Identifier
Created
Classification
Origin
08ASHGABAT1341
2008-10-09 12:14:00
CONFIDENTIAL
Embassy Ashgabat
Cable title:  

TURKMENISTAN: LOCAL CONSTRUCTION COMPANY COMPLAINS

Tags:  PREL ECON EINV ENGR EPET TX 
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RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 2958
C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001341 

SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: DECL: 10/08/2018
TAGS: PREL ECON EINV ENGR EPET TX
SUBJECT: TURKMENISTAN: LOCAL CONSTRUCTION COMPANY COMPLAINS
ABOUT NONPAYMENT BY ENERGY FIRM

Classified By: Charge d'Affaires a.i. Sylvia Reed Curran for reasons
C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001341

SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: DECL: 10/08/2018
TAGS: PREL ECON EINV ENGR EPET TX
SUBJECT: TURKMENISTAN: LOCAL CONSTRUCTION COMPANY COMPLAINS
ABOUT NONPAYMENT BY ENERGY FIRM

Classified By: Charge d'Affaires a.i. Sylvia Reed Curran for reasons 1.
4 (B) and (D).


1. (C) SUMMARY: The director of the only private Turkmen
construction company has complained about nonpayment for its
renovation of office space, allegedly at the behest of a U.S.
energy firm. The energy firm, Midland Oil and Gas, is
actually a UK entity with U.S.-based management. The work,
performed without a contract, was completed in February 2008,
but since then only a token payment has been transferred to
the construction company. The procuracy advised the
construction company to inform post about the matter before
filing a lawsuit. Midland's local representative was
dismissive of the claim, stating that the construction
company acted prematurely when it began the work without a
contract. At the same time, he said, Midland wants to
maintain a good reputation in the community and would
eventually resolve the matter out-of-court. END SUMMARY.


2. (C) Batyr Agayev, the director of the privately-owned
Turkmen company "Bally Construction," asked to meet with
poloff to discuss a business dispute about payment for an
office renovation project completed for Midland Oil and Gas
UK ("Midland"). Agayev assumed Midland was a U.S. company
because he met with with two Midland officials who were based
in the U.S. (Note: According to its website, Midland is a UK
entity, but its only functioning office is in New York.) In
January 2008, Agayev met with the visiting Midland officials
to discuss the renovation of office space in an existing
building. Bally quickly put together a design for the space
that was approved by the Midland officials. Agayev said the
Midland officials were in a hurry to get the office
refurbishment completed, so he agreed to begin the work
without a written contract. He added that he had expected a
U.S. oil company would be trustworthy and reliable about
payment for such work.


3. (C) By the end of February, the work was completed.
According to Agayev, Midland officials inspected the work

during a subsequent visit to Ashgabat and were satisfied, but
asked for more time to pay because Midland was not yet
registered to do business in Turkmenistan. In May, Midland
transferred a USD 10,000 payment to Bally's account, but
Agayev claims that USD 139,000 remains owed. In August,
Bally decided to dismantle the work it had completed in
Midland's office space, but the building's landlord objected
because the lease provided that the renovation would be
completed at Midland's expense in lieu of the first six
months rent. Beginning in August, Midland began paying
monthly rent to the landlord, although Midland has never
occupied the space, which still lacks carpeting and
furniture. Agayev said that the procuracy instructed him to
contact the Embassy about the matter before he could file a
lawsuit in order to avoid offending anyone and perhaps help
reach a solution. He said he was at a loss at how to collect
payment from Midland and that he planned to proceed with
filing the lawsuit.


4. (C) Poloff also met with Midland's local agent, Archinhan
Bayramgeldyev, who helps with logistical arrangements for
Midland officials during their visits. He was aware of
Bally's complaint, but commented that there was no contract
and therefore, "it is Bally's problem." He added that there
was no agreed budget for the renovation work and that Bally
had acted prematurely in going ahead with the project.
Bayramgeldyev also mentioned that Midland's funds are tight
due to the global financial crisis, and that Midland was only
paying "minimum expenses." But, while saying that the lack
of a contract meant there are "no formal relations" between
Midland and Bally, Bayramgeldyev also acknowledged that it
was important for Midland to have a good reputation locally
in order to do business here. He suggested that the dispute
with Bally would be resolved and that Bally would be
"satisfied." However, in the same breath, he mentioned that
Midland will probably never occupy the office space, but

ASHGABAT 00001341 002 OF 002


instead pursue plans to build its own office building.


5. (C) COMMENT: If Bally's allegations are true, it looks
like the company, which normally only does work for the
Turkmen government, has been taught a lesson about the
importance of contracts and the complexity of dealing with
foreign firms. It is interesting that the Procuracy wanted
Bally to talk with the Embassy, to avoid creating any
misunderstanding, before filing a lawsuit. Given Bally's
apparent connections with the government, its claim will
likely receive a favorable hearing by the courts. Midland's
agent, while seemingly unconcerned about Bally's claim,
nonetheless acknowledged that an arrangement with Bally would
need to be reached in order to preserve Midland's reputation.
By filing the lawsuit, Bally could bring some pressure on
Midland to settle the dispute more quickly. END COMMENT.
CURRAN