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PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDBU RUEHDF RUEHIK RUEHLH RUEHLN
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DE RUEHAH #0328/01 0720711
ZNR UUUUU ZZH
P 130711Z MAR 09
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 2457
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 4930
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RUCPDOC/DEPT OF COMMERCE WASHDC
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RUEATRS/DEPT OF TREASURY WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 3388

UNCLAS SECTION 01 OF 03 ASHGABAT 000328 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
 
E.O. 12958: N/A 
TAGS: PREL PGOV EFIN EPET ETRD TX RU IR
SUBJECT: ACCORDING TO TURKMENISTAN'S MINISTRY OF FINANCE, 
ALL IS WELL, FOR THE LONG- AND SHORT-TERM 
 
REF: 08 ASHGABAT 1394 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  According to one of the top officials at 
the Ministry of Finance, Turkmenistan's exchange rate will 
remain fixed for at least the next year in order to maintain 
stability and confidence among foreign investors.  She said 
Turkmenistan's economy is growing, inflation is down, and the 
country is working towards getting the most from its 
purchasing dollars by leveraging its resources to buy in bulk 
and use savings to benefit people.  The official mentioned 
"confidence of foreign investors" and private sector 
development several times, but did not acknowledge excessive 
bureaucracy and other hurdles.  She said that Turkmenistan 
plans budgets using conservative revenue estimates for its 
gas exports and that this situation is stable due to its 
regular customers (Russia and Iran).  The official expressed 
the opinion that nationalization of banks all over the world 
as a result of the international financial crisis will be a 
long-term situation.  Although she claimed strong growth in 
Turkmenistan's economy, especially the oil and gas sector, 
there could be problems if the country cannot meet its 
commitments to deliver gas to its regular customers in the 
next few years.    END SUMMARY. 
 
MONETARY POLICY 
 
¶3.  (SBU) Head of the Ministry of Finance Government Finance 
Consolidation Department, Galina Romanova -- who 
knowledgeable people in Turkmenistan's business and finance 
circles often consider the de facto minister due to her 
institutional knowledge and overall competency -- said in a 
meeting on March 11 that the Ministry has been working 
closely with the International Monetary Fund on currency 
exchange rate issues.   She said the IMF has counseled 
Turkmen officials that it is in the best interest for the 
country's -- and citizens' -- financial stability to maintain 
a fixed exchange rate for the next year at least.  Romanova 
said that Turkmenistan made this decision in order to 
maintain the confidence of foreign investors. 
 
STATUS OF TURKMENISTAN'S PRIMARY INDUSTRIES:  PETROCHEMICALS 
AND TEXTILES 
 
¶4.  (SBU) Romanova then said that Turkmenistan's economy grew 
110.5 percent over the previous year, and added that the 
International Monetary Fund and the European Bank for 
Reconstruction and Development confirmed this.  (COMMENT: 
EBRD has stated that Turkmenistan's GDP went down in 2008. 
END COMMENT.)  She said that gas exports continue to climb, 
including over last year, and that the country is bringing in 
substantially increased revenue due to higher gas prices paid 
by Russia.  She admitted some decrease in textile exports, 
possibly because of a decrease in demand in international 
markets because of the financial crisis, and said that 
Turkmenistan was considering ways of improving the quality 
and variety of exported textiles that would make them more 
desirable.  Romanova said that while textile exports do not 
play a large role in Turkmenistan's economy in comparison to 
that of the oil and gas sector, it nevertheless bears some 
weight on the economy and is worth mentioning.  Romanova then 
extolled Turkmenistan's efforts geared towards decrease of 
expenditures on imports, including raw materials and 
equipment used in construction, in order to reduce prices of 
final products and to encourage private sector development. 
A side effect of this is a decrease in the inflation rate. 
Turkmenistan aims to increase trade with the Commonwealth of 
Independent States and Europe, and is working on concluding 
tax and other agreements towards this end. 
 
INVESTMENT 
 
ASHGABAT 00000328  002 OF 003 
 
 
 
¶5.  (SBU) Investment policy is geared toward growth and 
diversification of the country's economy, and the country is 
devoting 70-75 percent of its investment resources towards 
stimulating sectors that can have an effect in the 
short-term, such as agriculture, transportation, and 
manufacturing.  According to Romanova, investment grew more 
than 600 percent from 2007 into 2008, which means that 
foreign investors have high confidence in Turkmenistan and 
that they feel comfortable investing in the country. 
Turkmenistan is using this injection of funds to support the 
Rural Development Plan.  Romanova said that President 
Berdimuhamedov has long-term plans to develop the country's 
technological capacity, naming education, information 
technology, and nanotechnology as examples. 
 
POSSIBILITY OF FALLING GAS PRICES:  NOT A CONCERN, AT ALL 
 
¶6.  (SBU) Romanova said that Turkmenistan is not considering 
falling gas prices as a potential problem because the country 
has "regular customers" which maintain income stability, as 
well as stability of exports and profits.  Romanova said that 
recent investments in oil and gas facilities have resulted in 
increased efficiency and quality, and therefore profits. 
Romanova also explained that the Government conservatively 
estimates income when planning budgets, which she felt is a 
useful means of refraining from financial overextension.  She 
pointed out that processing gas and oil in Russia is 
expensive because processing plants are located far away from 
the sources, resulting in high transportation costs.  "You 
have to consider all factors," she said. 
 
WEALTH STABILIZATION FUND 
 
¶7.  (SBU) Romanova explained that the Wealth Stabilization 
Fund (reftel) will be used on certain projects that will 
stimulate the economy, and also to make up the difference 
when certain projects need additional funds.  Also, the 
Government plans to use the fund to finance the purchase of 
certain products, such as construction materials and food, in 
large quantities in order to receive discounts for bulk 
purchases.  Profits from this scheme will be used to fund 
mortgages. 
 
CREDIT IN TURKMENISTAN REMAINS STABLE 
 
¶8.  (SBU) Romanova said that Turkmenistan's credit situation 
was stable "unlike in other countries all over the world," 
and pointed out that governments were nationalizing banks all 
over the world in order "to regulate the process and to 
influence policy of the banks."  After Economic Officer 
pointed out that this situation is not desirable, Romanova 
said that she thought this situation would not be temporary. 
 
¶9.  (SBU) COMMENT:  Romanova, and other high-level 
apparatchiks, have thrived in a command economy system and no 
doubt feel vindicated by the events around the international 
financial crisis.  Perhaps unintentionally, she gave the 
impression of satisfaction with current gas prices that the 
Turkmen receive from their regular customers, mainly Russia 
and, to a lesser extent, Iran.  But, despite Romanova's 
upbeat outlook, the global crisis is being felt even here. 
In his remarks to the assembled Council of Elders on March 6, 
President Berdimuhamedov said the crisis is "negatively 
affecting the country's economy ... above all, 
export-oriented industrial sectors."  The President noted 
that revenues have been lost due to drops in both demand for 
and prices of Turkmenistan's export items.  On the positive 
side, he asserted that Turkmenistan's banking sector has been 
unaffected by the crisis because of the country's complete 
lack of foreign debt, and that as a result, the national 
currency remains strong.  Perhaps the government revenue 
 
ASHGABAT 00000328  003 OF 003 
 
 
situation will become more acute in coming years if export 
prices continue to fall, or if the country cannot meet its 
commitments to deliver gas.  END COMMENT. 
MILES