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UNCLAS SECTION 01 OF 02 ASHGABAT 000655 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR SCA/CEN; EEB 
 
E.O. 12958: N/A 
TAGS: PGOV EIND EINV ECON TX
SUBJECT:  TURKMENISTAN TO PRODUCE METAL CONSTRUCTION MATERIALS 
 
ASHGABAT 00000655  001.2 OF 002 
 
 
¶1. (U)  Sensitive but unclassified.  Not for Internet distribution. 
 
¶2. (SBU)  SUMMARY:  Last week, President Berdimuhamedov commissioned 
Turkmenistan's first metal works plant.  The project, which was 
approved when former President Niyazov was still alive, was intended 
to reduce the importation of metal materials used for construction. 
However, opening such a factory makes little economic sense given 
the country's lack of raw materials needed for such production. 
Although the original idea was to produce new materials made from 
recycled metal waste, the supply of metal waste will be too limited 
to keep the factory operating for very long, raising questions about 
why the decision was made by the post-Niyazov Government to continue 
with its construction.  END SUMMARY. 
 
NIYAZOV'S IDEA TO BUILD THE PLANT 
 
¶3. (SBU)  In June 2005, the late President Niyazov instructed the 
Turkmen State Mechanical Engineering Concern to sign a $64.5 million 
contract with two Turkish companies to build the first metalworks in 
Turkmenistan.  According to the decree, the Turkish companies 
Erdemir and Sehil were to have begun construction in August 2005 and 
finish before February 2007.  President Niyazov instructed all 
government organizations and agencies to collect metal waste 
materials and send them to the plant.  However, the plant's 
construction floundered for four years before it was commissioned in 
early May 2009.  The factory's mission was to manufacture metal 
construction materials that are in high demand in Turkmenistan but 
are imported at great expense. 
 
THE PLANT IS READY, BUT ... 
 
¶4. (SBU)  Last week, President Berdimuhamedov hosted the diplomatic 
community at the opening ceremony of the plant located in Owadan 
Depe, about 20 kilometers northwest of Ashgabat.  During the 
ceremony, the Turkmen leader said the plant is the first of many 
heavy industry factories to be built in the country, and will 
initially employ 150 people.  He stated that in the future, the 
number of employees will reach 600-800 and the plant will reach full 
production capacity in a couple of years.  The plant is capable of 
producing 160,000 tons of metal products a year, and is supposed to 
produce rebars, U-sections, L-steel and rolled metal materials. 
According to an Embassy Locally Employed Staff person who knows the 
plant's manager, the plant's commissioning was delayed because of 
serious problems, including lack of cement, that arose while it was 
under construction.  Knowing that corners had been cut during 
construction, the manager had refused to sign documentation 
declaring it operational more than a year ago, and a decision was 
then made to correct the deficiencies, according to the manager. 
 
... HOW TO FEED IT? 
 
¶5. (SBU)  Turkmenistan has no significant metal deposits or other 
minerals used in metallurgy.  Metal materials were imported from 
other former republics during the Soviet era.  Thousands of small 
metal foundries and light industrial facilities were established 
here after the Second World War to strengthen Soviet industry, fed 
by raw materials shipped in by rail.  After independence, 
Turkmenistan still had thousands of tons of scrap metal, but most 
was exported in the 1990s, via local businessmen who exported all 
the scrap metal they could find, including cast-iron manhole covers, 
to Iran, China and others.  In June 2005, Niyazov ordered the 
construction of the plant and also banned the export of scrap metal. 
 Nevertheless, due to previous export activity and the lack of heavy 
industry in Turkmenistan, the supply of scrap metal is thought to be 
currently limited, so the plant will probably operate well below its 
production capacity and therefore well below the level needed to 
generate a profit.  In his speech at the ribbon cutting ceremony, 
President Berdimuhamedov said that in the future, exploration and 
development of metal and mineral deposits would become a key 
government priority. 
 
¶6. (SBU)  COMMENT:  It is perplexing how a project like this, 
 
ASHGABAT 00000655  002 OF 002 
 
 
apparently conceived without consideration of the long-term 
availability of raw or scrap materials, managed to survive the 
presidential transition and reach completion.  Like some other 
ill-conceived industrial projects Embassy officers have encountered 
here (like the glass plant and paper plant, both of which lacked 
critical sources of raw materials), this plant will probably crank 
out a small number of recycled metal materials that will be used for 
minor provincial construction projects, and employ a skeletal staff 
of employees who will keep it minimally operational.  The plant is 
unlikely to ever see the 600-800 employees the President trumpeted 
at the ceremony, which is unfortunate in a country where 
unemployment is sometimes estimated as high as 60 percent.  END 
COMMENT. 
 
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