TURKMENISTAN: GAS PRICE IS THE ONLY BIG ISSUE IN

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000770 SIPDIS SCA/CEN; EEB ENERGY FOR EKIMOFF/THOMPSON COMMERCE FOR HUEPER E.O. 12958: DECL: 06/18/2019 TAGS: PGOV EPET EINV RU BO TX SUBJECT: TURKMENISTAN: GAS PRICE IS THE ONLY BIG ISSUE IN GAZPROM NEGOTIATIONS REF: ASHGABAT 0576 Classified By: Charge Richard Miles, reasons 1.4 (b) and (d). ¶1. (C) SUMMARY: On June 18 EU-TACIS Program Manager Michael Wilson shared news he had recently heard through his energy sector network regarding the ongoing negotiations with Gazprom. He said government officials are saying that the future price of gas is the only remaining business issue, but that the personal dispute between Putin and Berdimuhamedov may take time to resolve. Turkmenistan's financial reserves can hold out only for a few months more, and then the government will be forced to make some choices. Belarus President Lukashenko's visit this week will give Berdimuhamedov a chance to commiserate with a sympathetic colleague, and perhaps find some ways to poke at the Russian bear. Regardless, according to Wilson, Turkmenistan's financial situation is getting increasingly precarious. END SUMMARY. ON THE GAZPROM SPAT ¶2. (C) Wilson said that on June 17, State Agency for the Management and Use of Hydrocarbons Chairman, Yagshygeldy Kakayev, informally told him that Gazprom and the Turkmen Government had worked through most of their issues related to the current gas sales agreement, and the gas price remained the only issue. Wilson said he understood that the current agreement between Gazprom and the Turkmen Government does not contain a provision that requires Gazprom to take a minimum quantity of gas per month. He assessed that Gazprom would use the loophole to take little or no Turkmen gas before global demand peaked in the coldest winter months. Even so, Wilson said that Gazprom would probably take a significantly decreased volume compared to last year (about 40 bcm in 2008). Wilson guessed the decrease would be at least 30 percent compared to 2008. ¶3. (C) Wilson noted that the most significant issue regarding the spat between Russia and Turkmenistan over the April 8 pipeline explosion (ref) had arisen as the result of an angry phone call from President Berdimuhamedov to Russian Prime Minister Vladimir Putin several weeks ago. During the phone call, Berdimuhamedov had reportedly accused Putin of orchestrating the pipeline explosion to paint Turkmenistan into a corner regarding its gas pricing. Wilson said that the word from his contacts in Moscow was that Putin was exceptionally irritated with the phone call and required an apology from Berdimuhamedov. ¶4. (C) Kakayev told Wilson on June 17 that the Turkmen Government "can't keep bleeding $1 billion per month," referring to the losses being incurred as a result of the gas shutoff. Wilson assessed that Turkmenistan's financial reserves will be gone in six months, if the country continues its current rate of spending without gas profits coming in from Russia. He opined that there was no logic to the government's continued hard line holdout on Gazprom pricing negotiations, but commented that perhaps as the money dried up, logic would become a more significant factor in the government's decisionmaking. Still, he said that the dispute between Berdimuhamedov and Putin is "personal," which could mean that the Turkmen President will hold out longer than perhaps is wise. LUKASHENKO - A SYMPATHETIC EAR ¶5. (C) The current official state visit of Belarus President Aleksandr Lukashenko was likely to take on an interesting tone, Wilson said, because of Lukashenko's own ASHGABAT 00000770 002 OF 002 rocky relations with Russian leaders. Lukashenko owes Gazprom a lot of money for gas purchased last year, and has been stonewalling the energy giant's efforts to get the debt paid. He has also refused to recognize the Russian-orchestrated independence of the Georgian regions of Abkhazia and South Ossetia, perhaps viewing the move as a potential threat to his own country's sovereign territory, Wilson added. As a result of that decision, Belarus lost a key Russian loan, he added. Wilson said that Lukashenko and Berdimuhamedov now had much in common, and that they might potentially find mutually-beneficial ways of undermining Russian influence in both countries. ¶6. (C) As an example, he cited Turkmenistan's routine purchases of large quantities of trucks, buses, and utility vehicles from Russia. Belarus also produces good quality vehicles of this kind. Shifting Turkmenistan's large government orders from Russian factories to Belarus would benefit Turkmenistan and Belarus and annoy Russia, he said. ¶7. (C) COMMENT: If Wilson's assessment is correct regarding how much longer the Turkmen can resist Gazprom's pressure, the national treasury will be in trouble three months from now. And if, as Wilson suggests, the dispute has taken on a larger personal tone, the two countries may now be playing a game of Russian roulette that Turkmenistan will not be able to win without making some significant changes in behavior. END COMMENT. MILES