TURKMENISTAN-EU ENERGY MOU MIGHT OPEN NEW DOORS

C O N F I D E N T I A L SECTION 01 OF 04 ASHGABAT 000667 SIPDIS STATE FOR SCA/CEN, EUR/ERA, EEB PLEASE PASS TO USTDA DAN STEIN USEU FOR AMBASSADOR GRAY ENERGY FOR EKIMOFF/THOMPSON COMMERCE FOR HUEPER E.O. 12958: DECL: 05/27/2018 TAGS: PGOV PREL ECON EPET EU TX SUBJECT: TURKMENISTAN-EU ENERGY MOU MIGHT OPEN NEW DOORS FOR EUROPEAN FIRMS REF: ASHGABAT 0488 Classified By: CDA RICHARD E. HOAGLAND: 1.4 (B),(D) ¶1. (C) During his early-November 2007 visit to Brussels, President Berdimuhamedov agreed that Turkmenistan and the European Union would draw up and sign an energy memorandum of understanding (MOU). The original intention was that Deputy Prime Minister for Oil and Gas Tachberdi Tagiyev would return to Brussels before the end of December to sign the MOU. The EU submitted a draft in English and Russian, but by early January 2008, the Turkmen side admitted -- or at least said -- they hadn't yet read it. EU-TACIS Adviser Michael Wilson (strictly protect) speculates the Turkmen were uncomfortable with the original EU draft because it referred to a "southern corridor" for energy and specifically mentioned the Caspian Sea and the South Caucasus as the desired route to transport Turkmen natural gas to Europe. ¶2. (C) Once the EU pressed, the two sides started trading versions back and forth, with the negotiations occurring only in Brussels. However, Turkmenistan's embassy there was cut out, and the negotiator for the Turkmen side was Ennex Process Engineering General Director Koen Minne, a private businessman current in favor in the Presidential Palace and Turkmenistan's Honorary Consul in Belgium -- a situation Wilson described as "totally out of order." The two sides agreed the target date for signing should be during the EU Troika-Central Asia Ministerial in Ashgabat in April. ¶3. (C) By late March, the two sides had reached agreement on final language -- or at least the EU thought so. However, days before the Troika visit, Turkmenistan insisted on further language changes, and a signing during the Troika became impossible. After the earlier deletion of any mention of a southern energy corridor, most of the new changes were nit-picking word-smithing, except for two sticking points: -- In Article 1.1., the Turkmen wanted the word "data" deleted, noting that "data" could mean secret government information and arguing that the word "information" was sufficient. -- Of more significance, in the second tic of Article 2, the Turkmen wanted the word "oil" inserted between "related" and "work" so that the tic would read, "support co-operation in performing related oil work in the Turkmen sector of the Caspian Sea and in the transport of energy resources." The EU didn't object to the addition, but insisted if oil is mentioned, gas, too, logically had to be there -- oil and gas. The Turkmen strenuously objected, insisting that only the word "oil" could appear. The EU eventually shrugged and left out both oil and gas, but that wasn't quite the end of the story. LAST-MINUTE CRISES ¶4. (C) Keeping in mind the MOU had been negotiated in English and in Russian, late on Friday, May 16, someone noticed the final document was to be done in English and Turkmen. Thus ensued a mad scramble for a Turkmen version. By May 19, the EU had already chartered a plane (a non-refundable reservation) to fly EU Energy Commissioner Andris Piebalgs and delegation, along with EU Special Envoy for Central Asia Pierre Morel, to Ashgabat on May 25 for a signing on the morning of May 26. ASHGABAT 00000667 002 OF 004 ¶5. (C) After close of business on May 20, French Ambassador Christian Lechervy, representing the EU in Turkmenistan, received a call from a Tagiyev deputy who demanded the word "oil," without "gas," be reinserted in the Article 2 tic about the Caspian. Wilson described the deputy as "the reddest of the red boyars around tsar Tagiyev." On May 24, the same official telephoned again, "more belligerant than ever," and made the same demand, as well as insisting "data" absolutely must be dropped. ¶6. (C) After a fair amount of grand-standing by both sides -- "Do you want this visit, or not?" -- Piebalgs and Tagiyev signed the MOU on May 26. The word "data" remained in the final version of both languages. "Oil and gas" made it into the Turkman version but not the English one. But in the end, Wilson said, it just didn't make that much difference. ¶7. (C) Although Wilson at times has scoffed at the MOU as "emasculated," in his more philosophical moments he admits it will open the door for much broader EU contact with Turkmenistan on energy issues. He speculates the next step could be an inter-governmental agreement. In the post-signing euphoria -- or at least reliev -- he further speculated that production sharing agreements in the Caspian for European firms should now come relatively quickly. ¶8. (C) COMMENT: The saga of the EU-Turkmenistan Energy MOU suggests two things: Turkmenistan's cavalier attitude about agreed deadlines, and, more significant, its unwillingness to imply in any public document or forum concrete intentions to work with the West on trans-Caspian natural gas. We believe Ashgabat's intention is different, but this skittishness seems to confirm its unwillingness to annoy Moscow, and its rather naive belief it can hide its intentions. Further, this may be further evidence of the real battle that rages within the government of Turkmenistan between the Soviet-style old-school go-it-alone technocrats and the younger generation of generalists who have a broader view of the world (reftel). END COMMENT. ¶9. (SBU) BEGIN TEXT OF ENGLISH VERSION: ((TITLE) Memorandum of Understanding and Co-operation in the Field of Energy Between the European Union and Turkmenistan Recognising Turkmenistan's key role as a major hydrocarbon producer in the Caspian Sea region, and taking into account the mutual interest of both the European Union and Turkmenistan (hereinafter the Parties) for strengthening cooperation in the energy sector to increase security of energy suppy and to forecast energy demand, recognising the strategic importance of the energy sector for the economic and social development of Turkmenistan, having regard to the conclusions of the Brussels European Council meeting of 8-9 March 2007, which underlined the importance of strengthening co-operation in the field of energy between the European Union and the countries of Central Asia and the Caspian region, having regard to the strategy for a new European Union partnership with Central Asian countries adopted during the European Council of 21-22 June 2007, which refers to the common interest in diversifying export routes, demand and ASHGABAT 00000667 003 OF 004 supply structure and of energy resources, as well as the intent of the European Union to comprehensivelky support Central Asian countries in developing a Caspian Sea-Black Sea-EU energy transport corridor, recognizing that strengtheing co-operation between Turkmenistan and the European Union in the field of Energy will enable the discussion of issues not already covered by regional co-operation and would enable a focus on issues of mutual interest, and taking into account the importance of bilateral relations in the energy field and the need for a comprehensive approach to these relations, the Parties express their willingness to co-operate in the following directions: ¶1. Strengthening co-operation on energy security 1.1 The Parties will, whenever necessary, regularly exchange information on data and policy developments in the field of energy that may have an impact on the production, processing, transportation and use of all energy resources, with a focus on energy security. 1.2 The Parties will support taking joint actions aimed at attracting a wide range of investments to develop the energy sector, to increase energy security. 1.3 The Parties will regularly exchange views in the energy field aimed at making forecasts on possible future changes in energy demand and supply trends. 1.4 In view of mutual interest to diversity energy markets and supply routes, the Parties will co-operate in creating attractive, stable, equitable, and transparent conditions, including regulatory, legal, financial, and other conditions to facilitate and expand investments in the energy sector. The Paries will also co-operate on development of energy stransport infrastructure of mutual interest. This co-operation may, as appropriate include input from international financial organisations. ¶2. Co-operation in enhancing industrial development Recognising the common interest in attracting further investment into the energy sector in Turkmenistan, the Parties intend to: -- encourage co-operation between the Parties and their respective energy companies with a particular focus on investments in production, energy technology, the acquisition of technological skills, as well as appropriate training and exchange of expertise; -- support co-operation in performing related work in the Turkmen sector of the Caspian Sea and in the transport of energy resources; -- develop and bring into use renewable energy sources, including solar energy, as well as energy efficient and environment friendly technologies; -- encourage the creation and implementation of an energy efficiency policy as well as the exchange of the newest methods for manufacturing companies (including possibly companies in the construction sector and those active in the field of heat supply),in order to reduce unnecessary energy ASHGABAT 00000667 004 OF 004 loss and the energy impact of high energy consumption. ¶3. Final Provisions The present document is a document that records political intent alone and provides for no legal commitment. Done on the day of 2008, in 2 original exemplars in the English and Turkmen languages. On Behalf of the European Union On Behalf of Turkmenistan END TEXT. HOAGLAND