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UNCLAS SECTION 01 OF 04 ASHGABAT 000162 
 
SIPDIS 
 
DEPT FOR EUR/CACEN (Perry), EUR DAS (Bryza), SA DAS 
(GASTRIGHT) 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EPET PGOV PHUM PREL AJ TX
SUBJECT:  Lights Out in Energy-Rich Balkan Welayat 
 
Ref: 2005 Ashgabat 1108 
 
Summary 
------- 
 
¶1.  (SBU)  During a January 30-February 1 visit to Balkan 
Welayat DCM witnessed some of the bureaucratic 
inefficiencies that make the Government of Turkmenistan a 
problematic business partner.  Turkmenbashy, formerly 
Krasnovodsk, a hydrocarbon rich Houston of Central Asia, has 
been without water for ten days, and brownouts have caused 
the schools to operate on reduced hours with students in 
freezing non-heated classrooms for six hours a day.  The 
situation is the same for energy-rich Balkanabat City 
(formerly Nebitdag).  Nevertheless, Turkmenistan continues 
to export electricity to Iran, Afghanistan and other 
customers.  Turkmenistan's oil and gas reserves are likely 
substantial, but without reliable data and with world-class 
inefficiencies on the ground, Turkmenistan remains a 
problematic trading partner.  End Summary. 
 
Mayor and Governor Prevaricate 
------------------------------ 
 
¶2.  (U) On January 20, DCM met with Mayor of Turkmenbashy 
City Ashyrniyaz Pomanov and on February 1 with Balkan 
Welayat Governor Tachberdi Tagyev.  Though on the surface 
both were competent intelligent bureaucrats, Pomanov showed 
a curious lack of knowledge of the city's history -- he 
claimed the city was founded in 1891 (10 years after the 
battle of Goktepe and 12 years after official city records 
cite its establishment); and both outright lied about a 
number of current issues including energy outages ("there 
are none in Balkan Welayat"), pensions ("everyone's getting 
his/her full pension here"), and the destruction of Awaza 
holiday village ("it was just a slum anyway/the people will 
have a whole new complex").  In fact, local sources told us 
there has been no water for ten days in Turkmenbashy, 
schools were operating at reduced hours for lack of heat 
throughout the welayat, and children hardly could work at 
all in the freezing classrooms.  Heating and water for 
residences also is out at least in Turkmenbashy and 
Balkanabat.  In response to DCM's question, Pomanov said 
that he had gathered a group ("a couple hundred") of 
pensioners together with representatives of the Social 
Welfare Department and explained the "incorrectly 
calculated" pensions.  Pomanov said this did not affect his 
city's citizens, however, because they all were on 
government salaries and their pensions had been correctly 
calculated.  Tagyev concurred that the pension 
"recalculation" did not affect Balkan Welayat's citizens. 
Local sources told us many city teachers' and other 
government employees' pensions had been cut and that the 
cuts were the main topic of conversation around the welayat. 
 
¶3.  (U) In response to reports that a major swathe of 
holiday dachas had been destroyed to make way for government- 
constructed holiday complexes, Pomanov said, "that depends 
on your definition of dacha, mostly what was out there was 
just trailers and junk, it was a slum."  DCM drove to the 
community and witnessed a scene reminiscent of Bosnia after 
two years of war, an area consisting of approximately 10 
square kilometers and thousands of homes was reduced to 
rubble.  Owners/scavengers were driving away with what they 
could salvage -- bricks, window frames, doors, etc.  Still 
obvious, though, was the quality and care of many of the 
dachas.  Gardens, balconies, Greek columns, attractive 
architecture, etc., still were visible.  Anyone in 
Turkmenistan who can afford a vacation goes to Turkmenbashy, 
and these dachas were their destination.  Not only is income 
from these properties gone, but there will be no place to 
stay this summer except for the unaffordable and badly- 
serviced government-run Serdar and Turkmenbashy hotels. 
Pomanov himself said approximately 30,000 tourists visited 
Turkmenbashy every summer.  In response to DCM's question 
about vacation opportunities for low to mid-income 
Turkmenistanis, Pomanov said, "if they save all year, they 
should be able to afford a week or two out here."  DCM 
responded, if there were a few nice bed-and-breakfasts, the 
embassy would be frequent customers, but that neither the 
Serdar nor the Turkmenbashy had any appeal for western 
travelers.  According to Tagyev, "the people needed new 
complexes," (Comment:  yes, that's actually what he said. 
 
ASHGABAT 00000162  002 OF 004 
 
 
End Comment.) 
 
¶4.  (U) Referring to the upcoming local elections, Pomanov 
noted he was chairman of the welayat election committee, and 
said the etrap elections were scheduled for June; city 
elections were scheduled for December, he said, and conceded 
it was possible he could lose his seat.  Pomanov said the 
local elections were a big step forward but did not go into 
further details.  He did not respond to DCM's question about 
the possibility for multi-party elections but said every 
position would be contested by at least two candidates. 
Tagyev confirmed elections on the welayat level would take 
place in 2007 and that his position would be up for 
election; he ignored DCM's question about the possibility of 
multi-party elections. 
 
¶5.  (U) In response to DCM's question about unemployment, 
Pomanov admitted it was a problem, but insisted, "anyone who 
wants to work can find work."  Pomanov said Turkmenbashy's 
population was 65,000, but said the population was growing 
because other provinces' workers were flocking to 
Turkmenbashy in search of low-paying jobs (vice 
unemployment) with international oil companies.  Tagyev 
agreed with Pomanov's assessment and said that farmers from 
other welayats also were coming to Balkan to farm previously 
non-arable land.  He noted that Balkan had met both the 
wheat and cotton quotas in 2005 and said mechanization, 
specifically Caterpillar and John Deere tractors, 
contributed to the welayat's success.  Tagyev stated that 
the new law on State Agricultural Joint Stock Companies 
(Reftel: 2005 Ashgabat 1108) was perfectly understood and 
had contributed to the welayat's agricultural successes. 
 
¶6. (U) According to Pomanov, approximately 40% of 
Turkmenbashy's population was non-ethnic Turkmen.  He said 
"all who left wanted to leave," and said many of the 
remaining ethnic Russians, Armenians, Azeris, and Kazakhs 
had been in Turkmenbashy for three generations.  In response 
to DCM's question about minority language education, Pomanov 
insisted Russians still could study in Russian and said 
there were Kazakh classes.  But, he said, most "begged' to 
learn Turkmen. 
 
¶7. (U) In response to DCM's curiosity about President 
Niyazov's comments on tribalism during the January 12 events 
in commemoration of the Battle of Goktepe, in particular his 
appeal to the Teke to forgive the Yomut for their role in 
renting camels to the invading Tsarist troops, Pomanov said, 
"yes, I heard this speech," and after avoiding any 
discussion, his Mary Teke assistant said, "the president 
talked about this so people don't misinterpret what happened 
and hold it against the Yomut."  Both Pomanov and his 
assistant laughed nervously when DCM pointed out that the 
mayor's office was decorated exclusively in Teke carpets, 
"our carpets are that much more precious and rare," was all 
they could offer. 
 
Oil and Gas Officials Bullish on Turkmenistan 
--------------------------------------------- 
 
¶8.  (U) On January 30 DCM met with Turkmenbashy Oil Refinery 
Chief Amangeldy Pudakov and toured his massive complex; on 
January 31, she traveled to truly one of the world's least 
known "holidays in hell" Hazar (formerly Cheleken), home to 
the very profitable Dragon Oil and a dismal outpost of 
Soviet exploitation of Central Asia's resources; and on 
February 1 she met with TurkmenNebit State Concern Chief 
Garyagdy Tashliev. 
 
¶9.  (U) Pudakov's dissembling about attributing his lack of 
knowledge to being "new to the job" was notable in that he 
had been demoted from the position of Minister of Oil and 
Gas in September 2005, at which time he had been responsible 
for the production statistics of all of Turkmenistan's oil 
and gas industries.  He could not tell DCM the complex's 
total revenue, refused to comment on the company's future 
plans and seemed greatly relieved to hand off DCM to a 
senior technician for a tour of the plant. 
 
¶10.  (U) The plant is truly impressive, covering a vast plot 
of land in the middle of town and comprised of facilities 
for refining oil into a multitude of products including 
liquefied natural gas, lube oils, gasoline, diesel, laundry 
 
ASHGABAT 00000162  003 OF 004 
 
 
detergent and polypropylene.  The complex even included an 
electricity substation which supplied energy from excess oil 
products to the regional Turkmenbashy grid, which was then 
sold to Iran and Turkey.  State of the art refining 
equipment included investment from Japan, Germany and 
France. 
 
¶11.  (U) In spite of his pedigree from Turkmen Polytechnical 
Institute, Pudakov's Russian was bad and he insisted on 
having the majority of DCM's questions translated into 
Turkmen. 
 
¶12.  (U) After a 3.5 hour drive from Turkmenbashy down a 
sand-swept road through a landscape devoid of any life, DCM 
arrived at the Dragon Oil Camp in Hazar.  Dragon Oil Site 
Manager Abdel Hamid Bassiouni (Egyptian citizen) treated DCM 
to a gourmet's feast of shrimp and other delicacies imported 
from Dubai and provided her with a tour of Dragon Oil's 
facilities.  Dragon Oil remains the most successful of 
Turkmenistan's foreign oil concerns.  Bassiouni listened 
attentively to DCM's presentation about the possibility of 
renewed U.S. interest in investing in the hydrocarbon 
industry but offered little in the way of highlighting 
potential problems to investment, or more importantly, how 
Dragon Oil navigated the government. 
 
¶13.  (U) A Dragon Oil representative provided DCM with a 
tour of the neighboring neighborhood of Hazar, a formerly 
predominately Russian settlement established to supply the 
Soviet war effort during World War II.  Hazar is a city-size 
dump of dilapidated Stalin-era public buildings and parks 
joined with abandoned uniquely Soviet-era rusted hulks of 
industrialization.  Garbage, rust and broken beer and vodka 
bottles are everywhere.  The houses are straight out of some 
permafrost settlement and the cemeteries are full of Russian 
Orthodox crosses.  If Dragon Oil or the GOTX has made any 
profit from the vast oil reserves off Hazar, the only 
economic rise in Hazar has been in the number of prostitutes 
living in Hazar to service the oil workers.  (Note: during a 
previous embassy visit to Hazar, a Dragon official insisted: 
"these girls are not prostitutes, they just have sex for 
money." End note.) DCM passed a monument to the oil workers 
rising out of the rust with a plague quoting Lenin saying, 
"let me know what's going on with Cheleken's oil and oil in 
general;" according to local wags, this was the only time 
Moscow paid any attention to Cheleken. 
 
¶14.  (U) In response to DCM's curiosity as to why Dragon 
Oil's successes had not translated into economic prosperity 
at least for Hazar but in general for Balkan Welayat, Tagyev 
responded, "we'll get there."  TurkmenNebit Director 
Tashliev also noted that rehab of Hazar was in the grand 
plan, but that Hazar mostly had been a Russian community 
that had exported Turkmenistan's natural resources north, 
"and we have nothing to show for it," he said. 
 
¶15.  (U) Segueing into the future of Turkmenistan's 
hydrocarbons industry, Tashliev said, "eventually it will 
all be run and managed by Turkmen."  According to Tasliev 
Turkmenistan only was willing to offer Production-Sharing 
Agreements to international companies off-shore, 
"nothing/nothing will be offered to foreign companies on- 
shore, we now can do all that ourselves."  Tashliev did not 
see the contradiction in proclaiming Turkmenistan's ultimate 
aim to nationalize all GOTX's hydrocarbons while encouraging 
foreign investment.  His eyes lit up, however, when DCM 
asked about Chinese involvement, "they're happy with a 
service agreement, vice a PSA, which we'll give them if they 
build a pipeline to China," and in terms of oil production 
in the Caspian, "certainly the Chinese are no worse than 
anyone else, we'd be happy to develop PSAs with them."  In 
response to DCM's question about the feasibility of a Trans- 
Caspian Pipeline, Tashliev said, "Forget about it, our 
future is with Russia." 
 
Comment 
------- 
 
¶16.  (SBU) The main focus of DCM's visit to Balkan Welayat 
was to keep the pressure on the GOTX to show the USG was 
watching its hydrocarbon industry.  Not only is the industry 
inefficient and paranoid, but it is equally obvious that 
profits will not go toward improving the standard of living 
 
ASHGABAT 00000162  004 OF 004 
 
 
of Turkmenistan's citizens.  End Comment.