TURKMENISTAN: BRITISH DIPLOMATS TALK CENTRAL ASIA

C O N F I D E N T I A L ASHGABAT 000130 SIPDIS STATE FOR SCA/CEN; EEB; ENERGY FOR EKIMOFF/BURPOE/COHEN COMMERCE FOR DSTARKS/EHOUSE E.O. 12958: DECL: 01/27/2020 TAGS: EPET ECON PGOV EINV BTIO KZ UK TX SUBJECT: TURKMENISTAN: BRITISH DIPLOMATS TALK CENTRAL ASIA ENERGY Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d). ¶1. (C) On January 26, econoff met with the new British Ambassador to Turkmenistan Keith Allen and the British Regional Energy Officer Martin Child. The British Ambassador stated that he had brought up the UK's increased interest in securing natural gas for Europe at his first meeting with President Berdimuhamedov on January 20. He also noted that British Minister of State for Energy and Climate Change Lord Hunt is scheduled to visit Turkmenistan and Kazakhstan in March 1-2, a visit that the Turkmen have reportedly lauded. Ambassador Allen said that although he had been in the country for about a week, he quickly realized that the Turkmen President viewed high level visits as the most appropriate fora for bilateral deliverables, such as the signing of energy deals. He was hopeful that British energy companies in the country would benefit from future high-level visits. (NOTE: British Petroleum has an office in Ashgabat, but has been unable to strike an energy deal to date, to a large extent because the company's work near the disputed area of the Caspian. END NOTE.) ¶2. (C) The British Regional Energy Officer, posted in Astana, was in Turkmenistan for his regular quarterly visit. He opined that Turkmenistan was in many ways trying to follow Kazakhstan's energy model by expanding its hydrocarbon clients and routes. As an example, he cited Turkmenistan's opening of its energy markets to the Chinese. Moreover, he added both Central Asian countries have taken a lot of Chinese cash to develop their energy sectors. He asserted that the Kazakhs were starting to express buyer's remorse with the Chinese, especially when the Kazakhs are reminded that the Chinese own 27 percent of KazakhOil. The Turkmen, he suggested, seem to be less affected by the Chinese at the moment. He cautioned, however, that if the Turkmen continued to take multi-billion dollar loans from the Chinese and continued to offer them lucrative hydrocarbon development deals, Turkmenistan would be well on its way to "Chinese commercial colonization." ¶3. (C) Both British diplomats also discussed the Turkmen-Russian energy relationship since the two sides reached a gas agreement for 2010. They supposed that Russia would most likely purchase around 10 billion cubic meters (bcm) of gas from Turkmenistan, but did not need the gas. They were confident that Russia agreed to buy 10 bcm in order to keep its hopes for the Littoral or Pre-Caspian pipeline alive. They added that Russia was "painfully" watching its energy domination over Central Asia dissipate, and it had no choice but to buy gas from Turkmenistan and Uzbekistan, even if it was not economically favorable to do so. They posited that Russia would pay between $180-$195 per thousand cubic meters of Turkmen gas for 2010, which was still much more than Russia could afford. Since Turkmenistan now has China, Iran, and Russia as gas customers for 2010, it was less concerned that Russia had agreed to buy such low volumes of gas, they added. ¶4. (C) COMMENT: British energy companies in Turkmenistan have reported little success in reaching deals with the Turkmen. At the same time, the new British Ambassador has made pressing London for more high level visits a priority. In addition to gaining business for British firms, the new Ambassador plans on reiterating the importance of getting Turkmen gas to Europe. Nevertheless, he admitted he was unsure how he would get any Turkmen gas to Europe, given the absence of a trans-Caspian pipeline. END COMMENT. CURRAN