcome more natural gas to sell onward to the West, and an agreement for trans-Caspian transport would require only two countries. Berdimuhamedov said, "We support bilateral delimitation for specific projects. But, frankly, we,re more interested in selling refined products, like LNG." The Secretary raised the issue of "share collectors" with Azerbaijan. (NOTE: The translation of this term may have been faulty. END NOTE.) At this point, Meredov consulted with the President for several minutes, after which Berdimuhamedov, looking sour, said firmly, "Any unified work between Turkmenistan and Azerbaijan is not on the agenda." ¶16. (SBU) Secretary Bodman asked how Turkmenistan would sell LNG abroad. Berdimuhamedov mused it could go by railroad or by ships through the Don-Volga Canal to the Black Sea. ¶17. (C) The Secretary concluded, "What you do will be in your own best interest. We are willing to be helpful -- or we can stay out of your way, if you think that would be best." Berdimuhamedov thanked Secretary Bodman for adding to the success of the Turkmenistan International Oil and Gas Exhibition by his high-profile visit. ASHGABAT 00001256 004.3 OF 004 ¶18. (C) COMMENT: The meeting was both cordial and frank, and achieved the goal of advancing U.S. views. Although Berdimuhamedov continues to insist Turkmenistan sells its gas at its border, we note he said he would consider the Secretary,s view of the benefit of participating in the SIPDIS full-stream value chain. Based on the President,s comments, he is much more focused on selling gas to the West than via a so far hypothetical Trans-Afghanistan Pipeline. Although Berdimuhamedov introduced Meredov and Tagiyev as "my closest advisers," it is more clear than ever Meredov is the strategist and Tagiyev the technocrat. Whereas Meredov intervened several times, including one lengthy consultation with the President, Tagiyev barely spoke at all. Meredov also shows much more ease with the President than does Tagiyev, at least in public. END COMMENT. ¶19. (U) Secreatry Bodman's party did not have an opportunity to clear this cable. HOAGLAND