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FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9633
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
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RUEAIIA/CIA WASHDC
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RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 1856

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 001181 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
 
E.O. 12958: DECL: 11/01/2017 
TAGS: PGOV EINV EPET SOCI TX
SUBJECT:  TURKMENISTAN:  GAC MARINE FACES THE HURDLES OF 
DOING BUSINESS 
 
 
Classified By: Charge Richard E. Hoagland for reasons 1.4 (B), (D). 
 
 ¶1.  (SBU) SUMMARY:  GAC Marine S.A. plays a vital role in 
Turkmenistan's hydrocarbons industry as the only contractor 
offering shipping and marine services to companies in 
offshore drilling.  Gregory Flint (please protect), General 
Manager of the Turkmenistan office, recognizes the 
profitability of the industry but is discouraged by 
bureaucracy and lack of capacity, and worrieds about 
Turkmenistan's political future.  Though not an ideal 
example, we continue to suggest to Turkmenistani authorities 
that they look to Kazakhstan for models that attract Western 
investors.  END SUMMARY. 
 
¶2.  (C) Australian national Gregory Flint has been General 
Manager of Marine Services for GAC Marine S.A.'s Turkmenistan 
office since mid-2006.  The Swedish-owned GAC is the only 
contractor offering offshore drilling marine services to the 
hydrocarbons industry in Turkmenistan.  During an October 30 
meeting with EconOff, Flint expressed his frustrations with 
the unfriendly business climate and his uncertainties about 
how it is evolving.  Flint opined the quantity of offshore 
oil is not enough to justify the entry into the market of 
major international hydrocarbon firms.  He believed their 
entry into the market would not be easy, in any case, and 
recounted an anecdote that an official at the Ministry of Oil 
and Gas allegedly told a BP executive recently, "Don't think 
that it will be any easier for you here, just because you're 
big." 
 
CONCERN FOR THE FUTURE AND FRUSTRATIONS WITH BUREAUCRACY 
 
¶3.  (C) Flint stated that GAC is considering political risk 
insurance due to the company's uncertainty about the 
direction of the Berdimuhamedov government.  GAC does not 
exclude the possibility of government seizure of their ships. 
 According to Flint, the government of Turkmenistan owns two 
working ships, while GAC has 16 ships registered in 
Turkmenistan.  (COMMENT: Political risk insurance is prudent 
anywhere in the developing world.  However, we have heard 
nothing that would remotely suggest the government intends to 
expropriate private business property, and doubt that is a 
real threat for GAC.  END COMMENT.) 
 
¶4.  (C) Because Turkmenistan's insurance company does not 
have adequate assets to cover its clients, foreign firms like 
GAC use reinsurance services overseas.  Since the UK and 
Turkmenistan have a dual taxation treaty and the company 
purchased a policy from a British insurance company, GAC is 
entitled to a refund from Turkmenistan tax authorities of 15 
percent of the tax paid on its British policy.  However, the 
Turkmenistan tax authorities claim they cannot accept the 
official document from UK tax authorities submitted as proof 
of tax paid.  Unless a different form is submitted, 
Turkmenistan tax officials told GAC that they will not pay 
the refund and have threatened the company with a 40 percent 
penalty, retroactive to 2005. 
 
NEED TO BUILD CAPACITY 
 
¶5.  (C) Flint claimed he employs 60 Turkmenistanis to 
complete the work that four of his former employees did in 
Thailand.  Turkmenistan does not have any marine training 
centers, so GAC trains employees on the most elementary 
matters in a renovated apartment in Turkmenbashy.  GAC 
conducts some training on its ships, and sends other 
employees to Ukraine for advanced training at a marine 
academy. 
 
GOGOL WOULD HAVE UNDERSTOOD 
 
¶6.  (C) Flint recounted that Ministry officials regularly 
 
ASHGABAT 00001181  002 OF 002 
 
 
approach him to "hire" their sons, nephews, cousins, and 
other relatives.  However, these are employees in name only, 
since they do not show up to work.  Flint said he got rid of 
his "ghost" employees and refuses to hire any more.  However, 
he does hire those recommended to him who are willing to go 
through the training process and who are truly interested in 
work. 
 
ENTHUSIASTIC ABOUT A CHAMBER OF COMMERCE 
 
¶7.  (SBU) Noting that most information is exchanged with 
industry colleagues informally "over a beer," Flint said that 
some sort of multi-national Chamber of Commerce would be 
helpful as a forum to exchange ideas, experiences, and 
solutions in a more structured environment. 
 
¶8.  (C) COMMENT:  As more Western companies seek to enter 
Turkmenistan, they are likely to encounter problems not 
unlike those faced by GAC.  Incapacity, bureaucracy, and 
corruption could hinder real business development.  Though 
not an ideal example, we continue to suggest to Turkmenistani 
authorities that they look to Kazakhstan for models that 
attract Western investors.  END COMMENT. 
HOAGLAND