TURKMENISTAN: "THE DOOR IS OPEN, BUT WE FOLLOW

C O N F I D E N T I A L SECTION 01 OF 04 ASHGABAT 001307 SIPDIS SIPDIS STATE FOR SCA/CEN E.O. 12958: DECL: 12/01/2017 TAGS: PGOV PREL ECON EPET ETRD SOCI TX SUBJECT: TURKMENISTAN: "THE DOOR IS OPEN, BUT WE FOLLOW OUR OWN PATH" Classified By: CHARGE SYLVIA REED CURRAN FOR REASONS 1.4 (B),(D) ¶1. (C) SUMMARY: In a wide-ranging discussion with SCA PDAS Mann on November 16, Foreign Minister Meredov: -- reaffirmed Turkmenistan welcomes proposals from world-class energy companies; -- agreed more work needs to be done to reform the economy and improve the business climate; -- touted the planned Avaza Free Tourist Zone as a model for national development; --confirmed Turkmenistan wants bilateral Caspian Sea delimitation with Azerbaijan; -- expressed cautious optimism about some forms of educational cooperation; and -- remained non-committal about himself visiting Washington any time soon. Meredov is more sophisticated than many senior officials in Turkmenistan, and we need to trust that with our regular repetition of our views, he will take some on board. He is a key interlocutor because he is one of President Berdimuhamedov's closest advisers. END SUMMARY. TIOGE A GREAT SUCCESS ¶2. (C) Deputy Prime Minister/Foreign Minister Rashit Meredov welcomed SCA PDAS Steven Mann on November 16, noting the meeting was a good opportunity to strengthen the bilateral relationship. Mann congratulated Meredov on the success of the just-ended International Oil and Gas Exhibition. He told Meredov that he had spoken briefly with State Agency for Hydrocarbon Resources Director Muradov before Muradov's unexpected departure for Moscow, and knew that Chevron representatives had presented a serious and detailed proposal to the Turkmen government for consideration. He said, "Our hope is that Turkmenistan will choose our companies." Mann added every foreign business person he'd talked to had raised the difficulty of getting Turkmen visas, which is a structural, not Foreign Ministry, problem. ¶3. (C) Meredov thanked Mann for his positive evaluation of the conference, noting it had opened new avenues for cooperation with world-class companies. The next step is that they should present serious proposals. Meredov said he was aware of how much there is to do to improve the business and investment climate for companies interested in working in Turkmenistan. "Steps have been taken. There are more to come. This is a work in progress." He noted during the past 10 months, Turkmenistan has opened its doors to the world through its interactions with visiting delegations, during international trips, and through a growing number of business contacts, and diplomatic activity, both bilateral and multilateral. He said that these interactions have created a positive atmosphere. AVAZA AS A DEVELOPMENT MODEL ¶4. (C) Following government talking points, Meredov pointed to the Avaza Free Tourist Zone project as a key element of Turkmenistan's effort to build a positive business environment. Visa and economic reform will occur first in Avaza, then spread to the rest of the country. After Avaza, Turkmenbashy city and port will be modernized, then the entire Caspian zone. He cautioned, however, such broad development would not happen in a year, so expectations should be moderated. ASHGABAT 00001307 002.2 OF 004 ¶5. (C) PDAS Mann admitted there is skepticism about Avaza, especially if it doesn't have a solid business plan. He cited visa problems for prospective tourists and the fact that business people feel constrained by Ministry of National Security (MNB) interference and surveillance. Meredov did not reply directly. He said Turkmenistan must consider "macro-components" of reform. Economic reform is not a one-day process. It needs broad consultation with international organizations and international financial institutions. ¶6. (C) Mann persisted, "The key question is this: Is Turkmenistan Soviet or Modern?" ¶7. (C) Meredov said Turkmenistan is in the midst of reviewing its visa regime but will need more time. He pointed out Turkmenistan has long borders with Iran and Afghanistan it needs to protect and needs to consider changes to visa procedures very carefully as a result. Mann riposted that Turkey and Azerbaijan also have long borders with states of concern, but a traveler can easily get a visa at the airport. It would be a great improvement if entry to Turkmenistan were more easily accessible for legitimate travelers. "You need to simplify the system, not weaken it." ECONOMIC REFORM ¶8. (C) Meredov said that the country's reform plan was developing, but it's not done yet. Development and reform of the economy is key, and Turkmenistan is engaged in talks with international financial institutions to develop a road map, but they are seeking a realistic and pragmatic approach. CASPIAN DELIMITATION ¶9. (C) Mann raised the issue of Caspian Sea delimitation. He asked if on this sensitive issue Turkmenistan wants the United States to be helpful or keep its distance. Turning professorial, Meredov said the issue has a long history and has been vexatious in many parts of the world. He recognized the potential contribution of "U.S. or UK legal experts" and would always welcome advice on methodology," ¶10. (C) Mann conveyed Azerbaijani views, which he had received on his recent visit to Baku. He suggested a median-line approach could be agreed relatively simply, and then bilateral commercial agreements to mutually exploit the resources would naturally follow. He said, in his view, the issue is not solely legal, but requires bilateral good-faith negotiations. Meredov pointed out Turkmenistan and Azerbaijan have met three times in the last six months to consider delimitation, and will continue to meet, but did not otherwise agree or disagree. ¶11. (C) In a private pull-aside at the end of the meeting, Meredov told Mann, "We want a delimitation agreement and can reach it, but we have to have part of "Azeri Chirag" (NOTE: The disputed natural-gas field that is the main bone of contention for Turkmenistan. END NOTE). Mann said he is convinced Turkmenistan can reach a solution with Azerbaijan. He pointed out Baku needs Ashgabat to achieve a fully stable situation in the Caspian. Baku needs Ashgabat as a counter to Teheran. He then noted, "Your weakness is a methodology that no one else uses." He urged Meredov to agree on a median-line solution that includes commercial arrangements with Azerbaijan. Meredov replied, "I understand that." CASPIAN ENERGY DEVELOPMENT ¶12. (C) Mann said the United States respects Turkmenistan's independence. He said that recent talks with the President had also included discussion on new gas projects. ASHGABAT 00001307 003 OF 004 Turkmenistan is currently determining where companies will come in and do exploratory and developmental gas-field work. Meredov said Turkmenistan has to evaluate companies closely because "Mobil was here in the 1990s but 'ran away.'" Mann explained that when Exxon and Mobil merged, the new management didn't much like Mobil's PSA, and that was why the newly merged company pulled out. Mann then noted Chevron's desire to be the main operator for the block at Serdar. He emphasized the world is now a different place than it was in the 1990s, and that includes the price of oil. ¶13. (C) Mann raised the question of how Turkmenistan's gas can be transported westward and, thus, provide maximum benefit to the country. Selling gas at the border is the Gazprom model. Turkmenistan has the capacity to be a significant supplier to the West. The country would more greatly benefit if it became a partner in transport infrastructure as well. Turkmenistan would have the ability to develop an international reputation as a stable and long-term business partner as well if it engaged in such activity. Meredov again did not agree or disagree, but said that there were indeed great opportunities on the Caspian shelf. "If anyone has proposals, Turkmenistan is open to hear them, he said." ¶14. (C) Mann pointed to Kazakhstan as a model for turning partnership into national development. In Kazakhstan, modern, extreme-high-pressure technology is being used, and would be very useful in Turkmenistan as well where sub-salt gas will be difficult to extract. KazMunaiGaz took advantage of partnership with major foreign companies and profited from their training and expertise. KazMunaiGaz is now an international company in its own right. Turkmenistan could achieve the same, but it will need powerful partners. Full-stream partnerships are much more profitable than selling gas at the border. Meredov mused, "The opportunities are huge," then added, "But China is paying for its own pipeline -- your big companies should build our pipeline." BUILDING THE SOCIALIST PARADISE ¶15. (C) Linking partnership with foreign companies, Meredov noted pointedly that Kazakhstan and Russia went through economic collapse and the rise of oligarchs. Turkmenistan must control its economy to prevent the impoverishment of its citizens during systemic change. He rhapsodized, "We are rebuilding Ashgabat, then we will rebuild our other cities. We have to modernize our villages. We need schools, hospitals, running water. We've already spent $4 billion on this. Foreign companies can harm our people. The President has a plan to improve the social conditions of our people." EDUCATION ¶16. (C) Meredov added that the country is investing heavily in education -- many students are being sent to Russia and China for higher education. Petronas provides education. "Let your companies do the same, within the structure of our plan. We don't want foreign companies to harm our people. Turkmenistan must balance the need to develop socio-economically with the need to open up to international investment." Meredov added that Turkmenistan would be very receptive to domestic, business-related educational programs paid for by companies who come to invest in Turkmenistan. "This would be easy to support and approve." He added that the government is doing a great deal behind the scenes to improve the skill base of the labor force, and the education system has a good base. ¶17. (C) Mann said some of the foreign businessmen at the oil and gas conference had commented they want to hire young Turkmen lawyers, but can't find any because law students have been studying "Ruhnama" for the last five years. Meredov ASHGABAT 00001307 004 OF 004 protested, "Steve! We have lots of young experts! We have lots of schools and institutes! We're starting English-teaching on television with your help. When the President was at Columbia University, he invited Professor Katherine Nepomnyashi for the Harriman Institute to come here to consider a Harriman Institute in one of our universities. Give us any proposal, and we will approve those appropriate for our system." ¶18. (C) Mann said the United States would welcome more Turkmen experts visiting the United States. Meredov replied, "We sent delegations to the United States and United Kingdom in the mid-1990s. But lots of time has passed since then. Where are the results today?" NEW OPPORTUNITIES ¶19. (C) Mann said the United States would like to look at new opportunities with Turkmenistan. For example, the U.S. Trade and Development Agency could consider sending teams to evaluate possibilities in the petrochemical industry, and possibly in telecommunications and agriculture. He asked, "Concretely, in the next 12 months, how can we best cooperate?" Meredov replied, "We're on different paths, but this is a promising moment. Let's see what develops." ¶20. (C) Alluding to the U.S. draft of the Meredov-requested 12-month work plan, to which Turkmenistan has not responded, Mann reminded Meredov that Secretary Rice has invited him to visit the United States. Meredov replied that the past year has been very intense. "But let's see what develops," he said again. ¶21. (C) COMMENT: This meeting was important for more clearly revealing the current Turkmen government world view -- especially the reluctance to take risks, including economic and social ones, that could, in their view, challenge their tightly controlled version of stability. The fairly regularly voiced lingering resentment that foreign projects from the mid- to late-1990s mostly came to naught almost willfully ignores the realities of the late Niyazov era, when Turkmenistan sealed itself off. However, Meredov is more sophisticated than many senior officials in Turkmenistan, and we need to trust that with our regular repetition of our views, he will take some on board. He is a key interlocutor because he is one of President Berdimuhamedov's closest advisers. END COMMENT. ¶22. (U) PDAS Mann has cleared this cable. CURRAN