MI SWACO'S EIGHT-YEAR EXPERIENCE IN TURKMENISTAN

C O N F I D E N T I A L ASHGABAT 000073 SIPDIS STATE FOR SCA/CEN; EEB; ENERGY FOR EKIMOFF/BURPOE/COHEN COMMERCE FOR DSTARKS/EHOUSE E.O. 12958: DECL: 01/19/2020 TAGS: EPET ECON PGOV EINV BTIO TX SUBJECT: MI SWACO'S EIGHT-YEAR EXPERIENCE IN TURKMENISTAN Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d). ¶1. (SBU) MI SWACO, a U.S. company represented in Turkmenistan by its UK-based subsidiary M-I Drilling Fluids U.K. Ltd, has been present in Turkmenistan since 2002. In Turkmenistan, the company focuses on supplying drilling fluids and drilling fluid-related equipment. The company also provides consultations for utilization of the company-produced drilling fluids. During its eight years in Turkmenistan, MI SWACO has supplied its products and services to Dragon Oil (UAE),Burren Energy (UK),Chalyk Energy (Turkey),and Mitro International (Austria). MI SWACO has also supplied its products to such Turkmen state companies as Turkmengaz, Turkmennebit (Turkmen state oil company),and Turkmengeologiya (Turkmen state geological service) on numerous occasions. Currently, the company's Turkmenistan branch employs 39 people, four of whom are expats, and has two offices in country. ¶2. (C) The general director of MI SWACO's Turkmenistan branch told Embassy economic assistant on January 15 that doing business in Turkmenistan has been a challenge throughout the company's eight-year tenure in the country. He added that although the company has only one serious competitor, Malaysian-based Skomi Oil Tools, it is difficult for MI SWACO to compete with Skomi, because U.S.-based MI SWACO cannot ship its products through Iran. Transit through Iran is reportedly the cheapest way to ship goods to Turkmenistan from the U.S. and U.K. As a result, the company has to outperform its competitors by providing higher-quality products and better service. ¶3. (C) According to the general director, the company has managed to win Turkmen Government contracts by going through the government's standard tender process, which it uses to award most contracts, and has successfully delivered on its contractual obligations. He hinted that, despite the company's positive track record in Turkmenistan, some Turkmen Government officials do not feel comfortable working with MI SWACO because it is an American company. The company rep also opined that MI SWACO's small size seemed to be an advantage in the eyes of Turkmen, outweighing the U.S. affiliation. ¶4. (SBU) COMMENT: MI SWACO's experience demonstrates that U.S. companies can work successfully in Turkmenistan's energy sector if they provide goods and services that are in demand by the Turkmen Government and competitively priced. Quality and customer service are also important factors. END COMMENT. CURRAN