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UNCLAS SECTION 01 OF 02 ASHGABAT 000173 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/UMB, EEB 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EPET UP CH IR TX
SUBJECT:  TURKMENISTAN:  UKRAINE STUMBLES AS IT SEEKS TO 
RE-ENGINEER THE BILATERAL RELATIONSHIP 
 
REF: 07 ASHGABAT 1186 
 
¶1.  (U)  Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU)   SUMMARY:  Ukraine's representation in 
Turkmenistan is continuing to have a difficult time reviving 
its bilateral diplomatic and business relationship. 
Ukrainian diplomats are showing deep interest in the frequent 
arrivals of various U.S. official delegations, which have 
incited both admiration and a modicum of envy that their own 
relationship with Turkmenistan's government is so stagnant. 
They are also watching Turkmenistan's energy export 
considerations closely, and want to portray their own energy 
goals here as preferable to those of competing Turkmen gas 
consumers.  They want to have a close bilateral relationship 
with Turkmenistan based on both energy and business 
interests, but there is a lot of competition, and no progress 
has been made in resolving old problems.  END SUMMARY. 
 
WHAT'S THE U.S. GOT THAT UKRAINE HASN'T GOT? 
 
¶3.  (SBU)   Ukrainian First Secretary Igor Roman asked to 
meet January 25 to discuss a variety of issues.  Ukrainian 
diplomats are clearly both fascinated and curious about the 
frequent visits of U.S. delegations to Turkmenistan, and view 
these visits as a sign of growing U.S. influence here.  In 
contrast, there appears to be a continuous ebb of Ukrainian 
influence.  According to Roman, Ukraine still is unable to 
resolve issues related to several old construction deals that 
were beset with serious problems several years ago (reftel). 
In addition, it has been difficult to resolve problems 
associated with attempts to establish direct flights between 
Ashgabat and Kyiv, something Ukraine has been proposing for 
several years.  These persistent issues, in turn, Roman said, 
are holding back development of the energy relationship 
between the two countries, which has the potential to be 
win-win for both countries.   He said a Ukrainian delegation 
is planning to come to Turkmenistan the week of February 18, 
when delegation members would have an opportunity to 
participate in Turkmenistan's Flag Day celebrations.  He said 
the goal will be to court Turkmenistan's top leadership and 
try to mend fences. 
 
PROMOTING THE NOTION OF "WHITE STREAM" ANYWAY 
 
¶4.  (SBU)  In light of press stories that had recently broken 
regarding Prime Minister Yulia Tymoshenko's public statements 
on a possible White Stream gas pipeline, Roman commented 
briefly on Ukraine's proposal to construct a pipeline that 
would continue from the proposed Trans-Caspian Pipeline 
(TCP), transit Azerbaijan and Georgia, cross the Black Sea, 
to enter Ukraine's existent gas transit system.  He said 
their plan offered a cheaper alternative to proposed transit 
through Turkey and would also be easier to build.  (NOTE: 
Tymoshenko's comments on this proposal, made during her visit 
to Brussels, were received coldly in Turkmenistan, where the 
foreign ministry released a statement tartly noting Ukraine 
had not yet broached the subject in Ashgabat of using 
Turkmenistan's gas.  END NOTE.) 
 
¶5.  (SBU)  Turkish Ambassador Hakki Akil recently told the 
Charge that RosUkrEnergo, the intermediary transit company, 
buys Turkmen gas from Gazprom at the Turkmen border for a low 
price and transits it through Russia.  Gazprom did not need 
to work through RosUkrEnergo but chose to do so because of 
the "(unspecified) major political figures" behind the 
company.  He said RosUkrEnergo had shady affiliations, 
inluding possible part ownership by international crime 
figure Semyon Mogilevich and several Ukrainian and Russian 
oligarchs.  According to press and Embassy Moscow reporting, 
Mogilevich was arrested in Moscow on tax-evasion charges the 
first week of February, possibly because Ukrainian Prime 
Minister Tymoshenko was threatening to expose details of the 
intermediary company, which she has claimed sells 
 
ASHGABAT 00000173  002 OF 002 
 
 
Turkmenistan's gas to Ukraine for an unnecessarily inflated 
price. 
 
"UKRAINE COULD BE TURKMENISTAN'S BEST PARTNER" 
 
¶6.  (SBU)   Roman suggested the Chinese and the Iranians will 
never be the export partners for Turkmenistan that Ukraine 
could be.  He was surprised to hear that Post was working to 
confirm a Chinese press report that claimed the Beijing had 
agreed to pay the highest price yet recorded for Turkmen gas. 
 (NOTE:  A Chinese business journal reported on January 21 
that China had agreed to pay $195 per thousand cubic meters 
(tcm) for Turkmen gas, once the Turkmen-Chinese pipeline is 
completed in 2009.  Hoever, the report also indicated that 
this price would include a $50 per tcm transit fee, which may 
actually be the fee payable to the transit countries beyond 
Turkmenistan.  Turkmenistan's press has not reported the 
price upon which the two countries agreed.  END NOTE.) 
 
¶7.  (SBU)  The Chinese deal makes no economic sense for 
either side, he asserted, and the Chinese would only using 
the gas for their industry anyway (sic).  Further, he said, 
it is becoming obvious that the Iranians are bad business 
partners, and the recent fallout with Iran may be teaching 
Turkmenistan that it can pick and choose its customers. 
Ukraine is worried, however, about whether Turkmenistan will 
have the future output that all these consumers need.  He 
also said he had read that Turkmen oil and gas production had 
increased by only 9% in 2007, in spite of the fact that 
Turkmenistan's government had publicly set a goal in March 
2007 of increasing it by 20%.  This statistic had Ukrainian 
officials wondering if Turkmenistan would able to meet all 
its gas deal obligations. 
 
¶8.  (SBU)  COMMENT:  The Ukrainians say they have much to 
offer the Turkmen in terms of business, construction, 
military, and energy expertise; but until the old issues are 
resolved, Turkmenistan is likely to continue to give them 
short shrift.  Turkmenistan's government appears unconvinced 
that Ukraine is a reliable partner worthy of consideration. 
Perhaps more than anything else, the friction over botched 
construction contracts continues, and the Turkmen have long 
and precise memories.  END COMMENT. 
HOAGLAND