Identifier
Created
Classification
Origin
08ASHGABAT546
2008-04-30 11:50:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Ashgabat
Cable title:
RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -
how-toVZCZCXRO1912 PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ RUEHPW RUEHROV RUEHVK RUEHYG DE RUEHAH #0546/01 1211150 ZNR UUUUU ZZH P 301150Z APR 08 FM AMEMBASSY ASHGABAT TO RUEHC/SECSTATE WASHDC PRIORITY 0711 INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY RUCNCIS/CIS COLLECTIVE PRIORITY RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY RUEHAK/AMEMBASSY ANKARA PRIORITY 3707 RUEHBJ/AMEMBASSY BEIJING PRIORITY 1525 RUEHKO/AMEMBASSY TOKYO PRIORITY 1392 RUEHIT/AMCONSUL ISTANBUL PRIORITY 1961 RUEKJCS/JOINT STAFF WASHDC PRIORITY RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY RUEKJCS/SECDEF WASHDC PRIORITY RUEAIIA/CIA WASHDC PRIORITY RHEHNSC/NSC WASHDC PRIORITY RHEFDIA/DIA WASHDC PRIORITY RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
UNCLAS SECTION 01 OF 02 ASHGABAT 000546
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/TPP/ABT/ATP JANET SPECK
ANKARA FOR AGRICULTURAL COUNSELLOR
E.O. 12958: N/A
TAGS: EAGR ECON ETRD PGOV TX
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -
TURKMENISTAN
REF: STATE 39410
UNCLAS SECTION 01 OF 02 ASHGABAT 000546
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/TPP/ABT/ATP JANET SPECK
ANKARA FOR AGRICULTURAL COUNSELLOR
E.O. 12958: N/A
TAGS: EAGR ECON ETRD PGOV TX
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -
TURKMENISTAN
REF: STATE 39410
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: Turkmenistan relies heavily on imports of many
basic foodstuffs. As a result of economic reforms in the country
(including an 800% increase in gasoline prices),low domestic food
production due to years of bad agricultural policies, rising food
prices worldwide and an abnormally cold winter, food prices in
Turkmenistan have increased steeply. The European Bank for
Reconstruction and Development (EBRD) has estimated inflation since
the beginning of the year to be 30 percent, with much of this effect
felt in foodstuff prices. While public discontent is increasing,
the Government of Turkmenistan appears to be aware of and is taking
measures to counter it. However, current trends will most likely
continue. END SUMMARY.
3. (SBU) Under former President Niyazov, Turkmenistan almost
exclusively had a command economy, including in the agriculture
sector, with a heavy emphasis on production of wheat and cotton.
Niyazov instituted a policy of mandatory 10% production increases
every year. This led to overfarming of Turkmenistan's delicate
desert soil and increasing acreage being converted from livestock,
fruit and vegetable production to cotton and wheat. Local experts
believe that President Berdimuhamedov will gradually abandon
Niyazov's ambitious plan of making Turkmenistan self-sufficient in
wheat and will concentrate primarily on growing cotton. Experts
believe that the government will purchase more wheat from abroad
with its hydrocarbon revenues, and direct its efforts and resources
toward promoting cotton production to feed its export-oriented
textile factories.
FOOD AND AGRICULTURAL COMMODITY DEMAND
4. (SBU) As a country where industry is mostly concentrated on
development of energy resources and agriculture is heavily dependent
on irrigation, Turkmenistan relies largely on imports of basic food
staples, including wheat, meat, sugar, and vegetable oil. According
to post's unofficial estimate, Turkmenistan imports 50 percent of
the wheat the country needs, 99 percent of sugar and 50 percent of
vegetable oil.
SUPPLY
5. (SBU) Domestic production of wheat is insignificant because of
poor seed quality, ineffective bureaucratic management and shortages
of irrigation water. According to official 2007 statistics,
Turkmenistan harvested 1.2 million tons of wheat -- independent
estimates place this figure closer to one million tons. This is
half of the wheat needed for the country's population.
6. (SBU) The expansion of wheat and cotton production also resulted
a decrease in the land available for growing fruits, vegetables,
rice, and other products. Turkmenistan imports fresh and dried
fruit, vegetables and nuts from Iran, Pakistan and the United Arab
Emirates; sunflower oil from Russia, Ukraine and Turkey; and soybean
oil from Iran. Turkmenistan produces cottonseed oil, which is
mainly consumed by the country's rural population due to its lower
cost.
7. (SBU) Over the past three years, domestic production of meat and
dairy products decreased due to both the increased price of animal
feed and the decreased acreage for grazing -- a direct result of the
government's expansion of wheat and cotton production. (NOTE:
These decreases were exacerbated by extensive livestock losses due
to the abnormally low temperatures during January and February 2008.
END NOTE.) This decreased production also led to sharp price
increases for these products.
ECONOMY
8. (SBU) The European Bank for Reconstruction and Development has
ASHGABAT 00000546 002 OF 002
estimated inflation since the beginning of the year to be at 30
percent. Over the past 18 months, prices at local markets increased
25 percent for flour, 50 percent for butter, and 120 percent for
sunflower oil. These higher prices were the result of a number of
factors, including global increases in food prices, decreased
domestic production and sharply rising transportation costs
following a sharp 800% increase in gasoline prices as the president
seeks to begin phasing out fuel subsidies. The higher flour prices
were reflected in the increased price of bread sold at the markets.
POLITICAL IMPACT
9. (SBU) Until February 2008, the government was fairly successful
in maintaining living standards of the very poor through a system of
extensive subsidies, including cheap automobile gasoline. A
February 11 government-mandated gasoline price increase immediately
caused a spike in transportation costs and set off a 20 to 50
percent increase in food prices. Food prices continue to rise,
putting the population -- especially those with low incomes --
closer to the edge of survival. Public discontent is growing, but
there have not yet been any signs of unrest or friction between
Turkmenistan's "haves" -- basically government officials -- and
"have-nots."
ENVIRONMENT
10. (SBU) Former President Niyazov's ambitious and unrealistic
plans for wheat and cotton resulted in degradation of soil and water
quality, salinization of farmlands, and ecological imbalances.
Although the government adopted a new land code in 2004, which
states that land will be taken away from farmers who misuse or waste
land and water, the land is rarely enforced in Turkmenistan, where
all land is state-owned.
HOST GOVERNMENT POLICIES
11. (SBU) Government officials appear to be well aware of public
discontent. In addition to increasing security, government
officials have responded by purchasing chicken from the United
States and low-quality "buffalo" meat from India. On April 29, the
president signed a decree ordering an increase in the acreage (from
13,000 hectares to 18,000 hectares) to be allocated to rice
production. He also has offered soft loans and tax benefits for
private food producers. All these measures are intended to address
shortages and keep prices under control.
POST PROGRAMS
12. (U) This post does not administer food aid programs.
POLICY PROPOSALS
13. (U) Post has encouraged and will continue to encourage the
Government of Turkmenistan to allow farmers to privatize plots in
order to reduce monoculture. Post also encourages the Government of
Turkmenistan to commence utilization of environmentally sound
farming techniques such as crop rotation.
CURRAN
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/TPP/ABT/ATP JANET SPECK
ANKARA FOR AGRICULTURAL COUNSELLOR
E.O. 12958: N/A
TAGS: EAGR ECON ETRD PGOV TX
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -
TURKMENISTAN
REF: STATE 39410
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: Turkmenistan relies heavily on imports of many
basic foodstuffs. As a result of economic reforms in the country
(including an 800% increase in gasoline prices),low domestic food
production due to years of bad agricultural policies, rising food
prices worldwide and an abnormally cold winter, food prices in
Turkmenistan have increased steeply. The European Bank for
Reconstruction and Development (EBRD) has estimated inflation since
the beginning of the year to be 30 percent, with much of this effect
felt in foodstuff prices. While public discontent is increasing,
the Government of Turkmenistan appears to be aware of and is taking
measures to counter it. However, current trends will most likely
continue. END SUMMARY.
3. (SBU) Under former President Niyazov, Turkmenistan almost
exclusively had a command economy, including in the agriculture
sector, with a heavy emphasis on production of wheat and cotton.
Niyazov instituted a policy of mandatory 10% production increases
every year. This led to overfarming of Turkmenistan's delicate
desert soil and increasing acreage being converted from livestock,
fruit and vegetable production to cotton and wheat. Local experts
believe that President Berdimuhamedov will gradually abandon
Niyazov's ambitious plan of making Turkmenistan self-sufficient in
wheat and will concentrate primarily on growing cotton. Experts
believe that the government will purchase more wheat from abroad
with its hydrocarbon revenues, and direct its efforts and resources
toward promoting cotton production to feed its export-oriented
textile factories.
FOOD AND AGRICULTURAL COMMODITY DEMAND
4. (SBU) As a country where industry is mostly concentrated on
development of energy resources and agriculture is heavily dependent
on irrigation, Turkmenistan relies largely on imports of basic food
staples, including wheat, meat, sugar, and vegetable oil. According
to post's unofficial estimate, Turkmenistan imports 50 percent of
the wheat the country needs, 99 percent of sugar and 50 percent of
vegetable oil.
SUPPLY
5. (SBU) Domestic production of wheat is insignificant because of
poor seed quality, ineffective bureaucratic management and shortages
of irrigation water. According to official 2007 statistics,
Turkmenistan harvested 1.2 million tons of wheat -- independent
estimates place this figure closer to one million tons. This is
half of the wheat needed for the country's population.
6. (SBU) The expansion of wheat and cotton production also resulted
a decrease in the land available for growing fruits, vegetables,
rice, and other products. Turkmenistan imports fresh and dried
fruit, vegetables and nuts from Iran, Pakistan and the United Arab
Emirates; sunflower oil from Russia, Ukraine and Turkey; and soybean
oil from Iran. Turkmenistan produces cottonseed oil, which is
mainly consumed by the country's rural population due to its lower
cost.
7. (SBU) Over the past three years, domestic production of meat and
dairy products decreased due to both the increased price of animal
feed and the decreased acreage for grazing -- a direct result of the
government's expansion of wheat and cotton production. (NOTE:
These decreases were exacerbated by extensive livestock losses due
to the abnormally low temperatures during January and February 2008.
END NOTE.) This decreased production also led to sharp price
increases for these products.
ECONOMY
8. (SBU) The European Bank for Reconstruction and Development has
ASHGABAT 00000546 002 OF 002
estimated inflation since the beginning of the year to be at 30
percent. Over the past 18 months, prices at local markets increased
25 percent for flour, 50 percent for butter, and 120 percent for
sunflower oil. These higher prices were the result of a number of
factors, including global increases in food prices, decreased
domestic production and sharply rising transportation costs
following a sharp 800% increase in gasoline prices as the president
seeks to begin phasing out fuel subsidies. The higher flour prices
were reflected in the increased price of bread sold at the markets.
POLITICAL IMPACT
9. (SBU) Until February 2008, the government was fairly successful
in maintaining living standards of the very poor through a system of
extensive subsidies, including cheap automobile gasoline. A
February 11 government-mandated gasoline price increase immediately
caused a spike in transportation costs and set off a 20 to 50
percent increase in food prices. Food prices continue to rise,
putting the population -- especially those with low incomes --
closer to the edge of survival. Public discontent is growing, but
there have not yet been any signs of unrest or friction between
Turkmenistan's "haves" -- basically government officials -- and
"have-nots."
ENVIRONMENT
10. (SBU) Former President Niyazov's ambitious and unrealistic
plans for wheat and cotton resulted in degradation of soil and water
quality, salinization of farmlands, and ecological imbalances.
Although the government adopted a new land code in 2004, which
states that land will be taken away from farmers who misuse or waste
land and water, the land is rarely enforced in Turkmenistan, where
all land is state-owned.
HOST GOVERNMENT POLICIES
11. (SBU) Government officials appear to be well aware of public
discontent. In addition to increasing security, government
officials have responded by purchasing chicken from the United
States and low-quality "buffalo" meat from India. On April 29, the
president signed a decree ordering an increase in the acreage (from
13,000 hectares to 18,000 hectares) to be allocated to rice
production. He also has offered soft loans and tax benefits for
private food producers. All these measures are intended to address
shortages and keep prices under control.
POST PROGRAMS
12. (U) This post does not administer food aid programs.
POLICY PROPOSALS
13. (U) Post has encouraged and will continue to encourage the
Government of Turkmenistan to allow farmers to privatize plots in
order to reduce monoculture. Post also encourages the Government of
Turkmenistan to commence utilization of environmentally sound
farming techniques such as crop rotation.
CURRAN