TURKMENISTAN: NEXT STEPS

C O N F I D E N T I A L SECTION 01 OF 04 ASHGABAT 000873 SIPDIS SIPDIS STATE FOR P, SCA/FO, SCA/CEN, EUR/ACE, EEB PLEASE PASS TO USTDA DAN STEIN FROM CHARGE D'AFFAIRES RICHARD HOAGALAND E.O. 12958: DECL: 08/23/2017 TAGS: PGOV PREL PHUM ECON EAID EPET KDEM KIRF IR RS, TX SUBJECT: TURKMENISTAN: NEXT STEPS REF: A. ASHGABAT 0871 ¶B. ASHGABAT 0866 ¶C. ASHGABAT 0865 ¶D. ASHGABAT 0864 ¶E. ASHGABAT 0861 Classified By: CHARGE RICHARD E. HOAGLAND FOR REASONS 1.4 (B) and (D) ¶1. (C) SUMMARY: Turkmenistan has decided at the highest level it wants to cooperate with the United States on economic reform and energy policy. We need to take advantage of this historic opportunity with a tiger-team response. If we can be nimble enough to be successful, we will have three of the five littoral states of the Caspian working together and more or less reasonably well disposed to the West; our energy-security policy will advance; and, concurrently, we will have more likelihood of advancing the other key components of our balanced policy. END SUMMARY. INTRODUCTION ¶2. (C) We have an historic opportunity in Turkmenistan for the balance of power in Central Asia to shift slightly westward and for the country to emerge as a reasonable partner with the West, like Azerbaijan and Kazakhstan. At the same time, a "reasonable" Turkmenistan would benefit Afghanistan (and Pakistan),and would add a significant step toward achieving the Secretary's vision of a north-south, Central-South Asia linkage. ¶3. (C) Turkmenistan,s pathological dictatorship ended with the death of President Niyazov on December 21, 2006. Eight months later, President Berdimuhamedov and his government have ended their deliberations about what kind of relationship they want with the United States, and have opened the door to us. They have heard and accepted our basic talking points. On August 14, President Berdimuhamedov told EEB Assistant Secretary Sullivan internal debate is over and he and his government want to work with the United States (ref B). 8WE WANT TO WORK WITH YOU, AND WE NEED YOUR HELP ) NOW8 ¶4. (SBU) The Turkmen message on August 14 was as clear as it was well-coordinated: -- President Berdimuhamedov: &We want to work with you on new economic models ) certainly in energy, but more broadly in the economy. We are truly eager to learn new economic models of development. We need your expertise because, frankly, we,re interested in your model. We need a plan of action to implement it. Militarily we are of course a neutral state. But economically, we want the American School, model.8 (ref B) -- Deputy Chairman of the Cabinet of Ministers/Foreign Minister Meredov: &Turkmenistan wants concrete cooperation with the United States on the widest possible range of issues.8 (ref E) -- Executive Director of the State Agency for the Use of Hydrocarbon Resources Myradov: &Where are your concrete proposals? What are the next steps? We really want to diversify our energy exports. You have the capability to provide world-class technology, training, and management. We don,t have it, and we want it. Now.8 (ref C) -- First Deputy Minister of Economy and Finance: &We need to get away from Soviet principles to attract more Western investment. Cooperation with the United State is key for these goals.8 (ref D) ASHGABAT 00000873 002 OF 004 ¶5. (SBU) Their message to us is clear: &We want to work with you, and we want concrete plans ) and actions ) as quickly as possible.8 Equally clear is that they are focusing first on economics, which Berdimuhamedov made explicit to A/S Sullivan. MOVING AWAY FROM THE PAST ¶6. (SBU) But they are delivering in other areas, too, making clear they understand that any new relationship must be relatively balanced. ¶7. (SBU) After a bit of pressure, the government agreed to receive the U.S. Commission on International Religious Freedom August 19-24. As a preparation, President Berdimuhamedov signed a degree on August 9 releasing 11 political prisoners from the Niyazov era, including former Chief Mufti Ibadullah. ¶8. (C) There are still problems in the Ministry of Education cooperating on education reform and exchanges, and the Foreign Ministry is aware of the problem. The Embassy is working to get past or remove the roadblock, a powerful old-guard anti-American adviser to the minister, as oily and mendacious as any character Charles Dickens ever imagined. In fact, Turkmenistan,s new direction is so new that it will take a fairly long time to remove the entrenched politicians and bureaucrats in all areas and at all levels who oppose the new relationship Ashgabat desires with Washington. WHATEVER WE DO, DO IT FAST ¶9. (C) For our new relationship to move forward toward success, we need to consider three points: -- We need to meet Turkmenistan more than half way. We need to accept their priorities and focus ourselves to respond. -- We need to respond concretely and quickly. This window of opportunity may be quite narrow, especially given the anti-American nature of the other key power players here - Russia and Iran. -- Implicit in the previous two points, we need to act fast. We need to respond with a tiger-team mentality, cutting red tape left and right to get boots on the ground. This cannot, repeat cannot, be business as usual. RECOMMENDATIONS: WHAT WE CAN DO FIRST ¶10. (C) STATE AGENCY CAPACITY TRAINING: The State Agency for the Use of Hydrocarbon Resources recognizes and states clearly it lacks capacity to negotiate and conclude responsible deals with the international energy companies, which is its primary responsibility. By farsightedness and coincidence, a Trade and Development Agency consultant, Bronek Dutkiewicz, has been here the last ten days to work with the agency to prepare a concrete fast-action plan for staff training. Executive Director Myradov is pleased. Because he is close to Berdimuhamedov, the president will be pleased. This must move forward without any kind of delay. ¶11. (C) U.S. ORIENTATION VISIT FOR ENERGY OFFICIALS. Berdimuhamedov has responded positively to Energy Secretary Bodman's invitation for senior energy officials and experts from Turkmenistan to visit Washington and Houston at the end of September. He gave A/S Sullivan his oral approval on August 14, and the key government newspaper, "Neutral Turkmenistan," published the decision on August 18. Although time is short, we need to ensure this visit is indeed VVIP, well-planned, and will offer Turkmenistan a deliverable - at a minimum, a bilateral energy cooperation statement, even if ASHGABAT 00000873 003 OF 004 relatively vague and anodyne. This is what they would take home to Berdimuhamedov so that he can bless more in-depth cooperation. They cannot return empty-handed to report to the president. Drafting needs to start now so that the text can be concluded before the delegation departs Turkmenistan. ¶12. (SBU) REFORM CONSULTANT AT CENTRAL BANK. During USAID Deputy Assistant Administrator Drew Luten's late July visit, the Central Bank of Turkmenistan (CBT) told us it is eager to restart the U.S. consultation and training in finance, banking, and monetary policy reforms that Niyazov suspended about four years ago. In close consultation with UNDP and World Bank, we should consider placing as soon as possible a Treasury Department financial reform consultant full-time in the CBT, certainly before the end of this calendar year. We need to be able to tell them soonest, "Help is on the way." ¶13. (SBU) INVESTMENT ROADMAP STUDY. During DAA Luten's visit, First Deputy Minister of Economy and Finance (MOEF) Japarov responded eagerly to Luten's suggestion that USAID could work with MOEF to prepare an Investment Roadmap Study. This should be fast-tracked to the fullest extent possible and begin within weeks. ¶14. (SBU) DOUBLE TAXATION AND BILATERAL INVESTMENT DOCUMENTS. Jeparov also talks to U.S. delegations constantly about a double-taxation agreement with the United States, as well as a Bilateral Investment Treaty (BIT). He points out the current double-taxation agreement is a left-over of the U.S.-Soviet agreement, and Turkmenistan wants a current one. We have made clear that a BIT is a longer and more complex process requiring Congressional consent. But at a minimum, to show good faith, we should at least provide a translated copy of a model BIT so that the government can begin identifying what steps it will need to take. ¶15. (C) TRANS-CASPIAN FEASIBILITY STUDY. A rapidly emerging Turkmenistan request, not yet fully or explicitly articulated, is for a feasibility study on trans-Caspian transport of Turkmenistan's oil and gas. They missed the boat when they declined to be named explicitly, even if in passing, in the Azerbaijan-Kazakhstan feasibility study's terms of reference signed in Baku on August 16. However, on August 17, Foreign Minister Meredov told me President Berdimuhamedov had been perplexed A/S Sullivan hadn't discussed with him on August 14 trans-Caspian hydrocarbon transport, "even though the president implicitly gave you two different openings." I responded that Sullivan had not dealt on that issue in any detail because Turkmenistan had just made clear its sensitivity by declining to be named, after we had explicitly asked, in the just-signed document. Meredov replied cryptically, "We are not pawns of others. We want to talk with you." (COMMENT: Just as we often assume our interlocutors totally understand the freighted background meaning of our talking points, so, too, Turkmenistan may make the same assumption. The result is we sometimes talk past each other. END COMMENT.) COMMENT ¶16. (C) I am certain better brains in Washington can come up with additional concrete suggestions that can be put into play as soon as possible. I stress speed - a tiger-team approach - because the government of Turkmenistan stresses it wants concrete action, and it wants it yesterday. If we do business as usual, with normal bureaucratic process, head-scratching, and initial nay-saying we might find the window of opportunity closed. ¶17. (C) COMMENT CONTINUED. If we can be nimble enough to be successful, we will have three of the five littoral states of the Caspian working together and more or less reasonably well ASHGABAT 00000873 004 OF 004 disposed to the West; our energy policy will advance; and, concurrently, we will have more likelihood of advancing the other key components of our balanced policy. END COMMENT. HOAGLAND