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DE RUEHAH #1045/01 2251024
ZNR UUUUU ZZH
P 121024Z AUG 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 1317
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 4136
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1948
RUEHKO/AMEMBASSY TOKYO PRIORITY 1813
RUEHIT/AMCONSUL ISTANBUL PRIORITY 2384
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0852
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RHMFIUU/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUEHVEN/USMISSION USOSCE PRIORITY 2759
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RUEKJCS/JOINT STAFF WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 ASHGABAT 001045 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
 
E.O. 12958: N/A 
TAGS: PGOV EPET EINV EIND CH TX
SUBJECT: TURKMENISTAN:  ENJOYING THE BENEFITS OF ITS 
PARTNERSHIP WITH CHINA 
 
¶1.  (U)  Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU)  SUMMARY:  Few would disagree that China's 
relationship with Turkmenistan centers almost exclusively on 
its expanding energy partnership and trade.  Regular 
political and economic engagement between the two states 
during President Berdimuhamedov's tenure in office suggests 
that his administration sees real benefit in expanding the 
relationship.  Although China has provided an alternative 
path for natural gas exports, Turkmenistan will likely 
continue to view it as one of a multitude of key 
relationships that must be balanced carefully.  END SUMMARY. 
 
¶3.  (SBU)  The Chinese-Turkmen bilateral relationship is 
based on the unique benefits each state derives from it. 
Although the relationship primarily is focused on economic -- 
and especially energy -- development goals, there is little 
in the political or military relationship that holds the 
potential to divide the two states.  Bolstered by a series of 
meetings, most recently on the fringes of the Olympics, the 
chemistry between Presidents Hu Jintao and Berdimuhamedov is 
basically good, according to Chinese DCM Li Hua.  This is 
reflected by still-developing plans for President Hu to make 
a state visit to Turkmenistan in late 2008.  With each 
country clearly aware of the value of the partnership, the 
relationship is cooperative and continuing to grow. 
 
MUTUALLY ADVANTAGEOUS, WITHOUT THE BAGGAGE 
 
¶4.  (SBU)  Nowhere is the symbiotic perspective more apparent 
than in the realm of energy.  Turkmenistan's goals of 
exporting more gas, developing and diversifying its 
hydrocarbon infrastructure and pipeline diversification are 
making more progress with Chinese partners than any others. 
Wanting its share of profit from the natural gas field that 
straddles Turkmenistan's border with Uzbekistan (Uzbekistan 
is already extracting gas in the field) and runs through the 
right bank of the Amu Darya, Turkmenistan selected the one 
country to work the block that it both hoped could handle the 
complexities of drilling in a high-sulfur environment and 
felt comfortable with, according to a Turkmengaz official. 
This decision has largely been successful:  Turkmen officials 
have already successfully used their blossoming energy 
relationship with China -- and the prospective opening of a 
new export pipeline that will not run through Russia -- to 
extract a much higher price for its natural gas from Gazprom 
-- $150 per thousand cubic meters in the second half of 2008. 
 Turkmenistan, in turn, understands China's need to bring 
more energy resources into its heartland to satisfy rapidly 
expanding industrial development.  China's willingness to 
throw cash toward an arrangement to guarantee a source of 
natural gas for the foreseeable future has put energy at the 
center of the bilateral relationship. 
 
TURKMENISTAN-CHINA PIPELINE MOVING FORWARD 
 
¶5.  (SBU)  When the two countries signed a major pipeline 
agreement in July 2007, it set into motion a plan for 
hydrocarbon development in eastern Turkmenistan that seems 
unlikely to experience significant political or economic 
hurdles.  In the deal, Turkmenistan got its wish of building 
an alternative gas pipeline going somewhere other than 
Russia.  China National Petroleum Corporation (CNPC) and its 
subsidiaries received the only production sharing agreement 
(PSA) that Berdimuhamedov's government has so far given to a 
foreign company onshore.  The pipeline ultimately is to 
deliver 30 bcm of natural gas per year to China, for a 30 
year term.  In a potentially new development, however, 
President Berdimuhamedov reportedly offered to Hu in Beijing 
to increase the volume of gas sales to 40 bcm per year.  (Li 
had no comment on this report.)  CNPC and its subsidiaries 
 
ASHGABAT 00001045  002 OF 003 
 
 
are now engaging in aggressive work to assess and develop gas 
resources in Lebap Province, and to build infrastructure to 
process and transport those resources when they are finally 
realized.  A gas processing plant is due to be completed near 
Turkmenabat before the end of the year.  Press sources and Li 
have continued to maintain that the Turkmenistan-China 
pipeline will be completed in 2009, although domestic 
competition for construction materials may push the 
completion date further off. 
CHINA VALUABLE AS AN ECONOMIC PARTNER IN OTHER AREAS 
 
¶6.  (SBU)  Chinese economic influence has been thriving in 
Turkmenistan in other regards as well.  Starved for foreign 
investment, Turkmenistan has been more than willing to open 
the door for Chinese companies, who have benefited from the 
Chinese government's willingness to sweeten prospective deals 
with extremely low-interest (1%) loans.  Huawei and ZTE, 
among others, increasingly have won lucrative tenders for 
non-hydrocarbon industrial development, as well as for the 
laying of fiber-optic cable and provision of Internet support 
technologies that will help modernize the telecommunications 
sector, to name a few.  President Berdimuhamedov met with 
Lenovo in Beijing, which clearly is also hoping to cash in on 
Turkmenistan's push to join the 21st century.  Taking China's 
growing commercial presence in new directions, construction 
company Capital Longhi has come to Turkmenistan, where it is 
currently building a few apartment buildings in hopes of 
eventually winning many more lucrative construction 
contracts.  Turkmenistan's government has also shown favor to 
Chinese railway technology, which will help the country to 
refurbish and expand its railway transportation capacity. 
 
¶7.  (SBU)  Turkmenistan has also benefited from educational 
assistance the Chinese government provided in past years, 
both for military and civilian educational scholarships. 
This year, Chinese officials indicated that they will 
increase the numbers of scholarships they will offer to 
Turkmen students, opening the door for as many as 60 students 
(30 civilian, and approximately 30 military) to study there 
next year.  Li noted that there are also approximately 100 
Turkmen students studying in China at their own expense. 
 
RELATIONSHIP UNENCUMBERED BY POLITICAL ISSUES 
 
¶8.  (SBU)  China and Turkmenistan appear to have few 
significant political differences, either bilaterally or in a 
regional sense.  President Berdimuhamedov assured Chinese 
leaders upon his arrival in office that Turkmenistan would 
continue to support China's "one China" policy, and has 
voiced his agreement with China's views on separatist groups 
such as the Uighurs.  The two countries signed a 10-year 
agreement to exchange information on regional terrorist 
organizations such as the East Turkestan terrorist group. 
 
¶9.  (SBU)  Although Turkmenistan does not belong to the 
Shanghai Cooperation Organization, due to its status as a 
"permanently neutral" state, it nevertheless maintains a 
connection to the group.  The two states also enjoy a 
bilateral relationship that lacks a substantive human rights 
component, which has long complicated Turkmenistan's economic 
partnership goals with EU member states and the United 
States.  Commenting on this, Chinese DCM Li Hua said that "we 
both believe that it is important to feed people first; only 
when they have full bellies can we discuss human rights." 
Turkmenistan also sent a humanitarian shipment of clothing, 
bedding and other essential items to victims of the Sichuan 
earthquake. 
 
¶10.  (SBU)  COMMENT:  There is no question this relationship 
has been good for both parties.  What remains to be seen, 
however, is the degree to which Turkmenistan's leaders will 
 
ASHGABAT 00001045  003 OF 003 
 
 
permit an increase in China's footprint here.  While China's 
distance and lack of obvious political agenda up to now have 
made it an attractive partner, the Turkmen will not want to 
give China any more influence than they have given to any 
other of the countries seeking to expand their presence in 
Turkmenistan.  Nevertheless, the former EBRD representative 
has expressed concern that the Turkmen may be getting in over 
their heads in terms of gas delivery commitments and 
acceptance of Chinese loans.  END COMMENT. 
CURRAN