TURKMENISTAN: MURADOV'S RESIGNATION IN SEPTEMBER

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001426 SIPDIS STATE FOR SCA/CEN, EEB USTDA FOR STEIN E.O. 12958: DECL: 10/31/2018 TAGS: PGOV PREL EPET ETRD TX SUBJECT: TURKMENISTAN: MURADOV'S RESIGNATION IN SEPTEMBER SIMPLY A SYMPTOM OF A MUCH BIGGER PROBLEM REF: ASHGABAT 1131 Classified By: Charge d'Affaires a.i. Sylvia Reed Curran for reasons 1. 4 (B) and (D). ¶1. (C) SUMMARY: A longtime expat advisor, resident in Ashgabat, shared his views about recent developments, Turkmen bureaucracy and obstacles to reform. He mentioned that the former State Hydrocarbon Agency chairman resigned in order to avoid being fired for disloyalty, having been seen as "too close" to foreigners. Concerning the creation of an arbitration mechanism according to international standards, Turkmenistan's power ministries remain firmly opposed because it would undermine their power. He also shared the view that corruption and theft of state resources is on the rise. In a system based on top-down decisionmaking and bureaucratic inertia, Turkmen officials have little to gain from taking initiative and being seen as too friendly with outsiders. END SUMMARY. MURADOV FIRED FOR FRIENDLINESS WITH FOREIGNERS ¶2. (C) EU-Tacis Advisor for Turkmenistan and longtime Turkmenistan resident Michael Wilson (please protect throughout) said that former chairman of the State Agency for Management and Use of Hydrocarbon Resources Baymmurat Muradov resigned before he was to be fired (reftel),due to "conflicts with (Deputy Chairman for Oil and Gas Tachberdi) Tagiyev's office." The president and his circle also did not appreciate Muradov's "speaking in English all over Brussels" during the president's visit in November 2007. According to Wilson, Muradov's predilection to speak freely in a foreign language with foreign interlocutors -- which left him free to express himself unchecked -- made him look like a loose cannon. AND ALSO FOR COMMITMENT TO RULE OF LAW ¶3. (C) Wilson acknowledged that Muradov's support of the EU-Tacis international arbitration project may have also put Muradov's position in jeopardy. Wilson's office had suggested that Turkmenistan create a new competent body that would administrate arbitration cases, but the public prosecutor and the president soundly rejected the idea. In a meeting with Deputy Chairman for Foreign Affairs Rashid Meredov, Wilson asked about the effect of Muradov's support for a new arbitration body on Muradov's professional reputation. Meredov declined to answer directly, but indicated that this topic came up in the period before Muradov's resignation. Meredov said that it would be possible for Muradov to return to the public sector at a later time. NO MOVEMENT ON PRODUCTION SHARING AGREEMENTS ¶4. (C) Muradov's departure has not helped the standstill in concluding production sharing agreements in the oil and gas sector. Wilson said that there has been no movement on agreements because "they don't know what to do or how to analyze contracts." NO SUPPORT FOR INTERNATIONAL ARBITRATION AMONG POWER MINISTRIES ¶5. (C) Wilson acknowledged that the public prosecutor's office and the security forces are squelching progress to establish an improved arbitration mechanism because these organizations would lose some power. In addition, Wilson claimed, the president can't make up his mind, doesn't know to whom he should listen and who he can trust, which always results in a standstill. Wilson added that President Berdimuhamedov continues to depend on Turkmenistan's businesses for his personal income, and that the government ASHGABAT 00001426 002 OF 002 does not utilize revenues from taxes and licenses, which is how governments function transparently. These conditions all factor into the lack of movement in developing the private sector and small and medium enterprises. ¶6. (C) COMMENT: The lack of adequate legal structures, let alone arbitration according to international standards, in Turkmenistan is a serious hindrance to attracting foreign investment. The top-down decisionmaking process in Turkmenistan's government results in bureaucratic paralysis and resistance to change. While donors will continue to urge reform as the only way for the country to achieve its potential, they must realize that, in the current environment, Turkmen officials will likely be punished for taking too much initiative or fraternizing "inappropriately" with outsiders. END COMMENT. CURRAN