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

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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.

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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

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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