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RHEFDIA/DIA WASHINGTON DC//DHO-2/REA/NMJIC-J2//
RUEKJCS/JOINT STAFF WASHINGTON DC//J5/RUE//
RUEKJCS/SECDEF WASHINGTON DC

UNCLAS SECTION 01 OF 03 ASHGABAT 000660 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN (NICOLAIDIS AND SNELSIRE) 
 
E.O. 12958: N/A 
TAGS: ENRG PINR PREL PGOV TX US AF
SUBJECT: Blame Game in Negotiating Sales of Turkmenistan's Energy to 
Afghanistan 
 
REF:  A. Ashgabat 523 
 
       ¶B. Ashgabat 317 
 
ASHGABAT 00000660  001.2 OF 003 
 
 
SUMMARY 
------- 
 
¶1.  (U) While in Ashgabat to explore next steps in the bilateral 
relationship with President Berdimuhammedov's administration, SCA 
Deputy Assistant Secretary Evan Feigenbaum met on June 25 with 
Minister of Energy and Industry Yusup Dawudov to discuss how the USG 
might assist with ongoing negotiations for increased supply of 
Turkmenistan's electricity to Afghanistan.  Dawudov stated that 
Turkmenistan is prepared to increase current supplies by 40 percent 
immediately upon completion of a 220KV line on the Afghan side to 
Herat.  Regarding a new contract for additional quantities of 
electricity, Dawudov expressed frustration with the changing 
composition and the lack of technical specialists in past 
Afghanistani delegations, which created obstacles to resolving 
numerous outstanding technical issues.  When pressed by DAS 
Feigenbaum to move forward concurrently on commercial discussions 
related to a new agreement, Dawudov stated that only President 
Berdimuhammedov could resolve the pricing issue.  Next week's visit 
by Afghanistan's President Hamid Karzai to Ashgabat represents a 
prime opportunity to address price and quantity issues so that even 
greater quantities of Turkmenistan's electricity can flow southward. 
 End Summary. 
 
"WE CAN'T DO IT FOR YOU - BUT WE'RE HERE TO HELP BOTH SIDES" 
--------------------------------------------- --- 
 
¶2.  (U) SCA DAS Evan Feigenbaum met with Minister of Energy and 
Industry Yusup Dawudov on June 26 to discuss ways in which the USG 
might support ongoing negotiations for increased electricity supply 
to Afghanistan.  Thanking the minister for meeting recently with 
several USG representatives, DAS Feigenbaum noted that the 
considerable attention paid to this issue reflected its importance 
to the most senior levels of the USG.  While acknowledging that, as 
a non-party to an eventual power purchase agreement (PPA), the USG 
had no direct role in the negotiations, DAS Feigenbaum stressed the 
U.S. interest in supporting both sides in pursuit of an agreement. 
To this end, he asked the outcome of the June 8-11 delegation to 
Ashgabat led by Afghanistan's Energy Minister Ismail Khan and how 
the USG might assist the process, if at all, in the future. 
 
¶3.  (U) Dawudov opened by stating that there are no problems with 
the existing supply contract.  Afghanistan's consumption had 
increased by 10-15 percent over last year.  Regarding a new contract 
for additional supplies, however, several obstacles remained. 
Turkmenistan was ready to increase sales by up to 40 percent on the 
Serhetabad-Herat line as soon as the voltage on the transmission 
line could be increased to 220 KV from the current 110 KV. (Note: 
Turkmenistan built its existing line to the border with 220 KV 
capacity, but Afghanistan only built a 110 KV line on its side of 
the border, so the current line operates at less than full capacity. 
 Dawudov stated that Afghanistan's work to upgrade the line to 220 
KV was 90 percent complete.  End Note.) 
 
¶4. (U)  During the most recent negotiations, Dawudov stated, the 
parties reached tentative agreement for the proposed new line to 
cross the border at Imam-Nazar (Note: Near Khamyab in Afghanistan. 
End Note.) on its way to Mazar-i-Sharif.  Although the Afghanistan 
side wanted the border crossing to be at Kerif, Turkmenistan refused 
since it would have crossed the Amu Darya river twice and required 
additional expenses.   DAS Feigenbaum sought clarification of 
whether any agreement had, in fact, been signed at this meeting. 
Dawudov hedged his reply by stating that "the content of the 
protocol was defined."  The minister then confirmed that a general 
protocol document containing only limited technical details was 
actually signed, and advised that it stated the price and quantity 
of any future sales would be determined at a later date. 
 
ASHGABAT 00000660  002.2 OF 003 
 
 
 
FRUSTRATED BY AFGHANISTAN'S CHANGING DEMANDS, PEOPLE 
--------------------------------------------- - 
 
¶5. (U) When asked the next step by DAS Feigenbaum, the ministry's 
Foreign Economic Affairs Department chief Eziz Berdimyradov said 
that the recent Ismail Khan delegation had discussed construction 
routes, and that the Turkmenistan side knew what was needed to 
complete its obligations.  If the Afghanistan side changed its 
proposed route, then Turkmenistan needed clarification.  Dawudov 
added that both sides had exchanged technical documents so that they 
can begin working together.  In order to increase electricity 
supplies in the near-term, Afghanistan must complete its work on the 
220 KV line from the border to Herat.  Although this would allow 
current supply to increase by 40 percent, Berdimyradov highlighted 
that a longer term concern was the lack of a local distribution 
network for the smaller cities around Herat.  Without such a network 
-- and paying customers -- the full potential could not be realized. 
 
 
¶6. (U) DAS Feigenbaum pressed for ideas on how the USG might be 
helpful.  Berdimyradov replied that the USG must "provide financing 
and construction" for the expected remaining work on the Afghanistan 
side.  Specifically, the Government of Afghanistan still needed to 
complete a new line from Mazar-i-Sharif to Turkmenistan's border 
before significant new supplies could be provided.  Furthermore, 
Berdimyradov asked, who would pay for the electricity?  He stated 
that, due to the current lack of an identified paying customer, 
Turkmenistan sought to clarify technical issues before moving to 
commercial points.  Dawudov interjected that Turkmenistan's 
negotiating team was always the same, but those on the Afghan side 
of table were constantly changing.  Noting that the USAID technical 
expert who participated in past delegations did not join the most 
recent discussions, USAID Representative in Turkmenistan, Ashley 
Moretz, suggested that USAID advisors could help navigate 
complicated technical issues if allowed to participate in the 
future. 
 
¶7. Dawudov further stated that even Afghanistan's power requirements 
remained unclear.  Although Afghanistan had asked Turkmenistan for 
its commitment to sell up to 300 MW of power, the currently proposed 
220 KV line to Mazar-i-Sharif would not support deliveries at that 
level.  For that reason, Turkmenistan had proposed to build a 500 KV 
line all the way to Mazar-i-Sharif, but USAID/Afghanistan had only 
committed to financing a 220 KV line.  Also frustrating to Minister 
Dawudov was the apparent position of Ismail Khan during the last 
round of negotiations:  Khan had asked for up to 700 MW -- 
Turkmenistan's entire electrical surplus -- for onward sales to 
Tajikistan. 
 
 
ONLY "THE HIGHEST LEVELS" CAN RESOLVE PRICE 
------------------------------------------- 
 
¶8. (U) Reiterating Ambassador Neumann's message to the Turkmen 
(Ashgabat 523), DAS Feigenbaum suggested that parallel discussions 
regarding cost and technical issues be conducted so that Afghanistan 
could make sound financial decisions among its potential suppliers. 
Dawudov responded that Turkmenistan must first conduct a feasibility 
study, since it could not currently supply the requested 300 MW via 
a single line.  Berdimyradov stated that pricing for new electrical 
sales were set "at the highest levels" anyway, so the ministry still 
had to wait for a price agreement before concluding a commercial 
Power Purchase Agreement.  He added that it was "in their best 
interests" for President Karzai to raise this issue when he meets 
with President Berdimuhammedov next week. 
 
COMMENT 
------- 
 
 
ASHGABAT 00000660  003.2 OF 003 
 
 
¶9. (U)  Both Afghanistan and Turkmenistan still seem to be talking 
past each other at this point.  Afghanistan believes that 
Turkmenistan has possibly changed its policy, begun under President 
Niyazov, of providing low-cost electricity as a humanitarian gesture 
to western Afghanistan, where large numbers of ethnic Turkmen 
reside.  On the other hand, Turkmenistan's Ministry of Energy and 
Industry does not have the authority to set pricing levels and so 
has remained focused exclusively on technical issues in recent 
discussions.  Turkmenistan has been further frustrated by the 
changing composition and lack of technical specialists in recent 
Afghan delegations, which has prevented clarification of the 
outstanding technical questions that are within these delegations' 
mandate.  These Turkmen complaints ring hollow, however, as the 
Afghanistani side at least is open to USG/USAID assistance whereas 
in Turkmenistan, direct contact with government bureaucracies still 
is largely nonexistent. If President Karzai can secure agreement on 
a price level for new electricity sales during his upcoming July 5-7 
visit to Ashgabat, a major obstacle to more serious discussions on a 
Power Purchase Agreement will be removed.  End Comment. 
 
BRUSH