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Cablegate: Turkmenistan: Afghanistan's "Unprofessional" Behavior

VZCZCXRO9015
RR RUEHAST RUEHDBU RUEHFL RUEHLA RUEHLN RUEHMRE RUEHPOD RUEHROV RUEHSR
RUEHVK RUEHYG
DE RUEHAH #0768/01 2140915
ZNR UUUUU ZZH
R 020915Z AUG 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 9099
INFO RUCNCIS/CIS COLLECTIVE
RUCNOSC/OSCE POST COLLECTIVE
RUEHLM/AMEMBASSY COLOMBO 0475
RUEHKA/AMEMBASSY DHAKA 0497
RUEHIL/AMEMBASSY ISLAMABAD 2185
RUEHBUL/AMEMBASSY KABUL 0934
RUEHKT/AMEMBASSY KATHMANDU 0232
RUEHNE/AMEMBASSY NEW DELHI 0982
RUEHCG/AMCONSUL CHENNAI 0150
RUEHKP/AMCONSUL KARACHI 0199
RUEHCI/AMCONSUL KOLKATA 0121
RUEHLH/AMCONSUL LAHORE 0135
RUEHBI/AMCONSUL MUMBAI 0160
RUEHPW/AMCONSUL PESHAWAR 0473
RHEBAAA/DEPT OF ENERGY WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC//DHO-2/REA/NMJIC-J2//
RHEHNSC/NSC WASHDC
RUEKJCS/JOINT STAFF WASHINGTON DC//J5/RUE//
RUEKJCS/SECDEF WASHINGTON DC

UNCLAS SECTION 01 OF 03 ASHGABAT 000768

SIPDIS

SIPDIS

SENSITIVE

STATE FOR SCA/CEN, SCA/A, EUR/ACE, EEB

E.O. 12958: N/A
TAGS: PGOV PREL EAID ENRG AF TX
SUBJECT: TURKMENISTAN: AFGHANISTAN'S "UNPROFESSIONAL" BEHAVIOR
FRUSTRATES MINISTRY OF ENERGY AND INDUSTRY

REF: A. ASHGABAT 0660
B. ASHGABAT 0523
C. ASHGABAT 0317

ASHGABAT 00000768 001.2 OF 003


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

SUMMARY

2. (SBU) Turkmenistan's Ministry of Energy and Industry Foreign
Economic Affairs Department Chief Eziz Berdimyradov blasted
Afghanistan's approach to negotiating increased electrical sales as
"unprofessional" and questioned whether a firm buyer exists in
Afghanistan for Turkmenistan's available electricity during a July
24 meeting with USAID Deputy Assistant Administrator (DAA) Drew
Luten. Berdimyradov advised that there were no changes in
Turkmenistan's positions since his last meeting with DAS Evan
Feigenbaum (Reftel A) and repeated that requests for construction to
be completed by end-2008 were unrealistic. He acknowledged that
commercial issues related to a power purchase agreement (PPA) was
the "right question," but suggested such discussions were premature
since the Cabinet of Ministers, not the ministry, was responsible
for setting prices for power sales. Berdimyradov said that the USG
had offered to facilitate a trilateral meeting with U.S. and Afghan
representatives and encouraged such a meeting to be organized. Post
recommends that this meeting also include other international donors
involved in building Afghanistan's power grid so that Turkmenistan
can make commercial decisions on whether to invest funds in this
project. In response to the question of signing a Memorandum of
Understanding (MOU) for USAID's Regional Electricity Markets
Assistance Project (REMAP), Berdimyradov replied that "the best way
to cooperate with USAID is to finish the project in Afghanistan."

NOTHING'S CHANGED FOR US...WHAT ARE YOUR UPDATES?

3. (SBU) Deputy Minister of Energy and Industry Orazgulyev
Yarmukhammed and Foreign Economic Affairs Department Chief Eziz
Berdimyradov welcomed the delegation led by USAID DAA Drew Luten
because Minister Yusup Dawudov was attending to a Tajik delegation
focused on purchasing Turkmenistan's electricity. (NOTE: Tajikistan
concluded a deal for 1bn kWh of electricity from October 2007 until
April 2008 at 2.1 cents per kWh. END NOTE.) Following Luten's
statement that it was important to understand Turkmenistan's
priorities in this sector, Berdimyradov responded that the ministry
closely cooperated with the United States on supplying energy to
Afghanistan and had met with many recent delegations on this issue
(Reftels B and C). Since the June 25 meeting between Minister
Dawudov and Deputy Assistant Secretary Evan Feigenbaum to discuss
how the United States might assist with ongoing negotiations for
increased supply of Turkmenistan's electricity to Afghanistan,
nothing had changed with regard to its negotiations with
Afghanistan.

4. (SBU) Berdimyradov stated that Turkmenistan's goal was to sell
Afghanistan 300 MW of electricity at the border. (NOTE: It was
about this time in the meeting when the power in the ministry's new
building cut off. The rest of the meeting was held in intermittent
natural light and flickering electricity. END NOTE.) After a joint
feasibility study, Turkmenistan proposed to construct a 500 KV
transmission line over the 400km to the Imamnazar border point.
Regarding Afghanistan's ongoing activities, Berdimyradov said that
Afghanistan still wants to build a 220 KV line to Mazar-i-Sharif.
The proposed routing of the border crossing has been changed, and
possibly will change again. "What are your updates?" he asked.

5. (SBU) Based on information provided by USAID Kabul, DAA Luten
confirmed that USAID is prepared to finance a 500/220 KV substation

ASHGABAT 00000768 002.2 OF 003


in Afghanistan if certain conditions were met. Berdimyradov
interjected that in recent discussions, Afghanistan had asked to
build the substation in Turkmenistan (COMMENT: Presumably to have
Turkmenistan shoulder the costs. END COMMENT), but since the
Mazar-i-Sharif-to-Kabul line operated at 220 KV, by running a 500 KV
line all the way to Mazar-i-Sharif and building a substation near
there would increase the overall capacity of Afghanistan's grid.
While cheaper, the proposed 220 KV line to Mazar-i-Sharif would
limit Afghanistan's ability to increase capacity in the future.
Although a 500 KV line was initially more expensive, it was cheaper
than building two 220 KV lines. Luten clarified that USG financial
guidelines require that a USAID-financed substation would indeed be
located in Afghanistan.

AFGHANISTAN'S APPROACH "UNPROFESSIONAL"

6. (SBU) Calling their approach to negotiations "unprofessional,"
Berdimyradov criticized Afghanistan's recent proposal to transfer
the border crossing point to Kelif to save costs. He noted that
this would require the lines to cross the Amu-Darya River twice,
thereby increasing costs to Turkmenistan. Although this was the
shortest straight line, there are no roads or other infrastructure
along this route. Furthermore, 500 KV lines are normally laid along
roads, and Turkmenistan's proposed route via Imamnazar currently has
both roads and existing lines. Asked by Luten whether this had been
communicated to Afghanistan, Berdimyradov confirmed that it had, but
said that it was the route preferred by Afghanistan since it
shortened the amount of electrical line to be constructed in
Afghanistan by 80 km.

WHO'S THE BUYER?

7. (SBU) During the "first meeting" with USAID representatives,
Berdimyradov said that a completion date of end-2008 had been set.
(NOTE: Presumably, he referred to the May 21 meeting with former
U.S. Ambassador to Afghanistan, Ronald Neumann. Reftel C. END
NOTE.) Recognizing the significant potential costs required for
construction in Afghanistan (Note: Estimated at $80 million, based
on approximately 250 km at $200,000/km, plus substation. End
note.), Berdimyradov claimed that Turkmenistan faced potential costs
of its own of $300 million for electrical lines, new turbines and a
substation. Before committing to such expenses, he wondered if
Afghanistan had the money to pay for electricity purchases. Since
this question remained unanswered, the ministry did not think an
end-2008 completion date was realistic.

8. (SBU) USAID/E&E Office of Economic Growth Director Maureen Dugan
asked about the possibility of signing a power purchase agreement
(PPA). Berdimyradov said that the Turkmenistan side discusses
technical issues every time with visiting delegations, but
acknowledged that the parties need to agree on a price. The issue
of price was the Cabinet of Ministers' responsibility. Although he
thought it was premature to discuss, it was the "right question."
"But who will pay the electricity?" he asked.

STEPS FORWARD

9. (SBU) Recognizing that time was passing with each discussion,
Berdimyradov said that in a past meeting, the United States had
offered to help facilitate a future meeting of the parties with
USAID Kabul's assistance (Reftel B). To this end, he encouraged
Kabul to organize such a meeting.

10. (SBU) In light of previous USAID proposals to include
Turkmenistan in USAID/CAR's REMAP project, Dugan asked whether the
ministry would be willing to sign an MOU with USAID on cooperation

ASHGABAT 00000768 003 OF 003


in the future. (COMMENT: Two days before the meeting, two ministry
participants, including the Deputy Minister Orazgulyev who sat
silently through the meeting, were unable to obtain U.S. visas due
to lack of Cabinet of Ministers' approval. Presumably, a signed MOU
would help to avoid such situations in the future. END COMMENT.)
Berdimyradov responded that the ministry had signed a number of MOUs
with many parties in the past, but the "best way to cooperate with
USAID is to finish the project in Afghanistan." The Ministry of
Energy and Industry does not deal with oil and gas. Its main
responsibility is to generate and transmit electricity and increase
export capacity. Again, this was "the best way to cooperate."

COMMENT

11. (SBU) Frustrations with Afghanistan over negotiations for
potential increased electrical sales are clearly rising in
Turkmenistan. President Karzai secured the minor concession from
Turkmenistan of $300,000 of free electricity during his July 5 visit
to Ashgabat, but does not appear to have raised the issue of a price
for future sales, a critical component of a potential PPA. As
reported previously, the ministry is not empowered to set prices, so
it will remain focused on technical issues until price issues are
resolved at higher levels. Even then, the issue of who will pay for
Afghanistan's imports of Turkmenistan's electricity is not apparent,
which prevents Turkmenistan from making serious investment and
construction decisions.

12. (SBU) COMMENT CONTINUED: Lack of clear information on the
status of USG- and multilateral-funded projects in Afghanistan also
limits Turkmenistan's ability to move forward confidently. If the
various donors active in Afghanistan cannot definitively state the
conditions under which infrastructure projects will proceed,
Turkmenistan cannot be expected to commit the necessary hundred of
millions necessary for constructing its part of the bargain. END
COMMENT.

13. (U) DAA Luten did not have the opportunity to clear this cable
before departing Turkmenistan.

HOAGLAND

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