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ZNR UUUUU ZZH
O 080956Z MAY 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5391
INFO RUCNCIS/CIS COLLECTIVE 1570
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0947
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RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1501

UNCLAS SECTION 01 OF 03 ASTANA 000819 
 
SIPDIS 
 
STATE FOR SCA/CEN, EUR/CARC, EEB/ESC 
STATE PLEASE PASS TO USTDA FOR DAN STEIN 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EPET EINV RS GG TX KZ
SUBJECT:  KAZAKHSTAN:  UK ENERGY ENVOY TOURS REGION 
 
ASTANA 00000819  001.2 OF 003 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On April 29, the Ambassador met with UK Caspian 
Energy Envoy Angus Miller (protect throughout) to discuss his 
six-week tour through the Caucasus and Central Asia.  Miller said 
that an investor from the United Arab Emirates plans to develop and 
modernize the port terminal of Poti on the Georgian Black Sea coast 
and added that the sunken dredging ship blocking entry to the port 
of Kulevy is now being disassembled.  He downplayed the announcement 
that German energy company RWE signed a Memorandum of Understanding 
with the government of Turkmenistan and said the government missed 
an opportunity during its energy security conference on April 23-24 
to award a license to a major international oil company.  Miller 
also told the Ambassador that he is concerned that Bautino bay on 
the Kazakhstani shores of the Caspian Sea is being overdeveloped and 
said the area lacks necessary power and other supporting 
infrastructure.  Miller is interested in coordinating U.S. and UK 
energy policies and looks forward to an opportunity to meet 
Ambassador Morningstar at his earliest convenience.  END SUMMARY. 
 
BIG PLANS FOR POTI 
 
¶3.  (SBU) UK Caspian Energy Envoy Angus Miller paid the Ambassador a 
courtesy call at the end of a six-week tour through the Caucasus and 
Central Asia.  Recalling his visit to Georgia in March, he called 
the port city of Poti "a disaster," but reported that an investor 
from the United Arab Emirates recently announced plans to invest up 
to $10 billion to develop 400 hectares of land behind the port, as 
well as land outside Tbilisi.  According to Miller, the investor 
also recently purchased the Sheraton hotel in Tbilisi. 
 
DISGRUNTLED DEPUTY AT BATUMI 
 
¶4.  (SBU) Miller also toured the oil terminal at Batumi, owned and 
operated by Kazakhstani national oil company KazMunaiGas, and was 
struck by comments made by the deputy manager, who is Georgian, 
about the general manager, who is Kazakhstani.  Miller said the 
deputy manager was openly critical and contemptuous about the 
company's Kazakhstani leadership.  According to Miller, the deputy 
manager said the Kazakhstanis "have not kept their promises" to 
upgrade the oil terminal's facilities since acquiring the asset in 
February 2008 from Greenoak Holdings.  Miller added that, based on 
what he could see, there was no indication that KMG was likely to 
modernize the terminal anytime soon. 
 
AZERBAIJANI INTERESTS IN GEORGIA 
 
¶5.  (SBU) Miller was skeptical about the future of the oil terminal 
at Kulevy, Georgia, which is owned by the State Oil Company of the 
Azerbaijani Republic (SOCAR).  He said the dredger that was 
submerged in front of the port is now being disassembled, but noted 
that even once that obstacle is removed, ships loading crude oil 
will still face delays due to bad weather and silting at the berths. 
 Finally, he commented that it appeared to him that the Azerbaijanis 
were "determined to buy the Georgian railway," and said they had 
plans to invest $5.4 billion to renovate the rail system in Georgia. 
 
 
NO BREAKTHROUGHS IN ASHGABAT 
 
¶6.  (SBU) Calling the government of Turkmenistan's Memorandum of 
Understanding with German firm RWE "just a piece of paper," Miller 
was dismissive of the company's plans to develop block 23, an 
offshore reservoir in the Caspian Sea:  "The block is a little 
triangle, close to the Iranian border, which will complicate 
development to say the least."  While acknowledging the symbolic 
importance of negotiations between the government of Turkmenistan 
and a Western energy company, Miller nevertheless said RWE is "not 
taken seriously by the Turkmen, because they are not a Western 
major." 
 
¶7.  (SBU) He said Turkmenistan "missed an opportunity" to take a 
dramatic step forward by signing an agreement or awarding a license 
 
ASTANA 00000819  002.2 OF 003 
 
 
to a major Western oil company during the energy security conference 
in Ashgabat on April 23-24.  Miller lamented that the conference did 
not alter the perception that the government of Turkmenistan is 
opposed to Western development of onshore assets and will not 
actively facilitate trans-Caspian transportation.  According to 
Miller, Turkmen President Berdymukhamedov told EU Special 
Representative for Central Asia Pierre Morel, "We have the gas 
available, all you have to do is come and get it." 
 
RUSSIANS LEAVE EARLY AND UNHAPPY 
 
¶8.  (SBU) Miller told the Ambassador that Russia's Deputy Prime 
Minister Igor Sechin "left Ashgabat early and unhappy," following 
his bilateral meeting with President Berdymukhamedov on April 21. 
Miller speculated that Berdymukhamedov blamed Gazprom for the recent 
gas pipeline explosion, although he himself considered the incident 
a result of both "Russian bullying and Turkmen ineptitude." 
According to Miller, the Bulgarian delegation to the Ashgabat 
conference circulated the Russian version of a proposed joint 
declaration and asked other countries to support it.  However, the 
final conference declaration contained very little of the Russian 
text, said Miller. 
 
BAUTINO BAY BECOMING CROWDED 
 
¶9.  (SBU) According to Miller, who toured the steel fabrication yard 
at Bautino on April 9-10, the bay is being unwisely overdeveloped. 
Miller said those developing the area are "trying to cram too much 
in there, too soon" and worried that the bay will silt because of 
the number of jetties being added.  He also noted that the immediate 
area lacks supporting infrastructure such as power and water, as 
well as skilled labor. 
 
EUROPEAN ENERGY SECURITY COORDINATION 
 
¶10.  (SBU) Miller told the Ambassador that the United Kingdom is 
"pushing Europe" to adopt a coordinated energy policy in Central 
Asia that embraces the diversification of export routes for oil and 
gas, and will continue to do so.  "Europe is fixated on gas," he 
said, "but liquids are essential.  We must not forget that oil 
exports from the Caspian region are crucial to our energy security." 
 Miller said it is important for Europe to speak with one voice on 
energy policy, but this is complicated by the divide between the 
countries of "New Europe," which advocate openly and forcefully for 
alternatives to reduce their dependence on energy supplies from 
Russia, and the countries of "Old Europe," which want to lock in and 
secure those same supplies from Russia.  Miller said that if  EC 
Energy Commissioner Andris Piebalgs departs when his term expires in 
October, it could throw EU energy policy into disarray. 
 
UK EURASIAN ENERGY POLICY 
 
¶11.  (SBU) During the Atyrau Oil and Gas Conference on April 8, 
Miller outlined the UK government's support for Kazakhstan's 
multi-vector energy export policy that would ship crude in four 
directions:  (1) domestically; (2) through Russia; (3) to China; and 
(4) across the Caspian to world markets.  Miller called the 
Baku-Tbilisi-Ceyhan (BTC) pipeline "the catalyst for change and a 
triumph for oil exports."  In his prepared remarks, Miller praised 
the BTC partners for overcoming "keen opposition from at least one 
very powerful opponent," but he left this phrase out when he 
delivered his speech at the conference. 
 
¶12.  (SBU) Miller did, however, say that the existing route through 
Russia "is vulnerable to political and economic constraints imposed 
by the host government.  Shipping of hydrocarbons via Russian 
facilities also raises serious questions about retained value, the 
lack of quality banks and access to Black Sea ports."  He advocated 
effectively for the development of the trans-Caspian option best 
known as the Kazakhstan Caspian Transportation System.  "Yes, it is 
vulnerable," he acknowledged, "as Russia's adventures in Georgia 
last August demonstrated, but it still offers an established and 
proven route with direct international market access."  According to 
 
ASTANA 00000819  003.2 OF 003 
 
 
Miller, the UK's preferred route, the Southern Corridor, would bring 
efficiency and clarity to markets, including producers at the 
eastern end of the Southern Corridor and consumers at its western 
end. 
 
THE IRANIAN OPTION 
 
¶13.  (SBU) Miller attempted to anticipate and address questions 
about Iran.  He conceded, for example, that it might be "quicker and 
cheaper" to export oil from Kazakhstan to world markets via Iran's 
Gulf ports, but he was quick to add that this depended entirely on 
Iran's nuclear ambitions and its relationship with its neighbors and 
the world community.  Miller said that the future of U.S.-Iranian 
relations was unpredictable, but he noted that a rapprochement would 
have significant implications for oil export opportunities for 
western and especially U.S. investors in Kazakhstan. 
 
MILAS