TURKMENISTAN: STATE HYRDOCARBON AGENCY HEAD ASKS FOR

UNCLAS SECTION 01 OF 02 ASHGABAT 001328 SIPDIS SENSITIVE STATE FOR SCA/CEN, EUR/ACE, EEB AID/W FOR EE/EA E.O. 12958: N/A TAGS: PGOV PREL EAID TX SUBJECT: TURKMENISTAN: STATE HYRDOCARBON AGENCY HEAD ASKS FOR USAID'S ASSISTANCE ON RANGE OF SUBJECTS ASHGABAT 00001328 001.2 OF 002 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) SUMMARY: After waiting since early August for an October 20 meeting to discuss potential cooperation on introducing International Financial Reporting Standards (IFRS) with funding from the USAID-Chevron public-private partnership, the State Agency for Management and Use of Hydrocarbon Resources (State Agency) Director spoke glowingly of past cooperation with USAID and said that there were many other potential areas for joint work. Training courses focused on project management, international models for production sharing agreements (PSAs) and service contracts, establishing representative offices abroad, and business planning for state entities were among the opportunities suggested in addition to the urgent IFRS work. Kakayev promised to provide a list of the State Agency's interests and proposed to meet again after the upcoming Independence Day holidays (October 27-28) to review the options. END SUMMARY. INITIAL MEETING DELAYED SINCE AUGUST ¶3. (U) On October 20, USAID Country Representative, Chevron Nebitgaz President and a representative of USAID's Economic Reforms to Enhance Competitiveness (EREC) project met with the State Agency for Management and Use of Hydrocarbons Resources Director, Yashigeldy Kakayev, to discuss potential cooperation on introducing International Financial Reporting Standards (IFRS) with funding from the USAID-Chevron public-private partnership. (NOTE: Chevron recently provided $500,000 to USAID to launch the first-ever Public-Private Alliance in Turkmenistan. The program will allow USAID to expand or extend three ongoing programs. END NOTE.) The proposed meeting had been postponed several times prior to receiving a half-hour's advance notice on October 20. ¶4. (U) After USAID provided an overview of USAID's activities in Turkmenistan, Chevron Nebitgaz's president highlighted the company's community development philosophy and explained Chevron's objectives for the company's alliance with USAID in Turkmenistan. The USAID/EREC representative then introduced the project's ongoing activities in Turkmenistan, including those supporting IFRS implementation. PROPOSAL FOCUSED ON IFRS TRAINING FOR HYDROCARBON SECTOR ¶5. (U) The USAID-Chevron proposal included a series of Certified Accounting Practitioner (CAP) training courses for State Agency and other oil and gas sector specialists and accountants, and assistance with developing a strategy for the implementation of IFRS in the oil and gas sector, including the development of IFRS-compliant financial statements for the State Agency. USAID/EREC shared the CV for the proposed expert to assist in strategy development and informed Kakayev that the expert, a Kazakh national, is scheduled to make a presentation on IFRS implementation in the oil and gas Sector during the Oil and Gas of Turkmenistan Conference in Ashgabat in mid-November. (NOTE: He is using one of Chevron's two speaking slots as a sponsor. END NOTE.) ¶6. (U) In response to the presentation, Kakayev said that the proposed work was urgent. He welcomed USAID-Chevron's contributions in this area, and said that assistance preparing the State Agency's own IFRS-compliant financial statements, as required by the new Hydrocarbons Law, would be helpful. The State Agency was required to do this despite the fact that the Ministry of Finance has not developed national accounting standards harmonized with international standards. In preparing IFRS-compliant financial statements, the State Agency currently referred to input and advice by international contractors operating in Turkmenistan, but the State Agency was not sure whether the approach was actually right or wrong. Kakayev also asked that the training courses be organized on the State Agency's premises. WHY STOP HERE -- CAN WE DISCUSS OTHER COOPERATION? ¶7. (U) In addition to the proposed IFRS-related training, Kakayev also asked if USAID could provide assistance in other areas, including: -- Developing rules on deposit development; -- Developing and/or updating of various (unspecified) legislative ASHGABAT 00001328 002.2 OF 002 documents and regulations; -- Business plan development; -- Establishing oil companies in Turkmenistan according to international models, including PSA and service companies; -- Building capacity in project management; -- Improving the operations of the State Agency's existing representative offices abroad, as well as those yet to be opened. ¶8. (U) Kakayev offered to provide a list of specific areas for potential cooperation. He repeated that any training courses, especially those in the project management area, should be tailored for a government agency since the State Agency is state-owned. At USAID's request, Kakayev provided a contact person at SAMUHR, and reiterated that the State Agency would provide a list of areas for cooperation. As a next step, Kakayev suggested to meet again in early November after the Independence Day holidays (October 27-28) to discuss further activities as part of technical assistance. ¶9. (U) Kakayev stressed that the State Agency welcomed cooperation with USAID. He spoke favorably of the extensive cooperation that USAID enjoyed in the 1990's with the State Agency's predecessor, the Competent Body, and lamented that cooperation with the oil and gas sector was downscaled in order to move to the agriculture sector. (NOTE: Personnel changes in the oil and gas structures also played a major role in the strategic re-orientation. END NOTE.) ¶10. (SBU) COMMENT: The wait for this meeting appears to have been worth it. Kakayev spoke positively of past cooperation with USAID and expressed hope that this cooperation could be re-established. Chevron Nebitgaz is also interested in responding to some of the requests, which will help build its relations with a key sector counterpart. That Kakayev provided a contact person at the State Agency to follow up with indicates his seriousness. The next test will be to see if the offered list of possible areas for cooperation is forthcoming. If extensive joint activities are requested, current funding will not support a comprehensive response. END COMMENT. CURRAN