TURKMENISTAN: UKRAINE STUMBLES AS IT SEEKS TO

UNCLAS SECTION 01 OF 02 ASHGABAT 000173

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EUR/UMB, EEB

E.O. 12958: N/A
TAGS: PGOV PREL EPET UP CH IR TX
SUBJECT: TURKMENISTAN: UKRAINE STUMBLES AS IT SEEKS TO
RE-ENGINEER THE BILATERAL RELATIONSHIP

REF: 07 ASHGABAT 1186


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: Ukraine's representation in
Turkmenistan is continuing to have a difficult time reviving
its bilateral diplomatic and business relationship.
Ukrainian diplomats are showing deep interest in the frequent
arrivals of various U.S. official delegations, which have
incited both admiration and a modicum of envy that their own
relationship with Turkmenistan's government is so stagnant.
They are also watching Turkmenistan's energy export
considerations closely, and want to portray their own energy
goals here as preferable to those of competing Turkmen gas
consumers. They want to have a close bilateral relationship
with Turkmenistan based on both energy and business
interests, but there is a lot of competition, and no progress
has been made in resolving old problems. END SUMMARY.

WHAT'S THE U.S. GOT THAT UKRAINE HASN'T GOT?


3. (SBU) Ukrainian First Secretary Igor Roman asked to
meet January 25 to discuss a variety of issues. Ukrainian
diplomats are clearly both fascinated and curious about the
frequent visits of U.S. delegations to Turkmenistan, and view
these visits as a sign of growing U.S. influence here. In
contrast, there appears to be a continuous ebb of Ukrainian
influence. According to Roman, Ukraine still is unable to
resolve issues related to several old construction deals that
were beset with serious problems several years ago (reftel).
In addition, it has been difficult to resolve problems
associated with attempts to establish direct flights between
Ashgabat and Kyiv, something Ukraine has been proposing for
several years. These persistent issues, in turn, Roman said,
are holding back development of the energy relationship
between the two countries, which has the potential to be
win-win for both countries. He said a Ukrainian delegation
is planning to come to Turkmenistan the week of February 18,
when delegation members would have an opportunity to
participate in Turkmenistan's Flag Day celebrations. He said
the goal will be to court Turkmenistan's top leadership and
try to mend fences.

PROMOTING THE NOTION OF "WHITE STREAM" ANYWAY


4. (SBU) In light of press stories that had recently broken
regarding Prime Minister Yulia Tymoshenko's public statements
on a possible White Stream gas pipeline, Roman commented
briefly on Ukraine's proposal to construct a pipeline that
would continue from the proposed Trans-Caspian Pipeline
(TCP),transit Azerbaijan and Georgia, cross the Black Sea,
to enter Ukraine's existent gas transit system. He said
their plan offered a cheaper alternative to proposed transit
through Turkey and would also be easier to build. (NOTE:
Tymoshenko's comments on this proposal, made during her visit
to Brussels, were received coldly in Turkmenistan, where the
foreign ministry released a statement tartly noting Ukraine
had not yet broached the subject in Ashgabat of using
Turkmenistan's gas. END NOTE.)


5. (SBU) Turkish Ambassador Hakki Akil recently told the
Charge that RosUkrEnergo, the intermediary transit company,
buys Turkmen gas from Gazprom at the Turkmen border for a low
price and transits it through Russia. Gazprom did not need
to work through RosUkrEnergo but chose to do so because of
the "(unspecified) major political figures" behind the
company. He said RosUkrEnergo had shady affiliations,
inluding possible part ownership by international crime
figure Semyon Mogilevich and several Ukrainian and Russian
oligarchs. According to press and Embassy Moscow reporting,
Mogilevich was arrested in Moscow on tax-evasion charges the
first week of February, possibly because Ukrainian Prime
Minister Tymoshenko was threatening to expose details of the
intermediary company, which she has claimed sells

ASHGABAT 00000173 002 OF 002


Turkmenistan's gas to Ukraine for an unnecessarily inflated
price.

"UKRAINE COULD BE TURKMENISTAN'S BEST PARTNER"


6. (SBU) Roman suggested the Chinese and the Iranians will
never be the export partners for Turkmenistan that Ukraine
could be. He was surprised to hear that Post was working to
confirm a Chinese press report that claimed the Beijing had
agreed to pay the highest price yet recorded for Turkmen gas.
(NOTE: A Chinese business journal reported on January 21
that China had agreed to pay $195 per thousand cubic meters
(tcm) for Turkmen gas, once the Turkmen-Chinese pipeline is
completed in 2009. Hoever, the report also indicated that
this price would include a $50 per tcm transit fee, which may
actually be the fee payable to the transit countries beyond
Turkmenistan. Turkmenistan's press has not reported the
price upon which the two countries agreed. END NOTE.)


7. (SBU) The Chinese deal makes no economic sense for
either side, he asserted, and the Chinese would only using
the gas for their industry anyway (sic). Further, he said,
it is becoming obvious that the Iranians are bad business
partners, and the recent fallout with Iran may be teaching
Turkmenistan that it can pick and choose its customers.
Ukraine is worried, however, about whether Turkmenistan will
have the future output that all these consumers need. He
also said he had read that Turkmen oil and gas production had
increased by only 9% in 2007, in spite of the fact that
Turkmenistan's government had publicly set a goal in March
2007 of increasing it by 20%. This statistic had Ukrainian
officials wondering if Turkmenistan would able to meet all
its gas deal obligations.


8. (SBU) COMMENT: The Ukrainians say they have much to
offer the Turkmen in terms of business, construction,
military, and energy expertise; but until the old issues are
resolved, Turkmenistan is likely to continue to give them
short shrift. Turkmenistan's government appears unconvinced
that Ukraine is a reliable partner worthy of consideration.
Perhaps more than anything else, the friction over botched
construction contracts continues, and the Turkmen have long
and precise memories. END COMMENT.
HOAGLAND