TURKMEN-AFGHAN ENERGY DIALOGUE - PROTOCOL A BREAKTHOUGH ON

UNCLAS SECTION 01 OF 03 ASHGABAT 000469

SIPDIS

SIPDIS

SENSITIVE

STATE FOR SCA/FO, SCA/CEN, SCA/A, EUR/ACE, EEB
USAID/W FOR EE/AA

E.O. 12958: N/A
TAGS: PGOV PREL EAID ENRG AF TX
SUBJECT: TURKMEN-AFGHAN ENERGY DIALOGUE - PROTOCOL A BREAKTHOUGH ON
WAY TO INCREASED EXPORTS TO AFGHANISTAN

REF: A. 07 ASHGABAT 0660

B. 07 ASHGABAT 0523

C. 07 ASHGABAT 0317


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


2. (U) SUMMARY: Following intensive meetings on April 8-9,
officials from Turkmenistan's Ministry of Energy and Industry (MOEI)
and Afghanistan's Ministry of Energy and Water (MEW) signed a
landmark agreement to supply additional 300 MW of electricity to
Afghanistan by 2010 and build related supporting infrastructures in
their respective territories. Additionally, both sides agreed to
improve future decision-making processes by establishing a Joint
Working Group (JWG). The new agreement will be utilized to enlarge
the scope to include additional supply. Turkmenistan President
Berdimuhamedov's upcoming visit to Afghanistan at end-April
represents an historic opportunity to reach agreement on pricing and
commercial arrangement for the delivery of the additional 300 MW by

2010. END SUMMARY.

STRONG COMMITMENT TO PROCESS DEMONSTRATED BY ALL SIDES


3. (U) The meeting's purpose was to discuss export of 300 MW to
Afghanistan from Turkmenistan and to finalize technical parameters
for the construction of 500 KV transmission line from Serdar
generating station in Turkmenistan to 500/220 KV substation in
Afghanistan. After delays postponed the originally proposed dates
in November 2007, an Afghan delegation headed by Gulam Rabbani, DABM
General President, and supported by USAID/Kabul consultants Krish
Krishnan and Prem Babu, met with Turkmenistan Ministry of Energy and
Industry counterparts in Ashgabat on April 8-9. Accompanying DABM's
Rabbani were two senior officials Ms. Zia Gul, Ministry of Energy
and Water's (MEW) Director of Planning, and N. Amani, DABM's
President, 220 KV System. In addition, the Afghan Government's
strong commitment for the deal was demonstrated by the presence of
Ambassador of Afghanistan to Turkmenistan Abdul Karim Kaddam and
First Secretary Mansouri. Ambassador Kaddam and First Secretary
Mansouri participated in all meetings and showed keen interest.


4. (U) USAID Representatives from both USAID Central Asia Republics
(CAR) and Afghanistan also actively participated in the meetings.
USAID/CAR Mission Director William Frej led the USAID team, and Anil
Mishra, Senior Energy Policy Advisor (CAR),Anthony Carvalho, Head
of Energy and Natural Resources (Afghanistan) and Serdar Yagmurov,
Program Management Specialist (Turkmenistan) joined the
discussions.


5. (U) Deputy Minister of Energy and Industry Yarmuhammet
Orazgulyev headed the Turkmen delegation accompanied by Azatguly
Ovlyagulyev, Acting Chairman of the state energy corporation,
"Turkmenenergo," and six other department heads.

AFGHAN PRESENTATION WAS PROFESSIONAL AND TO THE POINT


6. (U) DABM's Rabbani provided a snapshot of Afghanistan's
electricity supply and demand. He reviewed the power generation and
distribution projects being implemented in the country, and outlined
the deficit in supply and stressed significant additional capacity
required to meet the demand. He described the initiatives taken by
the Afghan government to import electricity from Turkmenistan,
Uzbekistan, and Tajikistan. He thanked the Turkmen government for
existing supply of electricity to Afghanistan and sought the
commitment of the Turkmen government to export an additional 300 MW
to Afghanistan by May 2010.


7. (U) Rabbani further elaborated on the role donors have played in
funding various power projects in Afghanistan. He specially praised
USAID for its unwavering financial support and commitment to bring
24/7 electricity to people in Kabul and other parts of Afghanistan.

USAID ADDRESSED CONCERNS ON FINANCING AFGHAN INFRASTRUCTURE


ASHGABAT 00000469 002 OF 003



8. (U) USAID/CAR Director Frej stressed the importance of the
supply of electricity to Afghanistan from Turkmenistan. He pointed
out that the United States through its State Department and USAID
stands behind Afghanistan to bring stability and support sustainable
economic growth to the entire Central Asian region.


9. (U) USAID/Afghanistan assured Turkmen delegates on its committed
financial support for the construction of infrastructure needed to
import power from Turkmenistan. There is a firm commitment by
USAID/Afghanistan to finance the costs of building power lines and
500/220 KV sub-station on Afghan side. The project design and
implementation plans are just awaiting commitment from the Turkmen
side.


10. (U) The technical consultants to MEW and USAID/Afghanistan
presented the findings of the 2007 feasibility study on load flow,
routing of transmission lines and interconnection for 300 MW supply
of electricity via a 500 KV transmission line. They discussed
various options explored and the recommended routing of transmission
lines, border-crossing point, and location of 500/220 KV sub-station
at Andkhoy inside Afghanistan.

AT FIRST TURKMEN WERE RESERVED AND COOL, THEN WARMED UP


11. (U) The Deputy Minister expressed disappointment at the time
taken by the Afghan side to reach current level of development, poor
interaction and communication that was taken as a sign of lack of
interest. The Deputy Minister was surprised by lack of
communication with the Turkmen side on the decision taken by the
Afghans four months ago on the transmission line crossing point and
the location of the sub-station in Afghanistan. He stressed the
need for mutual decision-making and keeping a good flow of
communication.


12. (U) Following the Deputy Minister's comments, Turkmenenergo
made a presentation on its progress toward increasing electricity
supply to Afghanistan. It advised that Turkmenistan could increase
supply of additional electricity to Badghis province, Qerqeen, and
Khamyab districts via the existing 110 KV line, provided Afghanistan
constructs the related receiving facilities inside its territory.


13. (U) In order to increase power supply to Herat, Afghanistan,
and upon completion of construction of 220/110 kV substations at
Herat by Afghanistan, Turkmenistan will upgrade the operating
voltage of the transmission line Serhetabat-Herat from 110 kV to 220
kV. Through these upgrades, additional power supply of up to 50-60
MW can be easily made available in the near term to Herat and Afghan
villages close to the Turkmenistan border.


14. (U) Turkmenenergo exports 10-15% of its current power
generation to neighboring countries of Turkey, Iran and Tajikistan.
To meet its export obligations and meet its own 8-10% increase in
domestic consumption, the government has decided to install one
additional power plant consisting of two additional 127 MW
gas-turbines, a new 500 KV and 220 KV sub-stations at Serdar.
Turkmenenergo plans to supply an additional 300 MW to Afghanistan
from a single generation source at Serdar and building 420 km of a
500 KV transmission line to Afghan border and installing a 500 KV
substation near the border. Turkmenenergo has the expertise and
resources to build the planned facilities inside Turkmenistan within
24-30 months once an agreement is reached. It expects all financing
to be provided by the state budget and will not need external
financing.

CHANGED TURKMEN ATTITUDE - UPBEAT AFTERNOON SESSION


15. (U) The Deputy Minister informed the delegation that President
Berdimuhamedov has decided to extend the existing electricity supply
agreement to Afghanistan at $0.02/kwh till 2010, despite its
production cost being $0.05/kwh. He presented to the Afghan
delegate copies of the Presidential Order and implementation
agreement for acceptance and signing.

ASHGABAT 00000469 003 OF 003




16. (U) Rabbani thanked the Turkmen President and the government
for the courtesy extended and sought time to present the new
agreement to Afghan Energy Minister for signing. Rabbani assured
the Deputy Minister a quick turnaround soon after his return to
Kabul. The Deputy Minister further announced that the Government of
Turkmenistan looks very positively at Afghanistan's request for an
additional 300 MW supply. They were convinced of the Afghan
government's resolve to build the new line and sub-station on their
side and the U.S. commitment to provide financing for the
construction of these facilities.

WORKING GROUP - NEW CHAPTER IN TURKMEN/AFGHAN RELATIONS


17. (U) The Deputy Minister wanted the project to move at a faster
pace. He proposed establishing a dual channel of communication
between the two sides - the existing formal one through the MFA and
another one direct with the Ministry of Energy and Industry. The
Deputy Minister agreed to the Afghan proposal to establish a joint
working group (JWG) to meet and review, approve, and monitor design
and construction of the proposed transmission lines and
sub-stations.


18. (U) Rabbani informed the Deputy Minister that the Afghan side
is prepared to name the Afghan nominees for the Joint Working Group
and offered to host the first meeting of the JWG in Kabul. The
Deputy Minister agreed to provide the names of Turkmen nominees
shortly in a formal communication to the Afghan Energy Ministry.


19. (U) Rabbani also requested that the Deputy Minister establish a
separate commercial working group to finalize a Power Purchase
Agreement (PPA),commercial arrangements, and decide on the pricing
for additional sale of electricity. The Deputy Minister pointed out
that it is outside his authority to decide on commercial matters and
pricing. All commercial decisions are to be taken at a higher
cabinet level and by the President. However, he agreed that the
proposed JWG could draw on the other resources of the government to
take up the matter related to PPA and commercial arrangements after
all technical issues are settled. The Deputy Minister further
suggested that the pricing issue could be raised and discussed by
two presidents in the upcoming visit of Turkmenistan's President
Berdimuhamedov to Kabul on April 28.

A LANDMARK BREAK-THROUGH AGREEMENT IS AGREED TO AND SIGNED


20. (U) The protocol of the joint meeting of technical experts of
the Ministry of Energy and Water of the Islamic Republic of
Afghanistan and the Ministry of Energy and Industry of Turkmenistan
was drawn up and agreed to. After the protocol was reviewed and
approved by the Turkmen Cabinet of Ministers, both sides signed it
in the presence of all the participants at approximately 10:00 pm
that night.


21. (SBU) COMMENT: There was a marked difference in the attitude of
the Turkmen Government towards the Afghanistan Delegation. Compared
to the cool reception the Afghans received a year ago, there was a
180 degree turnaround. Overall, the meetings were conducted in a
very positive, friendly, and accommodating environment.
Considerable credit for the meetings' results goes to the strong
USAID presence and level of preparedness and commitment shown by
Afghans in the meetings. END COMMENT.


22. (U) USAID/CAR Mission Director Bill Frej and Embassy Kabul
cleared this cable.
HOAGLAND