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PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDBU RUEHDF RUEHIK RUEHLH RUEHLN
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DE RUEHAH #1135/01 2510953
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P 080953Z SEP 09
FM AMEMBASSY ASHGABAT
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UNCLAS SECTION 01 OF 02 ASHGABAT 001135 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR SCA/CEN; EEB; NEA/IR 
ENERGY FOR EKIMOFF/BURPOE/COHEN 
COMMERCE FOR EHOUSE 
 
E.O. 12958: N/A 
TAGS: EPET PGOV EINV TX UP
SUBJECT: TURKMEN GAS TO UKRAINE; FORWARD TO THE PAST? 
 
REF: ASHGABAT 462 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY: A number of Turkmen media reports recently 
speculated that Ukrainian President Yushchenko will discuss the 
possibility of importing natural gas directly from Turkmenistan 
during his visit to the country scheduled for mid-September.  The 
media reports cited Yushchenko's energy envoy Bohdan Sokolovskiy, 
who reportedly stated that the Ukrainian president will try to 
secure an alternative to Russian gas supplies.  The reports come as 
Ukraine negotiates a reduction of gas imports from Russia due to 
reported plummeting demand for gas in Ukraine.  Moreover, Gazprom 
could block Ukraine's chances for directly purchasing Turkmen gas by 
insisting that Ukraine not get its own deal with Turkmenistan.  The 
two nations cooperated in the gas sector in the past, when 
Turkmenistan was the key gas supplier to Ukraine from 1999 - 2006. 
END SUMMARY. 
 
¶3.  (SBU) Turkmenistan started selling its gas to Ukraine in 1999, 
shipping the gas through the Soviet-era Central Asia - Center gas 
pipeline which crossed Russian territory on its way to Ukraine.  The 
price of gas then was 36 USD per thousand cubic meters (tcm) at the 
Turkmen border and was increased to 44 USD per tcm a couple years 
later.  Ukraine paid only 50 percent of the sum in hard currency and 
the other 50 percent in Ukrainian goods and services.  Turkmen 
officials labeled this system of payments as "the goods for gas" 
system.  The arrangement soured when the Turkmen accused the 
Ukrainians of providing poor-quality and overpriced goods for gas, 
while failing to pay for Turkmen gas on time.  Nearly every 
December, the Turkmen government threatened to cut gas supplies due 
to Ukraine's delayed payments, and nearly every December then 
Ukrainian President Kuchma would come to Ashgabat to negotiate 
another extension of payment.  Because of Kuchma's frequent December 
visits, many Turkmen joked that they would know that winter was 
approaching when Kuchma was in Ashgabat.  In 2005, Gazprom entered 
the scene, first through its gas-transit affiliated company 
RosUkrEnergo (RUE) that purchased Turkmen gas and transported it to 
Ukraine.  Later, Gazprom was able to leverage Russian government 
pressure to prevent Ukraine from directly importing any Turkmen 
gas. 
 
¶4.  (SBU) Although energy envoy Sokolovskiy did not provide exact 
dates for the visit, Yushchenko will most likely visit Turkmenistan 
from September 15-16 to attend the inauguration of a railway bridge 
over the Amudarya River, built by Ukrtransstroy, a Ukrainian state 
construction company.  The bridge was part of the services that 
Ukraine provided within the "goods for gas" arrangement.  Due to 
various reasons related to payment for Turkmen gas, the construction 
continued for about eight years and became a symbol of the 
inefficiency of "the goods for gas" arrangement.  According to a 
Ministry of Oil and Gas official, Yushchenko and Berdimuhamedov will 
probably discuss issues related to the remaining Ukrainian debt for 
Turkmen gas supplied from 2000-2005, as well as other outstanding 
financial obligations between the two countries.  As for gas 
supplies, the presidents will most likely confine themselves to a 
general declaration of mutual interest in developing cooperation in 
the energy sector. 
 
¶5.  (SBU) Technically, Turkmen gas can be delivered to Ukraine 
through the Central Asia - Center gas pipeline network.  These 
pipelines have been almost empty since the April gas dispute between 
Gazprom and Turkmenistan (reftel) and will not be used at full 
capacity even if supplies to Russia resume, given that the volumes 
are expected to be much lower than they were in 2008 due to 
decreased demand.  As a result, the Central Asia - Center pipeline 
network would have enough capacity to transport significant volumes 
of Turkmen gas to Ukraine if the Russians agreed to do so. 
 
 
ASHGABAT 00001135  002 OF 002 
 
 
¶6.  (SBU) COMMENT:  There are several issues that most likely will 
prevent Turkmenistan gas supplies from being sold directly to 
Ukraine.  First, the Turkmen government does not seem to be 
interested in supplying gas to Ukraine and does not consider Ukraine 
a reliable partner, mostly due to the payment difficulties 
associated with directly supplying gas to Ukraine in the past. 
Moreover, it would be in Gazprom's interest to oppose any such deal, 
as the company would unlikely choose to yield the Ukrainian market 
to Turkmenistan in a period of low, global demand for gas.  END 
COMMENT. 
 
CURRAN