TURKMENISTAN: BOEING CONTRACT CANCELED BECAUSE OF

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001293 SIPDIS STATE FOR SCA/CEN COMMERCE FOR EHOUSE E.O. 12958: DECL: 10/14/2019 TAGS: ECON ETRD PGOV PREL TX SUBJECT: TURKMENISTAN: BOEING CONTRACT CANCELED BECAUSE OF MISUNDERSTANDING REF: A. ASHGABAT 1170 ¶B. ASHGABAT 988 Classified By: Charge d'Affaires Sylvia Reed Curran. Reasons 1.4 (B) a nd (D). ¶1. (C) Two Boeing representatives met with Charge on October 8 to relay the disappointing news that their 2008 contract with Turkmenistan Airlines had apparently just been canceled. The contract was originally for two airplanes, to be delivered in 2013. They had subsequently agreed, at the request of the Turkmen government, to deliver the planes in 2011, which would mean a loss of $12 million for the company. However, when the Boeing reps went to sign the supplemental agreement for the accelerated delivery with Turkmenistan Airlines on October 7, airline representatives told them, apologetically, that the contract had been canceled. To get more clarity, the Boeing representatives went to talk to Deputy Chairman for Transport and Communications Nazarguly Shagulyev. Shagulyev first said that financial problems were the cause of the cancellation. Then he opened up and told them that there had been a presidential order saying that Turkmenistan did not need any additional airplanes. ¶2. (C) The Boeing reps are sure that there has been a misunderstanding. They think the agreement may have been presented to Berdimuhamedov as a new contract, instead of a revision of an existing one. Boeing officials had met with both Berdimuhamedov and Foreign Minister Rashid Meredov in New York at the U.S.-Turkmenistan Business Council dinner, and at that time both the president and foreign minister seemed happy with Boeing and gave them more time and attention than was given to the oil and gas companies. ¶3. (C) The Boeing reps requested Charge's help to get a meeting with Meredov. They were sure that if they could explain the situation to Meredov directly, then he could fix it because "he had the president's ear." (Comment: Post has noticed that Meredov seems to be out of favor these days (Ref A),so Boeing's hopes may be misplaced. END COMMENT.) Meredov was unable to meet with Boeing, because he was out of town until late on October 10. As of October 14, Boeing had not been able to arrange a meeting with Meredov. However, company representatives were invited to Turkmenistan's Independence Day celebrations, and they hope to meet with Meredov then. ¶4. (C) According to the Boeing reps, money cannot be the cause of the possible contract cancellation. The Turkmen government has already paid $40 million on this contract and no additional payment is due until August 2010, when the Turkmen would need to pay only another $8 million. The Boeing reps mentioned that they are happy to renegotiate payments, rather than have the whole contract canceled. The reps also told Charge that they had heard from Moscow sources that the Turkmen government is spending $1 billion per month, and that they only have $18-19 billion remaining in their Deutsche Bank account. ¶5. (C) COMMENT: Money may be more of a problem than the Boeing reps seemed to recognize, given the current lack of gas export revenues. According to other embassies, their companies are increasingly having problems getting paid. Turkish companies have been willing to self-finance, until the Turkmen finally pay what is owed, but several European companies have refused to start projects until they get some money up front. With the delivery of the new Boeings in August, perhaps the president has decided the airline has enough planes for the time being, as Shagulyev suggested. If that was indeed the case, no lower official would hesitate to cancel the contract, even if doing so did not make economic sense. END COMMENT. ASHGABAT 00001293 002 OF 002 CURRAN