THE FEW FOREIGN BANKS IN TURKMENISTAN

UNCLAS SECTION 01 OF 02 ASHGABAT 001428

STATE FOR SCE/CEN; EEB; NEA/IR
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SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EFIN EINV ECON EAID PGOV TX
SUBJECT: THE FEW FOREIGN BANKS IN TURKMENISTAN

ASHGABAT 00001428 001.2 OF 002



1. (U) Sensitive but Unclassified. Not for Public Internet.


2. (SBU) SUMMARY. Five foreign banks currently operate in
Turkmenistan: Turkmen-Turkish Bank, National Bank of Pakistan,
Saderat (Export) Bank of Iran, Deutsche Bank and Commerz Bank
of Germany. Besides the two German banks, these banks mostly
offer simple banking services to local and foreign customers.
The German banks only offer banking insurance to foreign
companies. To date, foreign banks in Turkmenistan are under
strict national regulation and are often unable to offer
services and products available in most countries. If
Turkmenistan truly intends to portray itself as a player in
global markets, it must reconsider its current policy toward
foreign banks. END SUMMARY.


3. (SBU) The Turkmen Central Bank requires any new foreign
bank to first provide evidence of five million USD in a basic
capital fund before the bank can be registered by the
government. All five foreign banks in the country have
reportedly met this requirement. German Deutsche Bank and
Commerz Bank are category "A" European banks, and both provide
banking insurance to foreign companies operating in
Turkmenistan; they do not currently provide traditional
banking services. Turkmenistan limits operations of Iranian
Saderat Bank as a non-compliant bank. The Saderat branch
operates despite U.S. warnings of its involvement in providing
support to terrorist activity.


4. (SBU) Recently, foreign banks were allowed to open
corresponding accounts with non-Turkmen foreign banks
directly; in the past foreign banks were required to complete
all overseas transactions through a correspondent account with
the Turkmen Central Bank operated by Deutsche Bank in Germany.
Local foreign bank representatives stated this simple change
has helped foreign banks immensely in Turkmenistan, but
cautioned that the amount of effort and time required to have
this one policy implemented does not bode well for future
policy changes.

TURKMEN-TURKISH BANK


5. (SBU) The Turkmen-Turkish Bank is a joint venture
established in 1993 by the Turkish Zeerat (Agricultural) Bank
and Turkmen Dayhan (Agricultural) Bank, to facilitate
bilateral trade between Turkey and Turkmenistan. According to
bank representatives, the Turkmen Central Bank appreciates the
Turkmen-Turkish bank's strict obedience to local banking
regulations and stressed that the bank operates in a
"corruption free" environment, with rigorous compliance with
Turkmen laws. The bank provides customary banking services
and opens and holds corporate and private accounts in local
and hard currency. The bank also owns and operates several
currency exchange offices throughout the country. The bank's
Turkish General Manager Gurbuz Gunduz added, however, that
Zeerat bank might try to move independently into the Turkmen
banking sector in the future.

NATIONAL BANK OF PAKISTAN BRANCH


6. (SBU) A branch of the National Bank of Pakistan (NBP)
opened in Ashgabat in 1996. Bank officials stated the branch
meets all local and national regulations in order to provide
credit to private citizens and businesses, while offering
foreign and local currency accounts. Due to the bank's
relatively long period of operation in Turkmenistan, bank
representatives boasted that most foreign companies prefer to
have their accounts in NBP versus any of the other foreign
banks in Ashgabat.

IRANIAN EXPORT BANK (SADERAT)

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7. (SBU) A branch of the Iranian Saderat (Export) Bank of Iran
opened in 1993. Saderat Bank's operations are reportedly
restricted by Turkmen authorities because Saderat did not
provide the mandatory $5 million basic capital fund.
Nevertheless, the Bank serves multiple Iranian businesses in
Turkmenistan. The Turkmen branch of Saderat Bank currently
only works with its five branches in Dubai (UAE) and its
branches in Iran. Sederat bank representatives acknowledged
that global sanctions had stymied the Bank's plans for
expansion.

DEUTSCHE BANK AND COMMERZ BANK


8. (SBU) The German banks Deutsche Bank and Commerz Bank both
began operations in Turkmenistan in 2008. As the only
European class "A" banks in Turkmenistan, Deutsche and
Commerz offices mostly issue "European class A bank"
guarantees to the foreign companies working with the Turkmen
government. This lucrative activity reportedly earns them
more than 10% of the secured amounts. The General Manager of
the Turkmen-Turkish Bank explained that the German banks
secure foreign projects with Turkmenistan through collateral
and deposit accounts.


9. (SBU) COMMENT: Foreign bank representatives were careful
to describe the Turkmen government's often intrusive banking
regulations as necessary for combating corruption, while being
careful not to hint at any criticism of Turkmen government
policy. Although the three foreign banks that offer regular
banking services stated business in Turkmenistan was going
well, the market does not seem to be attracting additional
competitors, due to the GOTX's tight control and ability to
close any bank at any time for virtually any reason. In
addition, the existence of few foreign banks in Turkmenistan
reflects the GOTX's well-known policy of limiting the
influence of foreign entities on Turkmenistan. END COMMENT.

CURRAN