TURKMENISTAN: PRESIDENT STATES HIS INTENT TO

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 000694

SIPDIS

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

E.O. 12958: DECL: 06/05/2019
TAGS: PGOV PREL EPET EINV TX
SUBJECT: TURKMENISTAN: PRESIDENT STATES HIS INTENT TO
EXPAND COOPERATION WITH UNITED STATES

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


1. (C) Summary. The first meeting between President
Berdimuhamedov and newly appointed Special Envoy for Eurasia
Energy Morningstar went quite well. Prospects for the
American energy companies were explored and Berdimuhamedov
made clear his intent in expanding cooperation with the
United States including in the energy sector. He is
dispatching his Foreign Minister to the U.S. and he repeated
his own desire to visit America "this year." He said he
welcomed visits to Turkmenistan by the Secretary and
President Obama. End summary.


2. (C) Special Envoy for Eurasian Energy Richard
Morningstar accompanied by Charge Miles met with President
Berdimuhamedov on May 29 to discuss energy-related issues.
President Berdimuhamedov was accompanied by Deputy Chairman
for International Relations, Foreign Minister Meredov.
Noting that he had met with the Secretary just before
departing for Turkmenistan, Morningstar passed greetings to
Berdimuhamedov and Meredov from President Obama and the
Secretary. He informed Berdimuhamedov that while he used to
visit Turkmenistan frequently, it had been ten years since
his last visit. One of the hallmarks of the new Obama
administration, he said, was a willingness to listen. "We
are not here to preach," he said. "We are here to listen to
you and to seek your advice on how to proceed to reanimate
the relationship." Berdimuhamedov said that listening was
the best and most simple method to develop the already good
relationship further. "We are grateful for these kind words
from the new administration," he said, and he asked
Morningstar to convey his greetings to the President and the
Secretary.


3. (C) Berdimuhamedov said that while he wanted to focus on
energy issues, he did want to note favorably the development
of good bilateral relations in other spheres of activity as
well: education, the Fulbright and other programs and the
Peace Corps, among other things. He noted also the
significant purchase of John Deere and Case agricultural
equipment and Boeing aircraft. Berdimuhamedov touched on
Turkmenistan's good relations with its neighbors and also on
the steps which Turkmenistan had taken to protect itself
during the global economic crisis.

Energy Issues


4. (C) There is one issue, however, said Berdimuhamedov,
where we always wind up in a blind alley (tupik) and that is
) hydrocarbons. Berdimuhamedov recounted the old story of
his frustration over the fact that, at the Tehran Summit in
2007, he received no support for his proposal on Caspian
delimitation. This recitation of events was predictably
followed by an account of threatening Azeri military naval
activity in the Caspian three days before Berdimuhamedov was
scheduled to go to Baku for talks with President Aliev. "Our
ideas had been destroyed," said Berdimuhamedov, "but I went
to Azerbaijan anyhow." "I told President Aliev that I didn't
understand these childish games and that I was in Azerbaijan
on behalf of the people of our two countries. But the train
had already left the station," Berdimuhamedov concluded.


5. (C) Berdimuhamedov then summarized Turkmenistan's energy
policy:

-- We sell gas at the State border.
-- As much gas as is needed by our customers, they will have
it.
-- In order to develop our own resources, we will not allow

ASHGABAT 00000694 002 OF 003


foreign companies to have production sharing agreements
(PSAs) onshore (the arrangement with China is the only
exception to this, said Berdimuhamedov, and that is to allow
them to construct their pipeline).
-- We want to attract all manner of foreign companies to
provide service agreements. In this context, Berdimuhamedov
mentioned his meeting with senior executives from Chevron and
Honeywell.
-- And, he concluded, we are interested in mutual work with
foreign companies in refining.

The Russians


6. (C) In the middle of the above description of Turkmen
energy policy, Berdimuhamedov embarked on a digression
concerning the Russians. We proposed several variations of
cooperation with the Russians, he said, but they didn't want
to build the "West-East" pipeline according to Turkmenistan's
terms, so the government put out an international tender on
it. They agreed on a fixed price for Turkmen gas and when
they couldn't pay ) there was an explosion in the pipeline.
"So I closed the pipeline," Berdimuhamedov said rhetorically,
"and I told them to please get out of our pipeline. We'll
export directly." The President said that a Russian official
(not identified) had said at some point in the past, "If you
Turkmen don't sell your gas to us, you can eat the sand in
the Kara Kum Desert!" Anyhow, Berdimuhamedov concluded,
"life and time" will show how we will widen our cooperation.
We are at the first stage now, he said, but we have begun.

The Azeri


7. (C) Ambassador Morningstar said that diversification was
a very wise policy. He noted that he had been personally
involved in energy-related negotiations between former
Presidents Aliev and Niyazov. "I know how difficult this can
be," he told Berdimuhamedov. Morningstar said that when he
had met with the present President, Ilham Aliev, the latter
had spoken very highly of his relationship with
Berdimuhamedov and of his admiration for him.


8. (C) Perhaps it will be difficult to reach a
comprehensive, "legal" agreement with the Azeris, Morningstar
told Berdimuhamedov; but maybe a pragmatic, business
relationship can be reached. If we can help, said
Morningstar, we would be happy to do so.

PSAs ) And Service Agreements


9. (C) Morningstar said that many countries did not like
PSAs. The major American energy companies do understand this
and they are willing to enter into other forms of agreement
with Turkmenistan which would conform to the law on
hydrocarbons of Turkmenistan. What the American companies do
want, said Morningstar, is predictability and long term
contracts. They are not so concerned with these complicated
pipeline issues, rather they believe that with increasing
production, the pipeline issues will solve themselves. And
they have the safe and proven technology and experience which
can help the country increase its production.

The U.S. Approach


10. (C) Let's continue to develop our dialog on energy
issues, said Morningstar. The Department of Energy (DOE) is
doing a conference on pipeline management in June. We have
many programs to encourage exchange of business and
professional people. We won't have American officials coming
to Ashgabat telling you, "You must do this! You must do

ASHGABAT 00000694 003 OF 003


that!" What we want is a dialogue, Morningstar said.

Berdimuhamedov's Response


11. (C) Berdimuhamedov said he appreciated the objective
approach laid out by Ambassador Morningstar. I do have a
good relationship and good contact with President Aliev, he
said, asking Morningstar to convey his greetings to Aliev.
In short, he said, Turkmenistan is ready to provide its
resources across the Caspian; Azerbaijan has clearly stated
that it is ready to serve as a transit country; all we need
is someone "brave enough" to implement this general
Azeri-Turkmen agreement. Maybe the Western companies can
serve as a "bridge" in this context. Maybe there could be
some involvement from Iran or Russia.


12. (C) Theoretically, said Berdimuhamedov, I agree with
your (Morningstar's) approach. Let the American companies
start work in Turkmenistan. In a few years we can look at
our law on hydrocarbons. Maybe we can reconsider it. We
will seriously consider these proposals, said Berdimuhamedov.
Let us proceed on a "step by step" basis. As a first step,
perhaps we could buy technology and ask the assistance of the
American companies in training our people to use it. If this
proves satisfactory, we would return to the issues you
(Morningstar) raised.

Importance of visits ) and an invitation


13. (C) We want to expand our relationship with America,
said Berdimuhamedov. When it is convenient for the Secretary
and President Obama to visit Turkmenistan and the region, we
welcome them. A high-level visit might help solve several
problems of regional significance. The Foreign Minister is
off to Europe ) and to the United States; hopefully, he can
meet with representatives of the business community on these
trips. I hope to visit the U.S. this year myself,
Berdimuhamedov concluded, adding emphatically, "We need to
move from words to deeds!" "We need to realize the
possibilities we have for the benefit of producer and
consumer alike."


14. (C) Comment: Berdimuhamedov was in fine form,
expansive and still in the forthcoming mode we have noticed
ever since the gas explosion with Russia six weeks or so ago.
He seemed to develop an instant bond with Morningstar which,
hopefully, will bode well for future discussions on energy
issues. Whether the American companies will remain hung up
on the issue of onshore PSAs remains to be seen. If we can
get beyond the "A rose is a rose is a rose" philosophy which
has prevailed until now, American companies might be able to
do some serious business in this country. End comment.


15. (U) Ambassador Morningstar has cleared this cable.
MILES