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Cablegate: Turkmenistan: Ukrainian Industrialist Mends

VZCZCXYZ0988
PP RUEHWEB

DE RUEHAH #0300/01 0641138
ZNR UUUUU ZZH
P 041138Z MAR 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 0375
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3460
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1278
RUEHKO/AMEMBASSY TOKYO PRIORITY 1145
RUEHIT/AMCONSUL ISTANBUL PRIORITY 1714
RUEHVEN/USMISSION USOSCE PRIORITY 2282
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY

UNCLAS ASHGABAT 000300

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EUR/EMB

E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV UP TX
SUBJECT: TURKMENISTAN: UKRAINIAN INDUSTRIALIST MENDS
FENCES, RESTARTS THE BILATERAL RELATIONSHIP

REF: A. ASHGABAT 0295

B. 07 ASHGABAT 1186

1. (U) Sensitive but unclassified. Not for public Internet.

2. (SBU) SUMMARY: With a series of diplomatic and
commercial forays in January and February, the Ukrainian
government appeared to be aggressively working to resolve
contractual issues that have stalled its relations with
Turkmenistan for several years. After President
Berdimuhamedov publicly made clear that the entire bilateral
relationship would remain stagnant until these serious
construction contract issues were resolved, the Ukrainian
government sent a wealthy industrialist to placate
Turkmenistan's president and try to find a solution. In
February, Serhiy Taruta of the Donbass Industrial Union
agreed to oversee two troubled construction projects to
ensure their timely completion. Turkmenistan's government
appears to be pleased with this turn of events and has begun
to respond to other Ukrainian diplomatic initiatives, such as
restarting air service between Ashgabat and Kyiv. Ukrainian
efforts to cut a separate deal on natural gas will take more
time, but at least the two parties are talking civilly again.
END SUMMARY.

3. (SBU) President Berdimuhamedov recently told a U.S.
official that he had warned Ukrainian President Yuschenko
earlier this year that if the work did not start back up
soon, he would re-open two construction projects to
international bidding (Ref A). The warning must have been
taken seriously, because on February 4, Serhiy Taruta, a
wealthy industrialist and Chairman of the Board of Directors
of the Donbass Industrial Union Corporation, arrived in
Ashgabat to meet with President Berdimuhamedov. The media
reported that after he met again with the president on
February 18, Taruta promised to oversee almost $300 million
worth of construction work in Turkmenistan. Media reports
indicated that Taruta will be taking responsibility for
assuring the completion of two particularly troubled
Ukrainian construction projects in Turkmenistan.

4. (U) Taruta reportedly talked with the president about
the troubled railway and automobile bridge over the Amu Darya
that the Ukrainian construction firm UkrTransBud started
several years ago and also appears to be taking
responsibility for assuring that InterBudMontazh's doomed
Ashgabat underground project (Ref B) is completed. According
to Turkmenistan's press, he will coordinate the work of
Ukrainian companies and will also bring in Russian partners
to get both projects done, but no timeline was reported.
(COMMENT: It is unclear whether UkrTransBud will play a
continued role in construction of the bridge. Ukrainian
television reported in January 2008 that the head of
UkrTransBud and another company head were to appear in court
to address tax evasion charges. The company has likely
burned its bridge here in any case, given reports of its role
in an embezzlement scandal when the project began. END
COMMENT.)

5. (SBU) Taruta also talked with President Berdimuhamedov
about how Ukrainian companies will move forward on the
underground communications infrastructure project in Ashgabat
that InterBudMontazh began several years ago. Igor Roman, a
political officer at the Ukrainian embassy, said in November
2007 that the project had been fraught with engineering and
other technical challenges, including flooding problems due
to Ashgabat's shallow and unpredictable water table. He
noted that Turkmenistan's government had been impatient and
inflexible with Ukrainian company representatives when they
tried to explain the problems and find a workable solution.
This and other -- possibly financial -- issues had caused the
company to stop work on the project.

6. (U) Turkmenistan government officials seemed pleased

that the Ukrainians had come up with a workable solution, and
responded by resuming weekly commercial air service between
Ashgabat and Kyiv on February 28. This new air service will
likely be filled with Turkmen students attending universities
and institutes in Ukraine and with Ukrainian employees
working in Turkmenistan. Between November 2005 and June
2006, both Turkmen and Ukrainian airlines had suspended
flights when disagreements over Ukrainian natural gas debts
and other issues peaked.

7. (SBU) COMMENT: Taruta's stated commitment to ensure the
timely completion of the construction projects appears to
have been well-received in Ashgabat. Turkmenistan government
officials would no doubt love to have these two complicated
and unfortunate projects out of their hair once and for all,
and Taruta's role as overseer means he alone will take the
heat if the projects do not show progress. Additionally, now
that the two projects will no longer be a burr under the
Turkmenistan government's saddle, it is possible that more
constructive dialogue could take place between the Turkmen
and Ukrainians on the key issue of natural gas imports, as
well as on more mundane issues, such as construction of a new
Ukrainian embassy or expansion of Ukraine's educational
exchange program. END COMMENT.
HOAGLAND

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