TURKMENISTAN: GOVERNMENT MAY BE AVOIDING U.S. AND

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000262 SIPDIS SCA/CEN; EEB PLEASE PASS TO USTDA DAN STEIN ENERGY FOR EKIMOFF/THOMPSON COMMERCE FOR HUEPER E.O. 12958: DECL: 02/25/2019 TAGS: PGOV PREL EPET EINV TX SUBJECT: TURKMENISTAN: GOVERNMENT MAY BE AVOIDING U.S. AND ITALIAN ENERGY MAJORS Classified By: Charge Richard Miles for reasons 1.4 (b) and (d). ¶1. (C) SUMMARY: The Bertling Amcit Logistic General Manager, a longtime Ashgabat resident, shared news he had heard about a potential new government policy on Italian and U.S. energy majors being kept out of the running on field development, and also shared his views on how to bring Turkmenistan and the U.S. closer. He also shared information about the large cash bribes that foreign companies have been reported to pay to get a meeting with the Turkmen President or to have a senior official advocate a business proposal. If his news about Italian and U.S. majors is true, then those companies will have to downsize their proposals and make them more inviting to the Turkmen Government if they want to stay in the game. Our contact's comments suggest that the road ahead for U.S. energy companies will not become any easier soon. END SUMMARY. GOVERNMENT VOTES DOWN WORK WITH ITALIAN OR U.S. MAJORS ¶2. (C) Political Officer met again with the Bertling Amcit Logistics General Manager on February 23 in the Embassy to discuss sensitive topics that could not be covered in his office. He was anxious to pass on to Post that he had recently met with General Electric (GE) representatives to work out the details of an arrangement in which Bertling will be transporting GE technology to Turkmenistan as part of a hydrocarbon sector contract. He reported that in the course of conversation with the GE representatives, they told him that Deputy Cabinet Chairman for Oil and Gas Tagiyev and his staff had been instructed not to engage in any oil and gas contract agreements with any major Italian or U.S. oil and gas companies. ¶3. (C) Our contact speculated that this decision had been made at the highest level, and had been made for a variety of reasons. Turkmen officials, he said, were still angry about onshore PSA holder Burren Energy's takeover by Italian energy conglomerate ENI without the knowledge or approval of the Turkmen Government. Our contact expressed the view that Turkmen officials had decided to pass on all major U.S. company offers for two reasons. The first, he argued, was that the majors currently seeking access to the market have �00A;not demonstrated their staying power in Turkmenistan by setting up an office, seeking registration, or engaging in other activities to show they planned to stay in Turkmenistan. Nor have they delivered anything "to benefit the Turkmen Government." The second reason related to Exxon and Mobil's withdrawal from Turkmenistan in the 1990s. (NOTE: The two companies had contracts to work the right bank of the Amu Darya River, where China National Petroleum Corporation currently has a PSA, and also for the site that is now being worked by Burren/ENI. When Exxon and Mobil merged, the decision was made to pull out of Turkmenistan, leaving contracts incomplete in Turkmen eyes, and ill will in their wake. END NOTE.) ¶4. (C) When Political Officer asked about the U.S. service companies that have recently won service contracts to work at various oil and gas fields, the Bertling Logistics General manager argued that companies like Schlumberger, Weatherford and Parker Drilling have a long record of reliability in Turkmenistan, have "done things to benefit Turkmenistan" and have earned the trust of the Government over time. Things that qualify as "benefiting Turkmenistan" include sponsorship of teams, cars, or organizations in a way that burnishes the country's positive image abroad. They can also include construction of a facility that promotes the country's social or economic development. He suggested that many foreign ASHGABAT 00000262 002 OF 002 companies begin here by successfully completing a small development project at the outset. THOUGHTS ON IMPROVING THE U.S.-TURKMEN BILATERAL RELATIONSHIP ¶5. (C) There is a way to turn around the Turkmen mindset about U.S. firms, our contact said, through regular meetings between senior U.S. Government officials and Turkmenistan's diplomatic representatives at the UN in New York or at the Embassy in Washington, DC. He claimed that Ambassador Meret Orazov, who received a significant state award last week for his work in Washington, has the respect and esteem of his President. Turkmenistan's Permanent Representative to the UN, Aksoltan Atayeva also received a state award. Presenting American technical ingenuity and know-how to these representatives, by means of a high-level relationship, would enhance the U.S. image in the eyes of the Turkmen, and show that Turkmenistan is important to the U.S., he said. In addition, he opined that the U.S. Embassy's prestige in Turkmenistan was being increasingly impaired by its more than three-year lack of a permanent Ambassador. COMMENTS ON HIGH-LEVEL CORRUPTION ¶6. (C) The Bertling Logistics General Manager also addressed Political Officer's inquiries about how foreign companies feed high-level corruption to gain market access in Turkmenistan. He reported hearing rumors that some companies had paid $15,000-$20,000 to win the advocacy and support of a deputy chairman on behalf of a business proposal. A meeting with the Turkmen President now costs about $300,000, and does not guarantee a successful outcome. He said all under-the-table payments are risky, as they can be very expensive and lead to further payment requirements. He noted that major commercial proposals that have a big price tag demand large bribes to be seriously considered at the presidential level. These bribes are now averaging about $1 million-$1.5 million, he said. He claimed that payments for senior government officials are made using local legal or commercial intermediaries who deliver cases of cash to an official's designated representative or directly to a member of the Presidential Apparatus. He said the legal entity, Bereket, has played the intermediary role in the past. ¶7. (C) COMMENT: It will take little time for the news to spread around the oil patch here about a possible Government decision to avoid contracts with big U.S. and Italian companies. If what our contact says is true, and unless this alleged policy is reversed, such companies will have to downsize their proposals and be more creative in addressing the concerns and interests of the Turkmen. Otherwise, they'll never become more than also-rans in the competition for access to Turkmenistan's hydrocarbon resources. ¶8. (C) COMMENT CONTINUED: We know that President Berdimuhamedov wants to visit Washington this year. Should the White House respond positively to this expression of interest, ways could--and should--be found to use the leverage thus provided to improve the access of the major U.S. energy companies to President Berdimuhamedov and his energy team. END COMMENT. MILES