Identifier
Created
Classification
Origin
09ASHGABAT576
2009-05-07 12:05:00
CONFIDENTIAL
Embassy Ashgabat
Cable title:
TURKMENISTAN: DETAILS EMERGE REGARDING RUSSIAN
how-toVZCZCXRO8573 PP RUEHAG RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW RUEHROV RUEHSR DE RUEHAH #0576/01 1271205 ZNY CCCCC ZZH P 071205Z MAY 09 FM AMEMBASSY ASHGABAT TO RUEHC/SECSTATE WASHDC PRIORITY 2778 INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY RUCNCIS/CIS COLLECTIVE PRIORITY RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY RUEHAK/AMEMBASSY ANKARA PRIORITY 5168 RUEHBJ/AMEMBASSY BEIJING PRIORITY 2912 RUEHKO/AMEMBASSY TOKYO PRIORITY 2777 RUEHIT/AMCONSUL ISTANBUL PRIORITY 3412 RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RUEHBS/USEU BRUSSELS PRIORITY RHEHNSC/NSC WASHDC PRIORITY RHEFDIA/DIA WASHDC PRIORITY RUEAIIA/CIA WASHDC PRIORITY RUEKJCS/JOINT STAFF WASHDC PRIORITY RUEKJCS/SECDEF WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000576
SIPDIS
SCA/CEN; EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: DECL: 05/07/2019
TAGS: PGOV EPET TX RS
SUBJECT: TURKMENISTAN: DETAILS EMERGE REGARDING RUSSIAN
GAS SHUT OFF
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 000576
SIPDIS
SCA/CEN; EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: DECL: 05/07/2019
TAGS: PGOV EPET TX RS
SUBJECT: TURKMENISTAN: DETAILS EMERGE REGARDING RUSSIAN
GAS SHUT OFF
Classified By: Charge Richard Miles for reasons 1.4 (b) and (d).
1. (C) SUMMARY: A longtime European resident and energy
sector insider, Michael Wilson (protect),told Political
Officer that Russia had indeed been the party that halted the
gas flow from Turkmenistan immediately after the early April
pipeline explosion, and was continuing the embargo under weak
legal pretenses in order to pressure Turkmenistan to
renegotiate gas prices and drop legal claims against Gazprom.
The Turkmen, however, are resisting Russian pressure, and
appear to be advancing efforts to seek punitive damages from
Gazprom. If the Turkmen Government can live without the
lucrative revenues it earns from gas exports to Russia in the
medium-term, it might counter Russian pressure by moving
forward with negotiations to export Turkmen gas to Europe.
Regardless, there is little doubt the crisis is a reminder of
the perils of dependence on one key customer. END SUMMARY.
2. (C) EU-TACIS program manager Michael Wilson, who is a
longtime resident of Ashgabat and rare recipient of insider
information from the oil and gas sector, shared some news May
6 regarding the recent pipeline accident kerfuffle between
Turkmenistan and Russia. Wilson said that his energy sector
contacts told him that Gazprom had not re-initiated the flow
of Turkmen gas to Russia after repairs were completed on the
Central Asia Center (CAC) pipeline that was damaged in the
April 8 blast. He added that Gazprom representatives who
came to Ashgabat on April 9 and 10 in a long-planned effort
to re-negotiate export gas prices (earlier than allowed by
contract) walked away empty-handed. Working level Gazprom
officials returned the week of May 4, but again achieved
nothing, he said.
3. (C) He assessed that Russia had several reasons for
stopping the flow of gas. First, it wanted to punish
Turkmenistan for publicly stating that it would seek punitive
damages if it was determined that Gazprom's actions were the
cause of the accident. Second, it alleviated Gazprom's
unenviable situation of having to pay global market prices
for gas that no one wanted. Wilson added that Russia had
exploited some international trade convention to allow
Gazprom to legally halt the flow of gas, which has infuriated
the Turkmenistan Government. Meanwhile, the Turkmenistan
Government is losing some $250 million per week in revenues,
he said. This certainly is having an impact on
Turkmenistan's financial situation.
4. (C) He said that the Turkmenistan Government had already
hosted a group of international experts who assessed the
cause of the pipeline explosion and determined which party
was to blame. The British consulting company, Gaffney, Cline
and Associates had organized the team of experts at the
request of the Turkmen. Wilson said they had determined that
Gazprom's failure to provide advance notice to the Turkmen
side of its intention to dramatically reduce the flow of gas
it received from Turkmenistan had caused the accident.
5. (C) COMMENT: Wilson's report is compatible with other
anecdotal reports post heard that Russia completely stopped
the flow of Turkmen gas in early April. The reasons he
outlined are logical, given what post has heard from the
commercial energy community about price declines and dismal
futures in the global energy market. While some in Russia
may think that halting the importation of Turkmen gas for an
extended period will pressure Turkmenistan to drop its legal
claim and renegotiate its gas prices, the reality may be to
the contrary. The halt could drive the wedge between the two
parties deeper, as Turkmenistan is painfully reminded of its
budgetary dependence on Gazprom and becomes more convinced
ASHGABAT 00000576 002 OF 002
that Western nations and companies can offer it an
alternative market. There is little doubt that pipeline
diversification has never looked as good to the Turkmen as it
does right now. END COMMENT.
MILES
SIPDIS
SCA/CEN; EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
E.O. 12958: DECL: 05/07/2019
TAGS: PGOV EPET TX RS
SUBJECT: TURKMENISTAN: DETAILS EMERGE REGARDING RUSSIAN
GAS SHUT OFF
Classified By: Charge Richard Miles for reasons 1.4 (b) and (d).
1. (C) SUMMARY: A longtime European resident and energy
sector insider, Michael Wilson (protect),told Political
Officer that Russia had indeed been the party that halted the
gas flow from Turkmenistan immediately after the early April
pipeline explosion, and was continuing the embargo under weak
legal pretenses in order to pressure Turkmenistan to
renegotiate gas prices and drop legal claims against Gazprom.
The Turkmen, however, are resisting Russian pressure, and
appear to be advancing efforts to seek punitive damages from
Gazprom. If the Turkmen Government can live without the
lucrative revenues it earns from gas exports to Russia in the
medium-term, it might counter Russian pressure by moving
forward with negotiations to export Turkmen gas to Europe.
Regardless, there is little doubt the crisis is a reminder of
the perils of dependence on one key customer. END SUMMARY.
2. (C) EU-TACIS program manager Michael Wilson, who is a
longtime resident of Ashgabat and rare recipient of insider
information from the oil and gas sector, shared some news May
6 regarding the recent pipeline accident kerfuffle between
Turkmenistan and Russia. Wilson said that his energy sector
contacts told him that Gazprom had not re-initiated the flow
of Turkmen gas to Russia after repairs were completed on the
Central Asia Center (CAC) pipeline that was damaged in the
April 8 blast. He added that Gazprom representatives who
came to Ashgabat on April 9 and 10 in a long-planned effort
to re-negotiate export gas prices (earlier than allowed by
contract) walked away empty-handed. Working level Gazprom
officials returned the week of May 4, but again achieved
nothing, he said.
3. (C) He assessed that Russia had several reasons for
stopping the flow of gas. First, it wanted to punish
Turkmenistan for publicly stating that it would seek punitive
damages if it was determined that Gazprom's actions were the
cause of the accident. Second, it alleviated Gazprom's
unenviable situation of having to pay global market prices
for gas that no one wanted. Wilson added that Russia had
exploited some international trade convention to allow
Gazprom to legally halt the flow of gas, which has infuriated
the Turkmenistan Government. Meanwhile, the Turkmenistan
Government is losing some $250 million per week in revenues,
he said. This certainly is having an impact on
Turkmenistan's financial situation.
4. (C) He said that the Turkmenistan Government had already
hosted a group of international experts who assessed the
cause of the pipeline explosion and determined which party
was to blame. The British consulting company, Gaffney, Cline
and Associates had organized the team of experts at the
request of the Turkmen. Wilson said they had determined that
Gazprom's failure to provide advance notice to the Turkmen
side of its intention to dramatically reduce the flow of gas
it received from Turkmenistan had caused the accident.
5. (C) COMMENT: Wilson's report is compatible with other
anecdotal reports post heard that Russia completely stopped
the flow of Turkmen gas in early April. The reasons he
outlined are logical, given what post has heard from the
commercial energy community about price declines and dismal
futures in the global energy market. While some in Russia
may think that halting the importation of Turkmen gas for an
extended period will pressure Turkmenistan to drop its legal
claim and renegotiate its gas prices, the reality may be to
the contrary. The halt could drive the wedge between the two
parties deeper, as Turkmenistan is painfully reminded of its
budgetary dependence on Gazprom and becomes more convinced
ASHGABAT 00000576 002 OF 002
that Western nations and companies can offer it an
alternative market. There is little doubt that pipeline
diversification has never looked as good to the Turkmen as it
does right now. END COMMENT.
MILES