VZCZCXRO6045
PP RUEHDBU
DE RUEHAH #0151/01 0301309
ZNY CCCCC ZZH
P 301309Z JAN 06
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 6938
INFO RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2499
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHEHNSC/NSC WASHDC
RUEHBS/USEU BRUSSELS

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 000151 
 
SIPDIS 
 
SIPDIS 
 
SECSTATE FOR DAS BRYZA, EUR/CACEN, SA DAS GASTRIGHT 
 
E.O. 12958: DECL: 01/30/2016 
TAGS: ECON ENRG EPET GG KZ PGOV PREL RS TX UP US
SUBJECT: NIYAZOV WANTS TO "SOLVE GAS ISSUES PEACEFULLY" 
WITH RUSSIA 
 
REF: A. ASHGABAT 50 
     ¶B. ASHGABAT 108 
     ¶C. ASHGABAT 140 
     ¶D. BRUSSELS 301 
 
Classified By: Ambassador Tracey Ann Jacobson for reasons 1.4 (b) and ( 
d) 
 
¶1.  (C) SUMMARY. Ambassador was called in by Niyazov Monday 
morning for a briefing on his Moscow meeting with Putin last 
week.  Unexpectedly, it transpired that the Turkish 
ambassador had been called in for the same briefing.  Niyazov 
said he had resisted Putin,s pressure to take sides against 
Ukraine in gas negotiations.  He then noted that Russia is 
taking delivery of Turkmenistan gas under its 2006 contract 
at an accelerated rate of 5-6 bcm a month, and that he, 
Niyazov, is ready to sign a contract extension in May not 
only for further deliveries in 2006 at a price of $100/tcm, 
but for up to three more years on the single condition that 
the price increase by $10 (ten)/tcm each year.  Niyazov 
earnestly expounded the basic ABCs of the Trans-Caspian vs 
Caspian littoral pipeline options, spoke with new enthusiasm 
of the latter and blandly ignored the fact that it would do 
zero to diversify the transit monopoly.  GazProm CEO Miller 
and team supposedly arrive in Ashgabat for talks by or before 
February 15.  Niyazov gave it to be understood he expected to 
sign a deal with the Russians absent new pledges of material 
Western backing for a TCP.   See Para 9 for comment.  END 
SUMMARY. 
 
 ¶2.  C) Niyazov,s one-on-one meeting with Putin lasted three 
times the scheduled half-hour, he said.  Putin pressed for 
support in the Moscow/Kyiv gas tussle, but Niyazov &said 
openly8 that Turkmenistan wouldn,t get involved, and 
criticized GazProm for blocking passage to Ukraine of 
contracted Turkmenistan gas.  He handed the two Ambassadors a 
sheet charting the ultimate destination of daily deliveries 
of Turkmenistan gas to the Uzbek border, to show that none 
was making it to Ukraine.  Niyazov said Putin had made it 
nakedly clear that the Kremlin viewed Ukraine as a political 
enemy and potential NATO entrant; it would never allow 
Turkmenistan to sell gas directly to Ukraine, or to Europe 
via Ukraine.  When Ukraine came up with the $88 million of 
overdue payments for Turkemenistan gas, Putin had tried to 
convince Niyazov not to accept it, saying Russia would make 
the payment instead, he alleged. 
 
¶3.  (C) Gas deliveries to Russia are proceeding at an 
accelerated pace, five to six bcm each month, Niyazov noted. 
The Russians are &urgently drawing down8 their quota under 
the December 29 bilateral agreement of 30 bcm at $65 tcm for 
calendar 2006.  Thus, the whole 30 bcm is set to be shipped 
by June.  This was fine by Turkmenistan, said Niyazov.  He 
would be agreeable to supplementing 2006 sales after May, but 
only at $100/tcm.  The past and current prices Russia has 
paid have been &robbery, theft8.  Niyazov then volunteered 
that he had told Moscow he would sign a three year agreement 
for 50 bcm per year under the sole condition that the price 
be increased by an extra $10/tcm each year, i.e., to $110 for 
2007, $120 for 2008 and $130 for 2009.  Putin wanted to 
negotiate the future prices via a formula or mechanism linked 
to international markets, but Niyazov had turned him down, 
insisting on the simple ten-dollar-per-year increment.   Even 
though $130 was a fair price, the Russians had suggested that 
at that level they could charge $30 for transit; in that 
case, Niyazov said, he could charge the Russians for the 700 
km of Turkmenistani pipeline through which the gas would also 
need to be sent en route. 
 
¶4.  (C) NOTE:  Niyazov,s scenario, if realized, evidently 
would mean gas deliveries to Russia in calendar 2006 of as 
much as 60 bcm.  END NOTE. 
 
¶5.  (SBU) Gesturing at his huge wall map, Niyazov reviewed 
westward pipeline alternatives:  under the Caspian, or on the 
littoral around to the north, i.e., via Russia.  &I proposed 
to Putin8 joint construction of a littoral pipeline, of 50 
bcm annual capacity, said Niyazov.  Through it, Turkmenistan 
gas would be sold both to Ukraine and to Europe.  Russia 
would sell its own gas to those markets through the littoral 
pipeline, too.  Russia had not encouraged the TCP option, 
invoking environmental concerns, said Niyazov blandly.  At 
this point, the Turkish ambassador made the obvious point 
that a joint Russian-Turkmenistan Caspian-littoral pipeline 
 
ASHGABAT 00000151  002 OF 003 
 
 
would do zero to dilute Russia,s transit monopoly on 
Central-Asian gas supplies to Europe.  Niyazov shrugged the 
point aside. 
 
¶6.  (SBU) Gazprom CEO Miller will come with a delegation to 
Ashgabat sometime during February 8-15 to discuss the gas 
contract and pipeline issues further.  Moscow is intent on 
settling the question before the July summit in St 
Petersburg, observed Niyazov.  He proceeded to note that 
Georgian president Saakashvili had sent him a letter last 
Saturday (January 28) proposing a GUAM meeting in Tbilisi, 
with Turkmenistan present in observer status, to discuss the 
TCP.  To hold such a meeting at this juncture would be 
premature and provocative, Niyazov warned.  &First, we (the 
GOTX) need to come to a resolution with the Russians,8 
Niyazov insisted   It is vital not to ratchet existing 
political tensions still higher in the course of finding a 
satisfactory settlement to the regional energy supply 
question.  But, if the U.S. supports the notion, sometime in 
April or May would be appropriate to convene such a meeting. 
However, it would only be useful if it produced cash for the 
project (&sbor sdelat, nada8), not just empty 
declarations, which moreover were politically dangerous.  It 
would also be incumbent to arrive at a commitment by European 
consumers to contract at least 20-25 bcm per year through the 
TCP.  The latter,s annual capacity would be some 50 bcm, and 
Turkey, Azerbaijan and Georgia together will not account for 
more than half.  The Russians should be invited to the 
meeting, too; it would be their right to boycott if they 
chose. 
 
¶7. (C) At various points, Niyazov also: 
 
-- Said Iran,s Foreign Minister and Deputy Oil Minister are 
flying to Ashgabat this Friday, but that Turkmenistan will 
refuse the main Iranian objectives.  He disparaged the 
Iranians for buying gas at $42 and selling to Georgia and 
Azerbaijan at $150, and to Turkey at still higher prices; 
 
-- Stressed continued GOTX support of a TAP and confirmed the 
scheduling of a high-level meeting of interested parties on 
the subject in Ashgabat mid-February; 
 
-- Asserted that Moscow was adding pressure on Turkmenistan 
by signing joint gas-exploration agreements with all the 
other ex-Soviet )stans, even Kyrgyzstan.  Nazarbayev had 
called him to boast of his own recent agreement; according to 
Niyazov his counterpart had been told to expect production of 
40 bcm to result, but the field didn,t hold more than half 
that amount; 
 
-- Stated that Lukoil hankers to buy a controlling interest 
in the Turkmenistan operations of Malaysia,s oil-producer 
Petronas.  &But Petronas here is working solidly,8 has all 
the cash it needs, and refuses to entertain the idea; 
 
-- Added that the Chinese likewise are insistently trying to 
buy Turkmenistan,s gas deposits outright.  Turkmenistan will 
never countenance this, and moreover has reiterated to the 
Chinese that they can only have access to deposits to the 
right bank of the Amu Darya. 
 
¶8.  (C) Ambassador noted that the USG is interested in 
supporting projects that will enhance competition for gas 
supply to Europe, not further extend Gazprom's monopoly.  As 
with the Turkish Ambassador's observation that a 
Russia-Turkmenistan Caspian Littoral pipeline project would 
not create a real alternative for Turkmenistan, and leave it 
at the mercy of Russian export routes, Niyazov was 
non-committal.  Ambassador also noted that any deepening of 
energy cooperation would require concommitant progress in 
other areas as well. 
 
COMMENT 
------- 
¶9. (C) Niyazov's 90 minute tete-a-tete with Putin left him 
much less positive about the possibilities of a Trans-Caspian 
pipeline than he was during this month's visits by DAS Bryza 
and Turkish energy minister Guler (reftels).   The optics of 
having the Turkish and U.S. Ambassadors at the table together 
to get a readout of Niyazov's Moscow trip were likely 
designed to bolster the hand he can play when Miller visits 
in 10 days or so.  However, both we and the Turks here 
believe there is still some small room for negotiations on 
 
ASHGABAT 00000151  003 OF 003 
 
 
pursuing an independent TCP and not selling out to the 
Russians -- but only with a clear political signal from the 
West.  Niyazov has heard words of interest and support from 
the US and Turkish governments, but nothing from the EU (we 
note that the EU is beginning to discuss this issue with EB 
Assistant Secretary Tony Wayne, although it has apparently 
not yet made public its position on energy security (Ref D). 
Even public European support, if (miraculously) appearing in 
the next week or so, might not be enough to overcome 
Niyazov's fear of Russian ire.  At current production levels, 
a 50 bcm contract with Russia would not leave much gas for a 
TCP or any other export possibility. 
JACOBSON