VZCZCXRO0149
PP RUEHAG RUEHBI RUEHCI RUEHDBU RUEHLH RUEHPW RUEHROV RUEHSR
DE RUEHAH #0387/01 0850533
ZNY CCCCC ZZH
P 260533Z MAR 09
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 2541
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 4992
RUEHBJ/AMEMBASSY BEIJING PRIORITY 2750
RUEHKO/AMEMBASSY TOKYO PRIORITY 2615
RUEHIT/AMCONSUL ISTANBUL PRIORITY 3236
RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 ASHGABAT 000387 
 
SIPDIS 
 
SCA/CEN; EEB 
PLEASE PASS TO USTDA DAN STEIN 
ENERGY FOR EKIMOFF/THOMPSON 
COMMERCE FOR HUEPER 
 
E.O. 12958: DECL: 03/25/2019 
TAGS: PGOV EINV EPET EFIN EBRD TX RS
SUBJECT: TURKMENISTAN: NOT WELL-MANAGED, BUT STILL 
FINANCIALLY STABLE, ACCORDING TO EBRD 
 
Classified By: DCM Sylvia Reed Curran for reasons 1.4 (b) and (d). 
 
¶1.  (C)  SUMMARY:  The EBRD's country manager recently 
painted a fairly stable picture of Turkmenistan's financial 
condition, in spite of the continuing global crisis.  The 
EBRD, though not a significant player here, is hoping to do 
more to promote the development of small- and medium-sized 
businesses and some form of privatization.  He noted that the 
country's economy is expected to enjoy continued annual 
growth of about ten percent, and that the crisis has thus far 
appeared to have little impact.  He expressed concern that 
finance-related ministries do not communicate with energy 
ministries, who could potentially warn them of approaching 
declines in revenue due to fluctuations on the world energy 
market.  The EBRD official's perspective on the country's 
financial leaders suggests that the relevant ministries could 
have difficulty keeping up with future developments in the 
global financial turmoil, much less engage in efforts to 
protect the national economy from its ill effects. 
Ultimately, however, Turkmenistan will probably continue to 
"muddle through."  END SUMMARY. 
 
EBRD SEEKING TO HELP SMALL BUSINESSES 
 
¶2.  (C)  A visiting scholar from the U.S.-based Center for 
Strategic and International Studies met with European Bank 
for Reconstruction and Development Country Director Neil 
McKain on March 16 to hear his views on the investment 
climate in Turkmenistan and prospects for oil and gas 
development.  Saying a few words about EBRD's current 
activities in Turkmenistan, McKain said that EBRD was 
currently only servicing modest loan projects that date back 
some eight years.  The EBRD, however, has been negotiating 
with Turkmen officials to approve a new project that would 
promote the development of small- and medium-sized 
businesses.  He said they hope to sign an agreement with the 
government by June 2009.  The project will provide investment 
capital for a handful of small food production companies and 
a supermarket chain, he added. 
 
¶3.  (C)  Regarding potential EBRD investment projects related 
to oil and gas, McKain offered that "niche" projects on 
ecology or energy efficiency would be the strongest 
contenders in Turkmenistan in the near term.  He said EBRD 
would like to conduct a nationwide audit of energy use to 
demonstrate to government officials how they might reduce 
domestic consumption, but there are no concrete plans to do 
that yet. 
 
LITTLE AWARENESS OF GLOBAL ENERGY PRICE FLUCTUATIONS 
 
¶4.  (C)  When asked his opinion regarding the Turkmen 
understanding of the current hydrocarbon market fluctuations, 
McKain said Turkmen officials have not demonstrated any 
awareness that European gas prices are likely to drop soon in 
the medium term.  He noted that the heads of ministries do 
not communicate with each other, so, for example, the Finance 
Ministry is unlikely to have received any warning from the 
Oil and Gas Ministry that it should anticipate a drop in 
export prices.  Communication also does not take place from 
the bottom up within the government, nor can private business 
people communicate with top leadership, he added. 
 
NOT WELL MANAGED, BUT "MUDDLING THROUGH" JUST FINE 
 
¶5.  (C)  McKain said that EBRD was still estimating 
Turkmenistan's economic growth at about ten percent next 
year, and the year after.  This, he said, means Turkmenistan 
will not be cash strapped any time soon.  While the country 
 
ASHGABAT 00000387  002 OF 002 
 
 
will feel the effects of changes in global oil and gas 
prices, it will nevertheless continue to be in good financial 
condition and able to cope.  When asked who he thought 
President Berdimuhammedov's closest economic advisors were, 
McKain opined that they were presidential administration 
officials Victor Khramov, Alexander Jadan and V. Umnov. 
(COMMENT:  McKain did not explain why he thought these 
shadowy figures dating from the Niyazov period were providing 
economic advice.  END COMMENT.) 
 
FURTHER ECONOMIC REFORM WOULD HELP 
 
¶6.  (C)  EBRD has been encouraged by modest economic reforms 
that the President has initiated over the last two years, 
McKain said.  The President made some encouraging remarks on 
agricultural reform at the recent Council of Elders meeting, 
and EBRD is hopeful that some land use reform will be part of 
that.  Currently, farmers can only rent land for one year at 
a time, but the government may extend the rental period.  A 
commercial entity recently rented a pier on the Caspian near 
the president's seaside palace that designated a 13-year 
lease period, he said, which is a sign of progress. 
 
¶7.  (C)  McKain said the reforms that EBRD would like to see 
unfold here include development of a more simplified raw 
materials or commodities exchange system, with a functioning 
commercial charges registry supported by agencies that do not 
exist now.  EBRD would also be encouraged by the 
privatization of some state enterprises, he said. 
 
¶8.  (C)  COMMENT: EBRD seems confident that Turkmenistan is 
in solid financial condition, in spite of the global 
financial crisis and instability in world oil and gas prices. 
 However, his window into financial decision-making suggests 
that the relevant ministries might have difficulty over the 
long term in keeping up with global financial turmoil, much 
less engaging in efforts to protect the national economy from 
its ill effects.  While Turkmenistan itself may not be 
directly feeling the pinch, major economic partners such as 
Russia, in coming months, could potentially pass along some 
of the unpleasant symptoms of the crisis, like cuts in 
capital investment flows or price increases for food imports. 
 Ultimately, however, Turkmenistan will likely continue to 
"muddle through," as it has done for some time.  END COMMENT. 
MILES