Identifier
Created
Classification
Origin
09ASHGABAT559
2009-05-02 05:57:00
CONFIDENTIAL
Embassy Ashgabat
Cable title:  

TURKMENISTAN'S FINANCIAL SITUATION SOLID, AND

Tags:  PGOV PREL ECON ETRD EINV EFIN TX 
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C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000559 

SIPDIS

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

E.O. 12958: DECL: 04/27/2019
TAGS: PGOV PREL ECON ETRD EINV EFIN TX
SUBJECT: TURKMENISTAN'S FINANCIAL SITUATION SOLID, AND
MAJOR PROJECTS TO MOVE FORWARD

ASHGABAT 00000559 001.4 OF 002


Classified By: Charge d'Affaires Ambassador 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 000559

SIPDIS

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

E.O. 12958: DECL: 04/27/2019
TAGS: PGOV PREL ECON ETRD EINV EFIN TX
SUBJECT: TURKMENISTAN'S FINANCIAL SITUATION SOLID, AND
MAJOR PROJECTS TO MOVE FORWARD

ASHGABAT 00000559 001.4 OF 002


Classified By: Charge d'Affaires Ambassador Richard Miles for reasons 1
.4 (b) and (d).


1. (C) SUMMARY: Deputy Assistant Secretary George Krol met
with Deputy Cabinet Chairman for Economy and Finance
Tuvakmammet Japarov on April 22, and discussed the global
financial crisis and its impact on Turkmenistan, goals for
the national economy, and development plans. According to
Japarov, the Turkmen government is in solid financial
condition, and plans to move forward on all of its ambitious
and expensive development plans for the oil and gas sector
and the nation's infrastructure. Although aware of partner
countries' financial belt-tightening, Turkmenistan does not
appear to have any substantive plans to curb spending or
delay any major projects. However, it is unlikely the
government would ever acknowledge any economic challenges
brought on by the crisis. Certainly, Turkmenistan can expect
its export figures--and oil and gas profits in particular--to
decline this year, and it is uncertain how the government
will respond. END SUMMARY.

GLOBAL CRISIS? WE NOTICED, BUT NO PROBLEMS


2. (C) Deputy Assistant Secretary George Krol met with
Deputy Cabinet Chairman for Economy and Finance Tuvakmammet
Japarov on April 22, and discussed the global financial
crisis and its impact on Turkmenistan, goals for the national
economy, and development plans. Deputy Chairman Japarov was
general in his comments regarding the global financial
crisis. He said the government is improving its ability to
control expenditures. Due to other countries' economic
issues, he noted that it is harder now to assure that
Turkmenistan's exports exceed its imports. Some partners, he
said, were cutting their expenses, and sought to cut down on
their imports. Still, he claimed that Turkmenistan's

macroeconomic situation was normal, and the government is
expecting continued increases in trade turnovers. "We don't
think there is any need to engage in protectionism," he
added. The GDP is expected to continue to grow at about 10
percent per year, he said. He said that the Stabilization
Fund had been established not long ago, and will be used to
maintain appropriate social "cushions" for the population,
which still enjoys a wide range of subsidies. The
government, however, is becoming more careful in monitoring
production at state enterprises, and is analyzing production
data on a weekly basis now from government factories,
especially those in the oil and gas sector that make a
significant contribution to the government's bottom line.


3. (C) Japarov noted that regardless of any impact the
global financial crisis has on the country's export activity,
the government is firm in its policy that strong social
supports should be maintained. There were no plans to cut
jobs in government enterprises, economic entities would
"maintain control of inflation," and existing subsidies the
population enjoys now will continue. For the Turkmen
government, he said, "the social issue is more important than
the economic issue." Japarov admitted that inflation in the
past year had undermined the government's effort to increase
salaries and pensions, and said he would like to improve its
ability to stay ahead of inflation.


4. (C) Japarov said the effort to re-denominate the
national currency was going well, and that they had replaced
some 80 percent of circulating old currency with the new. He
denied that there were any internal drivers that cause the
recent shortage of new currency amid fears that the U.S.
dollar's value was dropping. He claimed that international
news of the dollar's declining value had worried Turkmen

ASHGABAT 00000559 002.3 OF 002


citizens, who then sought to trade in their savings in U.S.
dollars for Turkmen manat.

MAJOR PROJECTS STILL TO MOVE FORWARD


5. (C) All planned construction projects and purchases, he
said, are to go forward, including purchases of American
tractors and earth moving vehicles, infrastructure projects
such as roads, the North-South railway, Ashgabat airport,
Avaza, the Turkmenbashy sea port, renovation of most
electricity substations, and various socio-economic projects
in the provinces. He said the government currently has no
credit concerns or needs right now. The country has
sufficient capital to pay for what it wants to do. As an
example, he noted that sixteen planes had recently been
ordered, and no credit had been required to purchase them.


6. (C) Development of the oil and gas sector is to continue
moving forward as well, with significant expenditure to be
devoted to it, he said. There are, for example, plans
underway to significantly expand the country's capacity to
produce and export liquefied natural gas, and to expand the
capacity for oil refining as well. The government, he said,
is still intent on drawing foreign investment for offshore
Caspian oil and gas development, although the government has
noticed that commercial and regional partners are more
hesitant to invest significant sums now.

SEEKING TO DIVERSIFY THE ECONOMY


7. (C) Japarov indicated that there is a need to diversify
the country's economy more. The government is planning on
achieving this in part by promoting further investment
cooperation with neighbor states such as Kazakhstan and
Azerbaijan. He noted that there are also efforts underway to
reduce the amount of land that is used to cultivate cotton in
places like Balkan province, where water is very scarce, he
said. Some farmers will be encouraged to grow a variety of
other crops such as wheat.


8. (C) He noted the success of the U.S.-Turkmen trade
relationship, although the trade turnover numbers are modest,
when no U.S.-made planes are purchased. Still, some 26
American companies are registered here now, including a legal
firm, Japarov said. He mentioned the bilateral trade
agreement, signed in the 1990s, between the United States and
Turkmenistan, and suggested that perhaps it was time to
consider signing a new agreement that takes Turkmenistan's
new tax, trade and business laws into account.


9. (C) COMMENT: Japarov, whom post views as one of the
(few) bright lights illuminating Turkmenistan's financial
sector, understands the implications of issues such as the
global financial crisis and the lack of a diverse economy.
The larger question, then, is the degree and pace at which he
convinces senior leaders of the need to change the way this
government manages its financial books. The fact that this
government does not plan to slow its spending or delay major
construction projects could be a reflection of the limits of
Japarov's influence. However, it is unlikely that the
government would, in any case, acknowledge to outsiders the
existence of financial challenges brought on by the global
crisis. END COMMENT.


10. (U) DAS Krol cleared this cable.
MILES