Identifier
Created
Classification
Origin
09ASHGABAT492
2009-04-17 12:58:00
CONFIDENTIAL
Embassy Ashgabat
Cable title:  

TURKMENISTAN: FURTHER INSIGHTS INTO OFFICIAL

Tags:  PGOV EIND EINV ECON TX TU RS 
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C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000492 

SIPDIS

SCA/CEN; EEB
PLEASE PASS TO USTDA DAN STEIN
COMMERCE FOR HUEPER

E.O. 12958: DECL: 04/17/2019
TAGS: PGOV EIND EINV ECON TX TU RS
SUBJECT: TURKMENISTAN: FURTHER INSIGHTS INTO OFFICIAL
CORRUPTION

Classified By: Charge Richard Miles for reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000492

SIPDIS

SCA/CEN; EEB
PLEASE PASS TO USTDA DAN STEIN
COMMERCE FOR HUEPER

E.O. 12958: DECL: 04/17/2019
TAGS: PGOV EIND EINV ECON TX TU RS
SUBJECT: TURKMENISTAN: FURTHER INSIGHTS INTO OFFICIAL
CORRUPTION

Classified By: Charge Richard Miles for reasons 1.4 (b) and (d).


1. (C) SUMMARY: A recent opposition website article about
Turkmen government purchases of trucks from the Russian
company KAMAZ exposed some interesting facts that suggest the
government buys the vehicles for an inflated purchase price,
leaving room for intermediaries and those who sign the
contracts to personally profit. Other practices, including
the hosting of large international conferences and major
expenditures on low-priority projects or those with inflated
costs, may also be routine methods by which
individuals--especially those high up in government--have
found ways to quietly divert funds away from the national
budget, to the detriment of the average citizen. END SUMMARY.

THAT'S ONE PRICEY TRUCK


2. (C) In February 2009, the Turkmen press announced that
President Berdimuhammedov instructed the Ministry of Trade
and Foreign Economic Relations to procure 1,040 Russian KAMAZ
truck and special machinery from KAMAZ FTC Corporation and
distribute them to the provincial governments and Ashgabat.
The contract was to total some $100 million. After the
report's publication, a Turkmen opposition website
(www.watan.ru) conducted an investigation to determine the
actual prices of the trucks and equipment. Opposition
journalists contacted official KAMAZ dealers through a
company website to get price quotes. They discovered that
the most expensive model of KAMAZ truck (model 65222-10) for
export (VAT not applicable for export trucks) was priced at
about $60,000 in February 2009. However, according to
Berdimuhammedov's decree, the Turkmen government was going to
purchase each truck for approximately $96,000--a difference
of about $36,000 per truck. If these figures are acccurate,
more than $37 million--or some 37 percent--of the overall
$100 million deal may have disappeared into private pockets.
The journalists were unable to learn anything about the

ownership or leadership of the intermediary firm KAMAZ FTC
Corporation, aside from its registration in the British
Virgin Islands.


3. (C) According to Russian and Turkmen press, in 2008
Turkmenistan was the third largest buyer of KAMAZ trucks,
after Kazakhstan and Ukraine. The government purchased 2,549
trucks in 2008, six times more than in 2007. The first two
contracts of 2008 alone had included 655 trucks and spare
parts totaling $47 million. In cases over the past year in
which the press stated the number of trucks and the total
cost, per unit costs of the trucks ranged between $91,367 and
as much as $119,000--an almost 50 percent markup ($59,000
over the actual $60,000 price). By comparison, in 2006, the
government purchased the same standard KAMAZ trucks for
$38,500 per unit. In July 2008, Berdimuhammedov and Russian
President Medvedev cut the ribbon opening a new KAMAZ Service
Center in Ashgabat, which was also supposed to supply trucks
and spare parts. It is unclear why KAMAZ FTC is handling
Turkmen government orders as an intermediary when a KAMAZ
dealership is here. The larger question is who all may be
benefiting from the markup.

OTHER EXPENSIVE PROJECTS SUGGEST GRAFT


4. (C) The first week of April, the president authorized
the signing of a $44 million contract with favored Turkish
construction company Polimeks to re-finish park fountains
along an Ashgabat street with black granite veneers and new
electrical systems. He also authorized a $177 million
contract--also to Polimeks--to build a new ice hockey
stadium, training facilities, conference hall and several
restaurants as the first phase of the planned $1.5 billion

ASHGABAT 00000492 002 OF 002


"Olympic Village" complex. This year, Berdimuhammedov has
already made $221 million available in the state budget for
large-scale construction projects, largely directed to
Polimeks and the French construction company, Bouygues.
Ironically, the day after the ice stadium contract was
announced, Ashgabat hosted an IMF-sponsored seminar entitled
"International practices to combat money laundering and
terrorist finance."

CONFERENCES ANOTHER WAY TO SIPHON FROM BUDGET?


5. (C) A Pol/Econ staffer spoke with an employee at one of
the ministries who said he believes that the numerous
international festivals, fora and conferences held in
Ashgabat are used by corrupt officials to embezzle state
funds. As examples, he cited the international conference
held in February called "Muhammet Gaimaz Turkmen--Reknowned
Eastern Scientist." Scientists and researchers from 20
countries attended the conference. On March 11, he said a
similar conference devoted to the literature and arts of the
Seljuks hosted representatives from more than 30 countries.
According to Turkmen press, these events, along with many
other forums, were organized by the Presidential Apparatus.
The Ministry employee said that significant funds from the
state budget are allocated to the Apparatus to conduct these
events. However, he claimed that Apparatus staff then pass
the costs of transportation, accommodation in expensive
hotels, gifts, formal lunches, dinners, and other expenses on
to other ministries and agencies to pay. "You better ask the
president's aide, V. Khramov how funds allocated for these
events are spent," the Ministry employee said. Turkmen
citizens consider the international fora that are given broad
coverage by the Turkmen press to be events of little
significance in both practical and scientific terms,
according to local staff.


6. (C) COMMENT: These cases provide another window onto
the culture of corruption that is so pervasive in
Turkmenistan. If the 37 percent "signing bonus" suggested in
the KAMAZ case is accurate and typical, then those who are
authorized to sign such large contracts are getting very,
very wealthy. Post's view is that the number of such people
is very small, and clustered at the top. In the larger view,
it strongly suggests also that a substantial portion of the
national budget is being steadily and quietly drained away,
to the detriment of the Turkmen citizen. END COMMENT.
MILES