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RUEHNEH RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #1484/01 3170647
ZNR UUUUU ZZH
P 120647Z NOV 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 1848
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 4490
RUEHBJ/AMEMBASSY BEIJING 2302
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RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
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RUEKJCS/JOINT STAFF WASHDC
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEHVEN/USMISSION USOSCE 3058

UNCLAS SECTION 01 OF 07 ASHGABAT 001484 
 
SIPDIS 
SENSITIVE 
 
STATE FOR SCA/CEN, EEB 
PLEASE PASS TO USTDA DAN STEIN 
ENERGY FOR EKIMOFF/THOMPSON 
COMMERCE FOR HUEPER 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EPET PHUM TX
SUBJECT: TURKMENISTAN: SCENESETTER FOR THE VISIT OF 
COORDINATOR FOR EURASIAN ENERGY DIPLOMACY AMBASSADOR STEVEN 
¶R. MANN 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  Embassy Ashgabat warmly welcomes your 
visit to Turkmenistan during the 13th Turkmenistan 
International Oil and Gas Conference as an important 
opportunity to advance our bilateral dialogue concerning the 
further development of Turkmenistan's energy resources.  Now 
approaching his second year of presidency, Berdimuhamedov is 
increasingly self-confident.  We believe his instincts are 
generally right, even if his understanding is elementary and 
his implementation timelines unrealistically quick. 
Turkmenistan will gradually bring its standards -- including 
educational and human rights -- more in line with 
international levels.  But he's starting from almost zero 
with very few on his team who have the experience and 
capacity to implement the reforms he says he wants.   Like 
many ex-Soviet governments, Turkmenistan relies too heavily 
on presidential decrees and the power of law-on-paper.  The 
longer-term monumental task will be to change ingrained 
national political psychology, the entrenched bureaucracy, 
and the culture of rent-seeking.  END SUMMARY. 
 
¶3.  (SBU) Nearly two years into the new era, it is clear 
Turkmenistan is becoming significantly different from the 
international bad-joke pariah state it was under the late 
President-for-Life Niyazov.  But precisely what Turkmenistan 
is becoming is still a work in progress.  Evidence 
increasingly suggests it could well one day become a 
responsible partner for the United States and a normal 
international player.  Berdimuhamedov's fundamental policies 
have been promising.  However, he faces an uphill struggle 
against political traditions that favor autocratic governance 
models and a bureaucratic capacity stunted by 15 years of 
Niyazovian repression and solipcism.  The challenge will not 
be to get new reforms on the books -- Berdimuhamedov is 
already beginning to do this -- but rather, to change the 
attitudes and modi operandi of those officials responsible 
for implementing the new policies. 
 
ECONOMY AND FINANCE 
 
¶4.  (SBU) President Berdimuhamedov has stated repeatedly, in 
many fora, that he wants to develop an international-standard 
market economy and to promote foreign investment.  To those 
ends, he has placed a new priority over the past eight months 
on promoting economic and financial reform.  Turkmenistan has 
announced that it will re-denominate its currency in 2009, 
lopping off three zeros, and has already unified the 
country's dual exchange rates.  The president has stated that 
some state enterprises will be privatized -- though not in 
"strategic" sectors like oil and gas, electricity, textiles, 
construction, transportation, and communications.  He has 
signed a new foreign investment law, which, among other 
things, guarantees resident foreign businessmen and their 
families one-year, multi-entry visas, and approved changes to 
the tax code.  The president divided the overworked Ministry 
of Economy and Finance into two bodies -- a Ministry of 
Economy and Development, and a Ministry of Finance, and he 
has created a Supreme Auditing Chamber with the goal of 
providing transparency in the budget process.  In a notable 
development, the president also announced that he will 
abolish the opaque extrabudgetary funds that were prone under 
his predecessor to misuse and corruption.  Finally, the state 
has slowly begun to raise the price of electricity and price 
of vehicle fuel.  These measures could be part of an early 
effort to phase out the state's extensive and tremendously 
expensive subsidies system. 
 
 
ASHGABAT 00001484  002 OF 007 
 
 
¶5.  (SBU) Even though the president has reshaped his 
bureaucracy, put in place the structures that theoretically 
should help promote a market economy, and opened Turkmenistan 
to cooperation with IFIs, the lack of basic understanding and 
bureaucratic capacity remains an enormous impediment to 
change.  New reforms are being rolled out with inadequate 
preparation, understanding of their consequences and 
explanation -- and are leading to increased public 
dissatisfaction.  USAID is working through its contractor, 
BearingPoint, to increase human capacity in several new 
government institutions, to prepare the strategy to support 
private sector development, and to support the introduction 
of International Financial Reporting Standards in 
Turkmenistan. 
 
ENERGY 
 
¶6.  (SBU) Turkmenistan has world-class natural gas reserves, 
but Russia's near monopoly of its energy exports has left 
Turkmenistan receiving much less than the world price and 
overly beholden to Russia, although Gazprom has agreed to pay 
the "world price" starting in 2009.  (NOTE:  Despite this 
promise, Gazprom and Turkmenistan have yet to agree on 
precisely what this means and are still negotiating natural 
gas prices for 2009.  END NOTE.)  Pipeline diversification, 
including both a pipeline to China scheduled for completion 
in late 2009 and the possibility of resurrecting plans for 
Trans-Caspian and Trans-Afghanistan pipelines that would 
avoid the Russian routes, and construction of high-voltage 
electricity lines to transport excess energy to 
Turkmenistan's neighbors, including Afghanistan, would not 
only enhance Turkmenistan's economic and political 
sovereignty, but also help fuel new levels of prosperity 
throughout the region.  Berdimuhamedov has told U.S. 
interlocutors he recognizes the need for more options and has 
taken the first steps to this end, but he also took the steps 
needed to increase the volume of gas exports to Russia, 
signing an agreement (with Russia and Kazakhstan) in Moscow 
in December 2007 to enlarge and rebuild a non-functioning 
Soviet-era Caspian littoral pipeline.  While little progress 
has been publicized on this project, government officials and 
some foreign oil company officials maintain that plans are on 
track, with construction to begin in 2009.  Berdimuhamedov 
will require encouragement and assistance from the 
international community if he is to maintain a course of 
diversification in the face of ongoing Russian efforts to 
keep Turkmenistan from weaning itself away from Russia. 
 
¶7.  (SBU) Although Turkmenistan and Azerbaijan have made 
excellent progress over the past year in resolving many of 
the issues that had troubled their relationship, officials 
have been broadcasting signals in recent months that -- from 
Turkmenistan's perspective -- the relationship is still not 
trouble-free.  Fundamentally, Turkmen leaders seem to believe 
that they have made most of the efforts at rapprochement over 
the last year, and are looking for signs that the Azeris are 
taking them seriously.  It is more important than ever for 
the United States to continue its constructive role, urging 
the two sides to work together. 
 
¶8.  (SBU) One of the biggest challenges that Turkmenistan's 
hydrocarbon sector will have to face, if it is to succeed in 
pipeline diversification, is the need for increased 
natural-gas production.  Turkmenistan produced a reported 
72.3 billion cubic meters (bcm) in 2007, a figure that barely 
meets its existing domestic needs and export commitments. The 
president directed that production should increase to 81.5 
bcm in 2008.  Even larger increases will be needed as/if new 
 
ASHGABAT 00001484  003 OF 007 
 
 
pipelines come online.  While Turkmenistan has welcomed 
foreign companies to work its offshore (primarily oil) 
Caspian blocks, it has up to now largely rejected allowing 
foreign energy companies to work its onshore gas fields, 
maintaining that it can handle the drilling itself.  But 
onshore natural gas production offers some tough challenges, 
including ultra-deep, high-pressure, high-sulphur, sub-salt 
drilling, which requires special skills and technologies and 
massive investment.  One Western analyst suggested that costs 
could run as high as $100 billion over the next five years. 
No one outside of the Turkmen government believes 
Turkmenistan has either the skills or the financial resources 
needed.  U.S. policy has been to promote onshore production 
by major Western oil companies.  President Berdimuhamedov 
told visiting U.S. officials in September that foreign 
companies would not be permitted to work onshore.  Given the 
technological challenges in extracting onshore gas, the 
policy could change in the future. 
 
¶9.  (SBU) Turkmen government policy and decision-making in 
the oil and gas sector remain cumbersome.  In August, the 
framework for government activity in the hydrocarbon sector 
was shaken up by the adoption of a new Petroleum Law and a 
shuffling of personnel at the key state oil and gas entities. 
 Foreign energy companies operating in Turkmenistan view the 
new law as a good first step in making it easier to do 
business here, and see the State Agency for Management and 
Use of Hydrocarbon Resources' ("State Agency") central role 
in implementing the law as a sign that the government is 
getting more serious about doing business with foreign 
companies.  The law includes new types of licensing 
arrangements, and new provisions apply some of the same 
protections given to production sharing agreement holders to 
service companies and sub-contractors.  As with any new law, 
however, the ultimate test will be its implementation, which 
depends in large measure on the new team of officials 
appointed in the oil and gas sector shortly after publication 
of the law.  Developments at the State Agency, which is 
intended to be a one-stop shop for IOCs wanting to do 
business in Turkmenistan, will weigh particularly heavily on 
the prospects for foreign companies.  State Agency Director 
Yagshygeldi Kakayev continues to put his team, expanded to 
cover the agency's new responsibilities, in place.  Even when 
fully staffed, the State Agency will be challenged in terms 
of the expertise needed to fulfill its mandate under the new 
law vis--vis the IOCs.  Meanwhile, the process for 
consideration of at least some IOC offshore and onshore 
proposals has apparently ground to a halt as the government 
still looks for maximum flexibility in applying its policy. 
 
DEMOCRACY AND HUMAN RIGHTS 
 
¶10.  (SBU) President Berdimuhamedov has made a public 
commitment to bring Turkmenistan's laws and practices -- 
including those relating to human rights -- up to 
international standards.  On his order, the country's legal, 
human rights and legislative bodies are working overtime to 
rewrite or draft more than 30 laws and codes, including on 
religion and civic organizations, family, criminal, and 
criminal procedure codes.  In late September, a revised 
National Constitution was adopted.  It included provisions 
for a strengthened and enlarged Mejlis (parliament), 
eliminated many of former President Niyazov's strange 
addenda, and contained some rights-related textual changes 
that the international community had suggested.  Most 
notably, it eliminated the Halk Maslahaty (Peoples' Council), 
an oversized, bureaucratic, and largely rubber stamp body 
whose powers have largely been transferred to the Mejlis.  A 
 
ASHGABAT 00001484  004 OF 007 
 
 
new law on election to the Mejlis has also been adopted, and 
elections to an expanded (now 125-seat) parliament will be 
held in December. 
 
¶11.  (SBU) In seeking to promote democratic development and 
strengthened respect for human rights, the Embassy is working 
with the newly empowered Institute of Democracy and Human 
Rights, which is one of the government bodies most open to 
and cooperative with foreign donors.  We believe that this 
body, which has a director who clearly enjoys the trust of 
the president, can play a significant role.  In January, the 
Ministry of Foreign Affairs agreed to USAID's proposal for 
cooperation with the Institute.  Areas for cooperation 
include information exchange, the provision of legal and 
technical expertise, and support for increased access to 
information.  The Institute has fully embraced USAID as a 
valued partner.  Together with the Institute, USAID's 
partner, the International Center for Not-for-Profit Law, has 
laid out an ambitious plan for cooperation over the next 
year.  Other USAID partners have made or are preparing to 
make other proposals based on feedback from the Institute. 
 
¶12.  (SBU) Although the president is making progress in 
overhauling Turkmenistan's laws, human rights practices 
continue to lag behind the president's intentions.  RFE/RL 
reporters continue to experience considerable harassment from 
security forces, including efforts to disrupt the wedding of 
one reporter's son.  Small evangelical Christian religious 
groups continue to experience problems with registration, and 
some unregistered groups have experienced harassment.  We 
have heard reports that some individuals are being barred 
from travel abroad, although the government has been willing 
to reverse travel bans in a limited number of cases where 
there is a clear U.S. interest.  While Berdimuhamedov in 2007 
released Turkmenistan's former Grand Mufti, imprisoned since 
2005 under charges of complicity in the 2002 attack, only a 
handful of other individuals, who were also imprisoned for 
alleged involvement in the attack have been released. 
Saparmurad Seidov, a named conspirator in the attack, who was 
released in October, was the most recent person freed. 
 
MEDIA 
 
¶13.  (SBU) While most of Turkmenistan's media remains 
state-controlled, President Berdimuhamedov has emphasized the 
need for reform, calling for more creativity and more 
international and political news to better inform readers and 
viewers.  Simultaneously, however, he has noted that a 
principal role of the media is to stimulate patriotism and 
support for reform efforts, and there is no official 
discussion of allowing independent media to develop.  Within 
this context, state media have shown gradually increasing 
openness, but still much uncertainty and a lack of capacity 
in attempting to fulfill the president's demands.  In 
particular, the Ministry of Culture and Broadcasting has 
asked specifically for U.S. experts and assistance to further 
develop Turkmenistan's news media.  This has led to 
unprecedented Embassy access to and contact with state media, 
but also so far to only minimal improvements in 
newsgathering, editing and production techniques.  Both 
broadcast and print media have started to cover a wider range 
of topics, but would not even think of challenging or 
criticizing government policies.  These limits are a result 
of strict self-censorship -- no one wants to be the first to 
try an "unapproved" innovation.  We believe there remains 
potential for coaxing Turkmenistan's media further along the 
road to providing more and better information.  A next step 
in this regard could be continued and expanded partnerships 
 
ASHGABAT 00001484  005 OF 007 
 
 
with U.S. and other foreign media outlets. 
 
EDUCATION 
 
¶14.  (SBU) President Berdimuhamedov and his officials 
repeatedly emphasize that reforming the education sector has 
been one of their top priorities, and he has said to U.S. 
visitors the hardest task is to change the mentality of a 
people.  Standard schooling has returned to the ten-year 
model of the Soviet era from Niyazov's nine-year standard. 
University education has returned to the previous standard of 
five years, instead of Niyazov's model of two years of study 
and two years of work.  Graduate study programs resumed in 
September following a many-year hiatus, but there appears to 
be a real lack of expertise and direction to make these 
successful.  Many new university buildings have been built or 
are under construction.  The country is opening "state of the 
art" grade schools and secondary schools, but seems to 
neglect teacher training and other programmatic aspects. 
Recently, the president announced that any new school 
construction project will only be considered completed when 
the building has full Internet access. 
 
¶15.  (SBU) And yet, to date, the president's (and 
government's) focus has been more on improving the shell than 
on reforming the core of the educational system.  While there 
has been little emphasis placed up to now on retraining 
teachers or on modernizing the curricula, there have been 
some clear signs, during recent visits of delegations from 
both Texas A&M and Chadron State College (Nebraska), that the 
government recognizes the links between human capacity and 
curricula and may be considering curricula changes for 
institutions of higher education.  In particular, the 
Minister of Education is eager to re-start a Texas A&M 
partnership that would reform Turkmenistan's sole business 
education program to American standards over the next 3-4 
years (this project is being fine-tuned for review by the 
Government of Turkmenistan).  At lower levels, however, the 
system -- including some hard-core hold-outs like the 
infamous Nury Bayramov, the Ministry of Education's 
International Relations head -- continues to constrain 
individual initiative and block suggestions for improvements 
and reforms from reaching the Minister.  In particular, many 
returned exchange participants are prevented or discouraged 
from returning to their places of work or study.  Despite 
these problems, there have been some glimmers of interest in 
a Bolashak-like program in which the government would provide 
scholarships to Turkmen students to attend U.S. universities. 
 
¶16.  (SBU) Action on U.S.-sponsored educational programs is 
focused in USAID and the Embassy's Public Diplomacy section. 
More than 100 Turkmenistan citizens are participating in 2008 
in the Embassy's FLEX (high-school), UGRAD (college-level), 
Turkmenistan AUCA Scholarship program (TASP), Teachers 
Excellence and Achievement (TEA), Muskie, Fulbright and 
Humphrey exchange programs.  Through its Quality Learning 
Program, USAID is seeking to support efforts to improve 
teaching and student assessment methodologies, increase 
teachers' participation in curriculum and education policy 
development, and promote development of transparent and 
efficient school finance and management systems.  In July, 
USAID proposed to assist Turkmenistan to improve pre-service 
and in-service teachers skills and content for secondary 
math, science and advanced literacy courses, and currently 
awaits the ministry's feedback. 
 
FOREIGN POLICY 
 
 
ASHGABAT 00001484  006 OF 007 
 
 
¶17.  (SBU) Like Niyazov, Berdimuhamedov has emphasized 
"neutrality" as the hallmark of the country's foreign policy. 
 Nevertheless, Berdimuhamedov has put an unprecedented 
emphasis on foreign affairs to repair Turkmenistan's 
international and regional relations and to become a 
respected player on the international stage.  Under the 
president's leadership, Turkmenistan has reached out to 
participate actively in regional organizations.  He has met 
with all the leaders in the region, as well as with those of 
other countries of importance to Turkmenistan.  China has a 
strong and growing commercial presence in Turkmenistan, and 
continues to court the president through a series of 
high-level commercial and political visits, including a July 
2007 Berdimuhamedov trip to Beijing focused on natural gas 
and pipeline deals, followed by two visits by President Hu 
Jintao to Ashgabat.  Presidents Berdimuhamedov and Gul 
(Turkey) have exchanged visits, but bilateral relations 
continue to be colored more by the image of Turkey's 
lucrative trade and construction contracts that are eating up 
large amounts of money from the national budget. 
Berdimuhamedov has held positive meetings with high-level 
leaders of international organizations (including both the UN 
and the Organization for Security and Cooperation in Europe) 
and IFIs that have led to productive, cooperative 
relationships.  UN Special Rapporteur on Religion Asma 
Jahangir met with Berdimuhamedov in early September, and 
OSCE's High Commissioner on National Minorities Knut 
Vollebaek visited in April. 
 
¶18.  (SBU) Berdimuhamedov has held positive meetings with 
high-level U.S. officials and is well-disposed toward the 
United States.  He made his first trip to the United States 
as president to participate in the UNGA session in September 
2007, where he also met with Secretary of State Rice.  In 
November 2007, Secretary of Energy Bodman met with 
Berdimuhamedov in Ashgabat, and Berdimuhamedov's meeting with 
President Bush during the April Bucharest NATO summit 
received extensive and very positive media coverage in 
Turkmenistan.  Berdimuhamedov made his first visit to EU and 
NATO headquarters in Brussels in November 2007. 
 
REGIONAL POLICY 
 
¶19.  (SBU) Accompanying the president's focus on reaching out 
to Turkmenistan's near and more distant neighbors has been an 
increased effort to participate in and cooperate with 
regional fora.  During President Berdimuhamedov's tenure, 
Turkmenistan has become an increasingly active player in a 
number of regional fora, including the (counter-narcotics) 
Central Asian Regional Information and Coordination Center, 
the Central Asian Trade Investment Framework Agreement 
mechanism (TIFA), and the European Union's Central Asian 
Troika process (Turkmenistan hosted the troika meeting and 
wanted to host TIFA).  Cognizant of its neutral status, it 
has bolstered its previous participation in meetings of the 
Commonwealth of Independent States and in its participation 
-- as an observer -- in the Shanghai Cooperation 
Organization, as well as in NATO with the status of a 
Partnership-for-Peace country.  Turkmenistan is also 
participating in regional reconstruction efforts in 
Afghanistan and sponsoring a number of Afghan students at its 
universities and pedagogical institutes.  In early April, the 
Turkmen government agreed to bolster by 2010 the electricity 
it is already selling to Afghanistan by an additional 300 
megawatts.  The president also agreed to extend the current 
price at which Turkmenistan is selling electricity to 
Afghanistan -- 2 cents per kilowatt hour -- to 2010. 
 
 
ASHGABAT 00001484  007 OF 007 
 
 
COUNTER-NARCOTICS COOPERATION 
 
¶20.  (SBU) Berdimuhamedov's efforts to distance himself 
gradually from Niyazov's "Golden Age," we-have-no-problems 
rhetoric, have led him to acknowledge publicly that 
Turkmenistan has serious problems with narcotics trafficking 
and addiction, primarily opiates from Afghanistan.  In 
January 2008, he established and funded the new State 
Counter-Narcotics Service with DEA-like responsibilities for 
both interdiction and demand-reduction efforts. 
Berdimuhamedov put in charge an activist official, Murat 
Islamov, that the international donor community both respects 
and trusts.  While Islamov already has a headquarters 
building, he is literally building his new service from the 
ground up.  During a meeting with Embassy officers in April, 
he welcomed whatever training and equipment the United States 
can provide.  With a promised infusion of $10 million in 
CENTCOM counter-narcotics funds in FY 09 and the possibility 
of an increased amount in FY 10, the Embassy country team is 
now working with SCNS to focus efforts to most effectively 
provide assistance to Turkmen counter-narcotics efforts. 
These efforts have led to the recent arrival of a TDY DEA 
special agent to pave the way for a permanent DEA presence. 
 
SECURITY 
 
¶21.  (SBU) The U.S. security relationship with Turkmenistan 
continues to unfold, with slow but consistent cooperation. 
Although basing is not an option, Turkmenistan remains an 
important conduit for the U.S. military to Afghanistan. 
Maintaining blanket overflight permission and the military 
refueling operation at Ashgabat Airport remains a key U.S. 
goal.  CENTCOM and Turkmenistan's military maintain an active 
military-to-military cooperation plan and a productive 
counter-narcotics program which has funded training and 
completion of two border-crossing stations on the Iranian and 
Afghan borders.  A third border-crossing station is nearing 
completion at Farap on the Uzbekistan border (under the 
supervision of the Nevada National Guard operating through 
the State Partnership Program), with two more to follow 
funded through CENTCOM's military cooperation program.  With 
the assistance of the Embassy's EXBS program, the Embassy 
works to strengthen Turkmenistan's border security and to 
increase its ability to interdict smuggling of weapons of 
mass destruction. 
 
¶22. (SBU) Current U.S. security assistance programs focus on 
improving the communications capability of the Turkmenistan 
armed forces in the areas of emergency response and border 
security, English language ability, and in building a future 
leadership with western principles.  The EXBS program has 
provided support for operational upkeep of the former USCG 
Cutter Point Jackson, a U.S. Excess Defense Article donation 
to the State Border Service in 2001, which is one of the few 
operational vessels in the Turkmenistan maritime security 
forces.  Turkmenistan has received FMF/IMET since 1997 and in 
FY08 received $0/$300K. 
CURRAN