TURKMENISTAN: HUNGARIAN ENVOY VISITS TO PROMOTE

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 001619

SIPDIS

STATE FOR SCA/CEN, EEB

E.O. 12958: DECL: 12/17/2018
TAGS: EPET ECON PGOV PREL HU TX
SUBJECT: TURKMENISTAN: HUNGARIAN ENVOY VISITS TO PROMOTE
NABUCCO SUMMIT

REF: BUDAPEST 1188

Classified By: Charge d'Affaires a.i. Richard Miles. Reasons 1.4 (B) a
nd (D).


1. (C) SUMMARY: Hungary's special envoy for Nabucco was in
Turkmenistan December 16-17 to promote Turkmen participation
at the January Nabucco summit in Budapest. Hungary's
proactiveness on Nabucco results from its desire to reduce
its energy dependence on Russia. He highlighted the summit's
planned "closed door" session as value-added to the event
vis-a-vis other Nabucco gatherings. The Hungarians invited
the Turkmen President to conduct a bilateral visit adjacent
to the summit, but no response from the Turkmen side was
given. The envoy expressed "alarm" at possible low-level
German participation at the summit. Discussions with Turkmen
officials touched on possible gas production levels in the
Caspian, but no promise was made about its ultimate
destination. The envoy valued U.S. political messages
supporting energy diversification and Nabucco and hoped they
would continue. END SUMMARY.

HUNGARY COMMITTED TO NABUCCO


2. (C) On December 17, Hungary's Nabucco Ambassador-at-Large,
Mihaly Bayer, met with the Charge to discuss the Hungarian
government's efforts to support the proposed Nabucco
pipeline, especially the planned January 26-27 Nabucco summit
in Budapest. His current trip to Ashgabat was mainly to talk
about the summit, which he described as having arisen from
Prime Minister Ferenc Gyurcsany's personal interest in
getting the Nabucco project on track. Bayer said energy
diversification is "a must" for Hungary in order for the
country not to depend entirely on Russia as its energy
supplier. Even eventual Nabucco deliveries would only stop a
further increase in Hungary's dependence, not eliminate it.
PM Gyurcsany had not been satisfied with the lack of progress
on Nabucco. However, by organizing the summit, the
Hungarians had succeeded in "throwing a stone in the still
water" to stir up some activity, as well as showing that if a
small state player can be active, then so can others.

RECENT MOMENTUM ON NABUCCO NOTED


3. (C) In Bayer's view, there has been some new momentum in
support of Nabucco. The events in Georgia without doubt
spurred progress on Nabucco, creating a window of
opportunity. EU CG-TREN officals and commissioner Andris
Piebalgs seem more inclined to support Nabucco. The Italians
have shifted their position and may use Nabucco for
deliveries. Bayer mentioned a meeting last week with Nabucco
partners at which it was agreed that an intergovernmental
conference should start a few days before the summit. Such a
meeting at an expert level, if Turkey accepts, would be a
positive development leading into the summit.

SUMMIT AGENDA


4. (C) Meanwhile, Bayer thought the summit itself could
resolve some open questions and add impetus to the Nabucco
process. Hungary has three goals for the summit: to
reconfirm political support behind Nabucco; to strengthen
partners' commitment; and to create an opportunity for a
"behind closed door dialogue" about what is still needed and
the partners' abilities to contribute. Bayer suggested the
closed door session would be the summit's real "value-added"
to the Nabucco process. It would be kicked off with a
statement by the CEO of the Nabucco pipeline corporation
about the current state of play, followed by EBRD remarks
about financing and then an open floor for attendees to
engage in a "genuine dialogue." Bayer hoped the summit would
send a message to upstream countries that the project was
supported and moving ahead.


ASHGABAT 00001619 002 OF 003


HUNGARIANS INVITE TURKMEN PRESIDENT FOR BILATERAL VISIT


5. (C) He continued by running through the current list of
expected summit attendees, similar to the list reported in
reftel. Concerning Turkmen attendance, Bayer was told in his
meetings with GOTX officials that the level of participation
was still being determined. On behalf of Hungarian President
Solyom, Bayer had extended an invitation for President
Berdimuhamedov to conduct a bilateral visit to Hungary in
January and to attend the summit on the side. Turkmen
officials had no immediate response. Bayer also mentioned
that proposed German participation at the level of "only" a
State Secretary was "alarming." He said Nord Stream was the
Germans' priority, but added that he understood it would be
difficult for the German President or Prime Minister to
attend because there were so many conferences in Europe, plus
the prime minister would visit Hungary next summer to
celebrate the anniversary of the opening of the border.
Bayer mentioned that he expected a strong U.S. message of
support. He also made a plug for high-level U.S.
representation to serve as an indicator of such support.

TURKMEN WANT TO DELIVER GAS TO EUROPE, IF POSSIBLE


6. (C) In meetings with Oil and Gas Deputy Chairman,
Tachberdi Tagiyev, and Minister of Oil and Gas, Annaguly
Deryaev, Bayer said he felt more openness about Nabucco and
that the Turkmen were more optimistic about the role they
could play. They told him that Turkmenistan would keep
trying to diversify its export options and wanted to deliver
gas to Europe, if possible. He was told that anticipated gas
production from Petronas' offshore Block I would be five bcm
in 2010 and ten bcm in 2012, although the officials did not
promise to send this gas westward. They did give him a
message to encourage European companies to come to
Turkmenistan, saying that "if Turkmenistan can create a
partnership with Europe, then solutions will follow."
Concerning construction of a trans-Caspian pipeline, the
officials noted their view that a pipeline can be built
without the consent of all Caspian littoral countries.

THE ENVOY'S SCENARIO FOR TURKMEN GAS VIA NABUCCO


7. (C) Bayer commented to the Charge that, if Petronas
production is achieved, it would be possible to link its
field with the existing Azeri pipeline network in order to
ship the gas westward. He observed that Turkmenistan has a
very centralized political system, which has as a result that
officials either lack answers about GOTX policy direction or
are not authorized to share such information. It was also
Bayer's view that the Turkmen would have more leverage with
Russia after the pipeline to China begins operation next
year. In that case, the Turkmen might become more visible in
their support for Nabucco once they're not relying almost
exclusively on Russia for exports. In order to move ahead on
Nabucco, the project needs to contract eight bcma from
Azerbaijan, plus another eight bcma from Turkmenistan. He
said 31 bcma would be peak throughput in 2024-2025 and would
not need to be delivered immediately.

POSITIVE VIEW OF U.S. CASPIAN DIPLOMACY


8. (C) Bayer thought U.S. diplomacy had had a positive impact
in the Caspian, especially its quiet diplomacy to sort out
the Turkmenistan-Azerbaijan delimitation issue. He also
suggested the importance of keeping these countries engaged
as partners with the West. In his view, U.S. political
messages supporting energy diversification and Nabucco have
always been strong and contribute to linking the Caspian
region with Europe. A relaxation of the U.S. position on
Nabucco would send the wrong message to Russia and others
about the seriousness of the energy diversification issue.

TURKEY'S COMMITMENT TO NABUCCO STILL IN DOUBT

ASHGABAT 00001619 003 OF 003




9. (C) Nabucco is the "trigger" to deliver gas from a
Southern route into the heart of Europe, continued Bayer.
Progress on Nabucco will reassure upstream producers about
the seriousness and reliability of Europe as a consumer. A
failure to move ahead would undermine the EU's credibility in
the region, plus any plan that would bypass Turkey would be
more complicated and difficult. If Nabucco fails, "there is
no Plan B for the time being." Bayer suggested that Turkey's
commitment is still a question, despite its approval of a
draft intergovernmental agreement and apparent Turkish
political support for the project. His concern is that
Turkey would not sanction the intergovernmental agreement
before it gained assurances about its own level of gas
supplies. Also, Turkey might not have given up its notion of
its "special role" related to energy supply and sales in the
region.


10. (C) Bayer closed with a plug for the EU's Caspian
Development Corporation ("CDC") proposal, saying it could
become a second trigger for Nabucco and spur development in
Turkmenistan. He mentioned that Deputy Chairman Tagiyev had
heard of the proposal, but didn't know details, and that his
contact at the Turkmen MFA knew nothing about it. Bayer
hoped for at least "silent support" from the U.S. for the
CDC, saying there were not many ideas about how to make the
link between Turkmenistan and the Western shore of the
Caspian.


11. (C) COMMENT: Once Turkmenistan's offshore blocks begin
gas production, there will remain the challenge of resolving
Turkmen-Azeri differences before Turkmen gas can flow
westward, even if the proposed connection is a relatively
modest linkage to existing Azeri infrastructure. The Turkmen
would be unlikely to yield much ground to Azeri demands as
long as they have alternative export routes for their gas.
Meanwhile, expanded export capacity due to the new Chinese
gas pipeline means that Turkmenistan will still be hard
pressed to meet its domestic requirements and existing export
commitments. With no near-term urgency to secure a Western
outlet, the Turkmen will likely take a wait-and-see approach,
even while they continue to encourage Western investment in
offshore production. In short, a number of significant
pieces will need to fall into place before Turkmen gas could
be shipped through Nabucco. END COMMENT.
MILES