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C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 001359 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN. SCA/PPD, EEB 
DOE FOR EKIMOFF/THOMPSON 
PLEASE PASS TO USTDA DAN STEIN 
 
E.O. 12958: DECL: 12/14/2017 
TAGS: PREL ECON ENERG EPET SOCI TX
SUBJECT: RUSSIAN DCM PLAYS UP GREAT GAME TO EXPLAIN U.S. 
INTERESTS IN TURKMENISTAN 
 
REF: A. ASHGABAT 1297 
 
     ¶B. MOSCOW 5563 
     ¶C. KYIV 2939 
     ¶D. ASHGABAT 1222 
 
Classified By: CHARGE SYLVIA REED CURRAN FOR REASONS 1.4 (B) AND (D). 
 
 ¶1.  (C) SUMMARY: In what was supposed to be a briefing by 
Russian DCM Aleksey Demin on the recent visit of Prime 
Minister Viktor Zubkov to Turkmenistan, we instead got an 
earful regarding American favoritism toward Ukraine and the 
U.S. hidden agenda on a trans-Caspian pipeline.  He also 
alleged that the United States was fearful of Russian 
companies' activity in Turkmenistan.  He said the only reason 
Turkmenistan struck a gas deal with the Chinese was to have 
better leverage in negotiating a gas deal with Russia.  Demin 
asserted that part of the reason for the Turkmen negotiating 
for a higher price for their gas is that President 
Berdimuhamedov needs more money for reforms and other 
projects.  Demin revealed that an announced future signing of 
a packet of Russian-Turkmenistan bilateral agreements was 
less than meets the eye, because officials have yet to put 
anything together.  While Demin's conspiratorial allegations 
regarding U.S. policy in Turkmenistan are ridiculous, it 
probably gives us some insight into what the Russians tell 
the Turkmen about U.S. intentions.  END SUMMARY. 
 
WHY THE INCREASE IN THE PRICE OF GAS 
 
¶2.  (C) We met December 6 with Russian Embassy DCM Aleksey 
Mihaylovich Demin to get more insight into the visit of Prime 
Minister Viktor Zubkov and recent negotiations between Russia 
and Turkmenistan (Ref. A).  Demin outlined the new gas price 
deal signed during the visit whereby Gazprom agreed to $130 
per thousand cubic meters (tcm) effective January 1, 2008 and 
$150 tcm effective July 1, 2008.  Demin said there were 
several reasons for the price increase.  First of all, the 
dollar has decreased in value.  With the price denominated in 
dollars, it was necessary to reflect that change.  Secondly, 
there has been an increase in the price of gas globally. 
Thirdly, Demin said it was necessary for Russia to equalize 
the price of gas it was getting from various sources in 
Central Asia - Kazakhstan, Uzbekistan, and Turkmenistan.  He 
noted Gazprom paid $145 tcm for Kazakh gas.  Demin said the 
last and most important reason for the price increase is that 
President Berdimuhamedov has projects and is conducting new 
reforms and needs money to implement them. 
 
NEW GREAT GAME 
 
¶3. (C) Demin quickly turned to U.S. interests regarding 
Central Asian gas and gave his interpretation of U.S. policy. 
 He said he knew that the U.S. presidential elections will 
take place in 2008 and that is the calculus driving U.S. 
plans in the region.  Relations between the U.S. and Iran are 
not good.  However, business and the economy will play a 
bigger role in the elections than U.S. military ambitions in 
the region, especially toward Iran.  He noted it was 
interesting that the U.S. pays so close attention to the 
issue of Turkmenistan gas, when none of the gas reaches U.S. 
shores.  The reason is the U.S. worries about its good friend 
Ukraine and does not want an increase in the price of gas 
that goes on to the European market, especially to "its good 
friend Ukraine."  Further insinuating nefarious U.S. motives, 
Demin said that Russia, unlike some countries (read United 
States) will never hide its plans about what it wants to do, 
especially about building gas pipelines. 
 
¶4. (C)  Demin said he understood that the "American friends" 
very much want a trans-Caspian pipeline and oppose a littoral 
 
ASHGABAT 00001359  002 OF 003 
 
 
pipeline that would take more gas through Russia.  However, a 
trans-Caspian pipeline is not feasible.  Poor relations 
between Azerbaijan and Turkmenistan prevent that pipeline 
from being built.  The unresolved delimitation of the Caspian 
Sea also will preclude its construction.  It would be 
possible, he said, to build a pipeline through Iran to take 
gas to Europe, but the United States would thwart it. 
Therefore, the only good, stable way to bring Turkmen gas to 
Europe is the littoral option.  Demin stressed there was no 
need to fear Russian companies' activity in Turkmenistan.  He 
pointed out that Lukoil does not have the technology to work 
alone offshore and must collaborate with other companies, 
including American ones.  (COMMENT:  Such as ConocoPhillips. 
As noted Ref D, Lukoil and ConocoPhillips are teaming 
together to strike a deal with Turkmenistan to work three 
offshore blocks.  although most observers believe that a 
production sharing agreement is imminent, it has not yet been 
signed.  END COMMENT.) 
 
¶5.  (C) COMMENT: Demin's allegations were nonsense, and we 
protested that his interpretation was inaccurate.  We said 
the U.S. supports a diversification of pipelines, and its 
policy in Central Asia is neither anti-Russian nor driven by 
our domestic political calendar.  However, every statement we 
made was greeted by a single cocked eyebrow that seemed to 
say, "are you kidding me?"  END COMMENT. 
 
CHINESE PIPELINE 
 
¶6.  (C) Demin said no one knows how much gas is in 
Turkmenistan, and only the future will show if there is 
enough to support the Chinese pipeline.  He claimed the 
Turkmen had struck a deal with the Chinese only in order to 
strengthen their hand in gas negotiations with the Russians. 
 
 
MORE SCHOOL PLACES FOR TURKMEN STUDENTS 
 
¶7. (C) Demin confirmed that during the visit both sides had 
agreed on an additional 150 places for Turkmen students in 
Russian universities.  While the slots are not limited to 
engineering or studies directly linked to the oil and gas 
industry, he said Russia hoped through its exchange program 
to increase the cadre of qualified Turkmen specialists in the 
oil and gas area.  He applauded Berdimuhamedov's emphasis on 
education and plans to improve the educational system that 
had been gutted by the former president, Niyazov.  Demin said 
everyone knows Turkmenistani education under Niyazov was 
"awful."  He also said American exchange programs were 
positive and offer real educational opportunities to Turkmen 
youth. 
 
¶8.  (C) Noting the still close ties between Russians and 
Turkmen, Demin said Russia would continue to promote cultural 
links, because there are people who still remembered the 
USSR.  Those people speak Russian and have a natural affinity 
for Russia.  It would be wrong to sever ties with them. 
 
FUTURE AGREEMENTS? 
 
¶9.  (C) During Zubkov's visit it was announced that the two 
sides planned in the future to sign a packet of bilateral 
agreements.  However, according to Demin, exactly what and 
exactly when was still under discussion.  He said definitely 
no agreements would be signed this year.  It is possible that 
something could be signed next year.  Before then, however, 
it would be necessary for officials on both sides to fulfill 
what Berdimuhamedov and Zubkov had said publicly and work to 
come up with appropriate agreements.  For now, it was too 
early to talk about anything. 
 
ASHGABAT 00001359  003 OF 003 
 
 
 
¶10. (C) COMMENT: It would be hard to know exactly how much of 
Demin's rant reflected his own personal view and how much 
reflected policy.  Nevertheless, it would have been odd for 
him to have spent so much time offering what was only his 
opinion in what was an official meeting.  In addition, a much 
junior Russian Embassy colleague, who also attended the 
meeting, nodded her head strenuously in agreement at 
everything he said.  In any case, this probably gives us some 
insight into what the Russians tell the Turkmen about U.S. 
intentions in this region.  END COMMENT. 
CURRAN