TURKMENISTAN: HONEYWELL TRYING TO COURT TURKMEN

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001270

SIPDIS

STATE FOR SCA/CEN; EEB; NEA/IR
ENERGY FOR EKIMOFF/BURPOE/COHEN
COMMERCE FOR EHOUSE

E.O. 12958: DECL: 10/05/2019
TAGS: EPET ECON PGOV EINV BTIO TX
SUBJECT: TURKMENISTAN: HONEYWELL TRYING TO COURT TURKMEN
PRESIDENT

REF: ASHGABAT 516

Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d).


1. (C) SUMMARY. On October 5, Honeywell's CEO and other
company executives met with the Charge to discuss plans to
expand the company's presence in Turkmenistan. Honeywell's
CEO arrived in Ashgabat for meetings with Turkmen President
Gurbanguly Berdimuhamedov, Deputy Chairman of Oil and Gas
Baymyrat Hojamuhammedov, and Foreign Minister Rashid Meredov.
The Honeywell CEO agreed to return to Ashgabat this fall
during his first meeting with the Turkmen President in March.
The company is currently pursuing joint ventures with the
state-owned gas company Turkmengaz, in addition to selling
Honeywell equipment in Turkmenistan. In addition, Honeywell
plans to provide much-needed technical training for Turkmen
employees as part of its business proposal. In the end, the
CEO's meeting with Berdiuhamedov did not take place. Company
executives are finding a stiff learning curve as they figure
out how to approach the Turkmen president and other GOTX
officials in order to land the desired deals. END SUMMARY.


2. (C) Honeywell's CEO made his second trip to Ashgabat this
year in order to meet with Berdimuhamedov and other
high-level officials (reftel). The trip was a promised
follow-up visit in order to discuss additional business
opportunities for Honeywell companies UOP and Honeywell
Process Solutions (HPS). UOP is a well-known supplier of
high-tech hydrocarbon drilling equipment and HPS would like
to partner with Belgian process engineering company ENEX for
projects at the Turkmenbashi oil refinery. Honeywell hopes
to sign a joint venture agreement with the Turkmen
state-owned gas corporation Turkmengaz, but has already noted
some Turkmen business practices that might make it tough to
close a deal. According to company reps, Honeywell received
a confidentiality agreement from Turkmengaz for the joint
venture, but noticed it was based entirely on Turkmen law,
with an arbitration clause that required any arbitration
hearings to be held in Turkmen courts. When Honeywell legal
experts suggested a few changes to the confidentiality
agreement, Turkmen officials reportedly balked, explaining
that it would have to be re-drafted and re-approved by the
Cabinet of Ministers and the President, a process which would
take months.


3. (C) Honeywell's Vice President for Government Relations
told Charge that GOTX officials had already pointed out a
Honeywell blunder, as Honeywell did not request an official
meeting between its CEO and Berdimuhamedov when the latter
was in New York in September for the UN General Assembly.
Honeywell was surprised that the absence of a Honeywell
letter was noticed by GOTX officials and that they considered
it to be a slight toward Berdimuhamedov. The Charge told the
Honeywell reps that they might consider sending a
congratulatory letter from the CEO to Berdimuhamedov for
Turkmen Independence Day on October 27 and inviting him to
visit Honeywell facilities the next time he is in the United
States. The Charge reminded the company reps that "making
the president happy" is an important step toward striking a
deal with the Turkmen.


4. (C) According to a Honeywell rep, the company has 130,000
employees in 100 countries. Its decision to expand in
Central Asia stems from its successful equipment sales to
international oil and gas companies in the region. The rep
added that as part of the proposed joint venture with
Turkmengaz, the company plans to hire 50 Turkmen employees
and only a couple expatriate employees, given that
Honeywell's policy is to utilize the work force of the host
nation as much as possible. The Charge said the law requires

ASHGABAT 00001270 002 OF 002


that the workforce of foreign companies be, at a minimum, 70%
Turkmen, noting that many foreign companies often employ 75
percent or more just in case. Honeywell reps said that the
company plans to establish and build training centers in
Turkmenistan as it has done in Kazakhstan, stressing the
importance of developing a highly skilled and well-trained
workforce in the country. Honeywell also plans to develop a
training partnership with the Ministry of Education,
specifically with technical universities and institutes.


5. (C) Later in the day, following his meeting with Deputy
Chairman for Oil and Gas Baymyrat Hojamuhammedov, the
Honeywell CEO told the Charge that Hojamuhammedov was
convinced the Embassy did not support Honeywell. According
to the CEO, Hojamuhammedov explained that Honeywell was not
on a list of companies that requested meetings with
Berdimuhamedov in New York. (NOTE: Member companies of the
U.S.-Turkmenistan Business Council (USTBC) who requested
meetings with the president appeared on this list. Honeywell
is not a member of the USTBC, and it did not request a
meeting with the president. It appears the GOTX has the
mistaken impression that the USTBC is a U.S. Government
entity, and membership constitutes an official endorsement by
the USG. END NOTE.) The Charge told the Honeywell CEO, in
no uncertain terms, that Hojamuhammedov's assertion was
false, and that the Embassy supports all U.S. companies doing
business or hoping to do business in Turkmenistan. The
Charge immediately put calls into the MFA to disabuse GOTX
officials of the unfounded notion that the Embassy does not
support Honeywell.


6. (C) COMMENT: In the end, the Honeywell CEO did not get
his meeting with Berdimuhamedov. Even though the CEO made
his second journey to Ashgabat this year, indicating a strong
desire to work with the Turkmen, it was not enough to assuage
Honeywell's inadvertent faux pas during Berdimuhamedov's
trip. Inadvertent or not, such a mistake is enough to
seriously sidetrack any budding business relationship. It
looks like there is some work that remains to be done before
a deal is closed. END COMMENT.
CURRAN