IN TAJIKISTAN, A LUMP OF COAL IS NOT SUCH A BAD THING

UNCLAS SECTION 01 OF 02 DUSHANBE 000778

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV ECON ENRG EAID TI AF
SUBJECT: IN TAJIKISTAN, A LUMP OF COAL IS NOT SUCH A BAD THING

REF: Dushanbe 637

DUSHANBE 00000778 001.2 OF 002



1. (SBU) SUMMARY: Nothing would please the Tajik government
more than big lumps of coal in their stockings this Christmas,
preferably from a U.S.-financed mine that fuels a thermal power
station. At a May 29 roundtable meeting on "Integrated
Development of Coal and Power Projects and Reconstruction of
Thermal Power Plants for Coal Fuel" sponsored by the Tajik
Ministry of Energy and Industry, investors, donors and the
government signed a declaration to study Tajikistan's coal
reserves, with an end goal of year-round electricity production
for domestic use and export. The United States agreed to
consider reassigning Trade and Development Agency grant money
already allocated to Tajikistan for a coal-related feasibility
study, should the Ministry submit a sensible proposal that
supports our regional energy goals. END SUMMARY.


2. (SBU) At the day-long meeting, the Ministry had a focused
agenda and concrete answers to donor questions about feasibility
and goals. After opening remarks by Minister of Energy Sherali
Gulov, Deputy Prime Minister Asadullo Ghulomov included in his
own comments specific references to a May 28 meeting with SCA
Senior Advisor Bob Deutsch (septel),noting that Tajikistan was
ready to comply with all international standards on power
purchase agreements. "We commit ourselves to upgrading Tajik
law in those areas where we do not meet international norms."
Deputy Minister of Energy Pulod Mukhiddinov outlined
Tajikistan's coal potential, notably deposits at Fon Yaghnob,
Nazar Aylok and Ziddi, and the possibility of converting
gas-powered thermal stations in Dushanbe and Yavan to
coal-fueled. All noted that despite rich hydropower potential,
coal-powered electricity would help meet the demand during
Tajikistan's winter months, when most of the country sits in the
dark, and help meet year-round export commitments.


3. (SBU) Prospective investors made presentations about their
interest and experience in the coal sector. Presenters included
the U.S. firm AES, Russia's RAO UES, three Kazakh firms, (one
having already invested $1 million in a Tajik coal field),a
British consultant, and Chinese equipment manufacturers. Among
the conference's 80 participants were local representatives from
the major international financial institutions -- World Bank,
Asian Development Bank, European Bank for Reconstruction and
Development, International Finance Corporation, Islamic
Development Bank, Eurasian Development Bank -- plus
Washington-based World Bank Energy advisor Raghu Sharma.


4. (SBU) At the end of the meeting, which finished a remarkable
five hours ahead of schedule, Sharma and Ghulomov facilitated a
discussion of the next steps to developing the coal sector and
finalized a "conclusions" declaration, which outlined
participants' intent and narrowed the focus to the Fon Yaghnob
deposit and possible rehabilitation of the Dushanbe and Yavan
stations. The declaration included commitments to uphold
environmental and safety standards and create a "shell company"
based on an Indian model that would obtain the necessary
clearance and conduct the feasibility studies, and then be
transferred to the private investor selected to develop the
project.


5. (SBU) Ghulomov repeated a previous appeal to the U.S.
government to reallocate TDA grant money to a coal feasibility
study; based on Deutsch's earlier meetings with Ghulomov,
Pol/Econ chief agreed that this would be possible if there were
a concrete proposal that supported U.S. regional electricity
goals, including developing an electricity source that could
provide Afghanistan with year-round power.


6. (SBU) In a likely effort to demonstrate strong government
commitment to the project, the Tajiks trotted out other economic
heavy hitters, including the chairman of the Tajik Aluminum
Company, the head of Tajik State Savings Bank, the deputy of
Orien Bank (Tajikistan's largest commercial financial
institution),the Minister of Economic Development, the
Presidential Advisor on Energy (and former Minister of Energy),
and most of the Ministry of Energy and Industry.


7. (SBU) Comment: The concrete goals and presentations of this
meeting contrasted sharply with the April roundtable for
consultants on a regional electricity trade project (reftel)
where Tajik officials remained in the realm of the theoretical,
making the pitch for any and all generation projects. Ghulomov,
who missed the last meeting due to medical treatment, was active

DUSHANBE 00000778 002.2 OF 002


and engaged in the discussion, and seemed to have taken
Deutsch's comments about international standard agreements to
heart. He assured investors and donors that Tajikistan was
ready to move forward quickly to ensure that thermal-generated
electricity could be part of the regional electricity trade. We
hope he means it. End Comment.
JACOBSON