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C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000215 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN (PERRY), SCA/CEN DAS GASTRIGHT, EUR DAS 
BRYZA 
 
E.O. 12958: DECL: 02/21/2016 
TAGS: ENRG EPET PREL RS TX UP
SUBJECT: NIYAZOV,S 2/17 GAZPROM, UKRAINIAN VISITORS: 
DECISIONS DEFERRED 
 
REF: ASHGABAT 209 
 
Classified By: Ambassador Tracey Ann Jacobson, reasons 1.4 (b) and (d) 
 
SUMMARY 
--------------- 
 
¶1.  (C)  GazProm CEO Miller,s February 17 visit to Ashgabat 
came and went without known result; FM Meredov told 
Ambassador that Niyazov deferred any new energy-sector 
decisions for at least two months.  Far less reassuringly, 
Ukraine energy officials, talks the same day with GOTX 
counterparts and Niyazov produced only harshly-worded public 
demands by the latter for Kyiv to pay its past gas debts. 
The Ukrainian Embassy DCM calls GOTX/Kyiv relations now "the 
worst in the last five or six years." He admits the GoU,s 
debt, but says his Embassy is convinced Niyazov is just using 
it as a pretext for discontinuing gas sales to Ukraine, and 
that the ultimate disposition of Turkmen gas for the next few 
years will be determined not in Ashgabat but by Ukraine,s 
election and Moscow,s further machinations thereafter.  END 
SUMMARY. 
 
¶2.  (C)  Background:  FM Meredov called Ambassador at 11 pm 
Friday, February 17 to inform her that President Niyazov had 
taken her brief message (delivered during the opening 
ceremony of the new Textile Ministry on Friday morning 
immediately prior to Niyazov,s meeting with GazProm CEO 
Miller; Reftel) on board.  Meredov had also briefed Niyazov 
on the fuller version of the talking points Ambassador gave 
him after buttonholing Niyazov.  As a result, said Meredov, 
Niyazov did not sign any new agreements with the Gazprom 
delegation on either joint ventures or gas supply 
volumes/prices beyond the current 2006 agreement for 30 bcm 
at $65/tcm.  Instead, Niyazov told Miller the GOTX would 
study its proposals for another two months.  Press and other 
sources have indicated that Niyazov undertook to settle 
future supplies and volumes "in the second half of the year" 
or "after September."  The GOTX statement after these 
meetings referred anodynely to their content.   From the 
Russian side, Miller and others were quoted as saying there 
are no issues concerning either the volume or the price of 
Turkmen gas sales to Russia.  The GOTX statement was silent 
on that subject. 
 
 ¶3.  (SBU) Following the meeting with Miller, Niyazov and his 
officials met likewise with the Ukrainian delegation headed 
by Minister Plachkov and Havtogaz Chief Ivchenko.   In 
howling contrast to the conventional tone of the 
Gazprom-visit communiqu, the MFA summary of that meeting 
attacked the Ukrainian participants for their "deeply 
unconstructive" approach.  Namely:  the GoU delegation 
purportedly not only came unprepared to settle what the GOTX 
described as its $159 million in overdue debt for past gas 
sales, but denied the debt,s existence.  Niyazov himself was 
quoted as saying that the Ukrainians, attitude was such as 
to preclude negotiations for future gas-sale arrangements. 
Media report that Yuschenko subsequently phoned Niyazov, 
evinced surprise at the reported debts, and promised to look 
into the matter. 
 
¶4.  (C)  Ukrainian Ambassador told Ambassador Saturday the 
GoU side had been ready to hear from Niyazov that 
Turkmenistan simply was powerless to supply gas because of 
Russia,s refusal to let it be transshipped.  What galled 
them was Niyazov,s instead harping on the issue of 
Ukraine,s debt as justification for not even admitting that 
the gas remains contractually due for delivery to Ukraine. 
In fact, the supposed debt is being paid off in accord with 
the agreed-upon schedule, according to the Ukrainian. 
 
¶5.  (C) We subsequently met with the Ukrainian Embassy DCM 
(protect), who offered extra details.  He echoed his chief,s 
account of Niyazov and his GOTX underlings having from the 
meeting,s start launched into sustained attacks over the 
unpaid debt -- self-evidently having no wish to discuss or 
resolve the issue.  Unlike his boss, the Ukrainian DCM did 
not assert that the GoU is current on its debt payments. 
Rather (as in our most recent meeting two weeks ago), he 
admitted that the GoU remained dozens of millions of dollars 
 
ASHGABAT 00000215  002 OF 002 
 
 
in debt, even after a large payment this January.  He 
repeated to us his opinion that Yushchenko has been lied-to 
on this and other issues by certain of his energy advisors, 
first and foremost Ivanchenko, whom Plachkov hates but is 
impotent to fire due to his central role in financing 
Yushchenko,s election campaigns. 
 
¶6. (C) That said, it was also a fact (the DCM proceeded to 
claim) that of the $159 million in GoU debt, two-thirds is in 
the form of goods and services, used as payment under the 
barter element of the existing bilateral gas-delivery 
arrangement, which either are en route or have actually 
already arrived at Turkmenistan,s borders - but not been 
accepted for delivery.  The GOTX is willfully stalling on 
doing so, and its motive is not to squeeze more money but 
"purely" to solidify its excuse for discontinuing future gas 
contracts or shipments to Ukraine, opined the DCM.   In 
regard to hard-currency payments, there is no current debt 
due at all, according to the Ukrainian. 
 
¶7.  (U) Meanwhile, gas does continue to reach Ukraine, which 
for now is apparently not even being billed for it.  But 
since, on the books, no Turkmen gas is being officially sold, 
the GoU may fear at least one of two scenarios, both bad: (i) 
even if Ashghabat finally "agrees" to sell Ukraine,s full 
agreed 2006 volume of 40 bcm, it will all be considered as 
having been shipped in the second half of the year, at 
$60/tcm vs. the $50 that by agreement was to have been 
charged for first-half-2006 sales; and/or (ii) Gazprom in 
turn may claim that all gas delivered to Ukraine since 
January 1 has been Gazprom,s own, Russian product, hence 
costing in excess of $200/tcm. 
 
¶8.  (C)  In practice, these pipeline and price machinations 
are mere secondary, background factors, the DCM believed. 
They will be left to hang fire pending Ukraine,s election 
results.  Thereafter, Moscow can be expected to re-calibrate 
and escalate its energy-supply pressures in accordance with 
the results. Should Akhmetov, Yanukovych et al win power, 
Moscow may proceed to offer Ukraine an especially naked 
choice:  cheap power tariffs in return for large-scale 
rapprochement.  In any case, for now the bottom line is that 
events in Ashgabat may be close to irrelevant to determining 
where Turkmenistan,s gas will ultimately be sold, he 
thought. 
 
¶9.  (C)  The extreme harshness of Niyazov,s and the GOTX,s 
public attacks on Ukraine,s debt and visiting delegation was 
not unprecedented, but bilateral relations are certainly now 
"the worst in at least the last five or six years", our 
interlocutor thought.  He said his ambassador had convened 
all his Embassy personnel immediately after the GoU 
delegation,s visit to warn them that the bilateral 
atmosphere has become hostile, and to brace for 
manifestations of GOTX displeasure, if not open harassment. 
 
¶10.  (C)  COMMENT.  Niyazov may or may not have been on the 
verge of feeling forced to commit himself to a longer-term 
agreement with the Russians before these twin visits.  In any 
case, the TCP apparently can now at a minimum count on at 
least a two-month reprieve.  But the official treatment of 
the Ukrainians bodes ill for the ultimate outcome.  To fend 
off Russian pressure, Niyazov clearly will need something 
more concrete than expressions of Western interest in TCP. 
JACOBSON