VZCZCXRO1912
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ
RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #0546/01 1211150
ZNR UUUUU ZZH
P 301150Z APR 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 0711
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3707
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1525
RUEHKO/AMEMBASSY TOKYO PRIORITY 1392
RUEHIT/AMCONSUL ISTANBUL PRIORITY 1961
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 ASHGABAT 000546 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/TPP/ABT/ATP JANET SPECK 
ANKARA FOR AGRICULTURAL COUNSELLOR 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ETRD PGOV TX
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES - 
TURKMENISTAN 
 
REF: STATE 39410 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Turkmenistan relies heavily on imports of many 
basic foodstuffs.  As a result of economic reforms in the country 
(including an 800% increase in gasoline prices), low domestic food 
production due to years of bad agricultural policies, rising food 
prices worldwide and an abnormally cold winter, food prices in 
Turkmenistan have increased steeply.  The European Bank for 
Reconstruction and Development (EBRD) has estimated inflation since 
the beginning of the year to be 30 percent, with much of this effect 
felt in foodstuff prices.  While public discontent is increasing, 
the Government of Turkmenistan appears to be aware of and is taking 
measures to counter it.  However, current trends will most likely 
continue.  END SUMMARY. 
 
¶3.  (SBU) Under former President Niyazov, Turkmenistan almost 
exclusively had a command economy, including in the agriculture 
sector, with a heavy emphasis on production of wheat and cotton. 
Niyazov instituted a policy of mandatory 10% production increases 
every year.  This led to overfarming of Turkmenistan's delicate 
desert soil and increasing acreage being converted from livestock, 
fruit and vegetable production to cotton and wheat.  Local experts 
believe that President Berdimuhamedov will gradually abandon 
Niyazov's ambitious plan of making Turkmenistan self-sufficient in 
wheat and will concentrate primarily on growing cotton.  Experts 
believe that the government will purchase more wheat from abroad 
with its hydrocarbon revenues, and direct its efforts and resources 
toward promoting cotton production to feed its export-oriented 
textile factories. 
 
FOOD AND AGRICULTURAL COMMODITY DEMAND 
 
¶4.  (SBU) As a country where industry is mostly concentrated on 
development of energy resources and agriculture is heavily dependent 
on irrigation, Turkmenistan relies largely on imports of basic food 
staples, including wheat, meat, sugar, and vegetable oil.  According 
to post's unofficial estimate, Turkmenistan imports 50 percent of 
the wheat the country needs, 99 percent of sugar and 50 percent of 
vegetable oil. 
 
SUPPLY 
 
¶5.  (SBU) Domestic production of wheat is insignificant because of 
poor seed quality, ineffective bureaucratic management and shortages 
of irrigation water.  According to official 2007 statistics, 
Turkmenistan harvested 1.2 million tons of wheat -- independent 
estimates place this figure closer to one million tons.  This is 
half of the wheat needed for the country's population. 
 
¶6.  (SBU) The expansion of wheat and cotton production also resulted 
a decrease in the land available for growing fruits, vegetables, 
rice, and other products.  Turkmenistan imports fresh and dried 
fruit, vegetables and nuts from Iran, Pakistan and the United Arab 
Emirates; sunflower oil from Russia, Ukraine and Turkey; and soybean 
oil from Iran.  Turkmenistan produces cottonseed oil, which is 
mainly consumed by the country's rural population due to its lower 
cost. 
 
¶7.  (SBU) Over the past three years, domestic production of meat and 
dairy products decreased due to both the increased price of animal 
feed and the decreased acreage for grazing -- a direct result of the 
government's expansion of wheat and cotton production.  (NOTE: 
These decreases were exacerbated by extensive livestock losses due 
to the abnormally low temperatures during January and February 2008. 
 END NOTE.)  This decreased production also led to sharp price 
increases for these products. 
 
ECONOMY 
 
¶8.  (SBU) The European Bank for Reconstruction and Development has 
 
ASHGABAT 00000546  002 OF 002 
 
 
estimated inflation since the beginning of the year to be at 30 
percent.  Over the past 18 months, prices at local markets increased 
25 percent for flour, 50 percent for butter, and 120 percent for 
sunflower oil.  These higher prices were the result of a number of 
factors, including global increases in food prices, decreased 
domestic production and sharply rising transportation costs 
following a sharp 800% increase in gasoline prices as the president 
seeks to begin phasing out fuel subsidies.  The higher flour prices 
were reflected in the increased price of bread sold at the markets. 
 
 
POLITICAL IMPACT 
 
¶9.  (SBU) Until February 2008, the government was fairly successful 
in maintaining living standards of the very poor through a system of 
extensive subsidies, including cheap automobile gasoline.  A 
February 11 government-mandated gasoline price increase immediately 
caused a spike in transportation costs and set off a 20 to 50 
percent increase in food prices.  Food prices continue to rise, 
putting the population -- especially those with low incomes -- 
closer to the edge of survival.  Public discontent is growing, but 
there have not yet been any signs of unrest or friction between 
Turkmenistan's "haves" -- basically government officials -- and 
"have-nots." 
 
ENVIRONMENT 
 
¶10.  (SBU) Former President Niyazov's ambitious and unrealistic 
plans for wheat and cotton resulted in degradation of soil and water 
quality, salinization of farmlands, and ecological imbalances. 
Although the government adopted a new land code in 2004, which 
states that land will be taken away from farmers who misuse or waste 
land and water, the land is rarely enforced in Turkmenistan, where 
all land is state-owned. 
 
HOST GOVERNMENT POLICIES 
 
¶11.  (SBU) Government officials appear to be well aware of public 
discontent.  In addition to increasing security, government 
officials have responded by purchasing chicken from the United 
States and low-quality "buffalo" meat from India.  On April 29, the 
president signed a decree ordering an increase in the acreage (from 
13,000 hectares to 18,000 hectares) to be allocated to rice 
production.  He also has offered soft loans and tax benefits for 
private food producers.  All these measures are intended to address 
shortages and keep prices under control. 
 
POST PROGRAMS 
 
¶12.  (U) This post does not administer food aid programs. 
 
POLICY PROPOSALS 
 
¶13.  (U) Post has encouraged and will continue to encourage the 
Government of Turkmenistan to allow farmers to privatize plots in 
order to reduce monoculture.  Post also encourages the Government of 
Turkmenistan to commence utilization of environmentally sound 
farming techniques such as crop rotation. 
 
CURRAN