VZCZCXRO3669
RR RUEHAST RUEHDBU RUEHFL RUEHLA RUEHLN RUEHMRE RUEHPOD RUEHROV RUEHSR
RUEHVK RUEHYG
DE RUEHAH #0660/01 1861234
ZNR UUUUU ZZH
R 051234Z JUL 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 8952
INFO RUCNCIS/CIS COLLECTIVE
RUCNOSC/OSCE POST COLLECTIVE
RUEHLM/AMEMBASSY COLOMBO 0384
RUEHKA/AMEMBASSY DHAKA 0406
RUEHIL/AMEMBASSY ISLAMABAD 2094
RUEHBUL/AMEMBASSY KABUL 0843
RUEHKT/AMEMBASSY KATHMANDU 0192
RUEHNE/AMEMBASSY NEW DELHI 0891
RUEHCG/AMCONSUL CHENNAI 0105
RUEHKP/AMCONSUL KARACHI 0154
RUEHCI/AMCONSUL KOLKATA 0076
RUEHLH/AMCONSUL LAHORE 0090
RUEHBI/AMCONSUL MUMBAI 0115
RUEHPW/AMCONSUL PESHAWAR 0428
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC//DHO-2/REA/NMJIC-J2//
RUEKJCS/JOINT STAFF WASHINGTON DC//J5/RUE//
RUEKJCS/SECDEF WASHINGTON DC
UNCLAS SECTION 01 OF 03 ASHGABAT 000660
SIPDIS
SIPDIS
STATE FOR SCA/CEN (NICOLAIDIS AND SNELSIRE)
E.O. 12958: N/A
TAGS: ENRG PINR PREL PGOV TX US AF
SUBJECT: Blame Game in Negotiating Sales of Turkmenistan's Energy to
Afghanistan
REF: A. Ashgabat 523
B. Ashgabat 317
ASHGABAT 00000660 001.2 OF 003
SUMMARY
-------
1. (U) While in Ashgabat to explore next steps in the bilateral
relationship with President Berdimuhammedov's administration, SCA
Deputy Assistant Secretary Evan Feigenbaum met on June 25 with
Minister of Energy and Industry Yusup Dawudov to discuss how the USG
might assist with ongoing negotiations for increased supply of
Turkmenistan's electricity to Afghanistan. Dawudov stated that
Turkmenistan is prepared to increase current supplies by 40 percent
immediately upon completion of a 220KV line on the Afghan side to
Herat. Regarding a new contract for additional quantities of
electricity, Dawudov expressed frustration with the changing
composition and the lack of technical specialists in past
Afghanistani delegations, which created obstacles to resolving
numerous outstanding technical issues. When pressed by DAS
Feigenbaum to move forward concurrently on commercial discussions
related to a new agreement, Dawudov stated that only President
Berdimuhammedov could resolve the pricing issue. Next week's visit
by Afghanistan's President Hamid Karzai to Ashgabat represents a
prime opportunity to address price and quantity issues so that even
greater quantities of Turkmenistan's electricity can flow southward.
End Summary.
"WE CAN'T DO IT FOR YOU - BUT WE'RE HERE TO HELP BOTH SIDES"
--------------------------------------------- ---
2. (U) SCA DAS Evan Feigenbaum met with Minister of Energy and
Industry Yusup Dawudov on June 26 to discuss ways in which the USG
might support ongoing negotiations for increased electricity supply
to Afghanistan. Thanking the minister for meeting recently with
several USG representatives, DAS Feigenbaum noted that the
considerable attention paid to this issue reflected its importance
to the most senior levels of the USG. While acknowledging that, as
a non-party to an eventual power purchase agreement (PPA), the USG
had no direct role in the negotiations, DAS Feigenbaum stressed the
U.S. interest in supporting both sides in pursuit of an agreement.
To this end, he asked the outcome of the June 8-11 delegation to
Ashgabat led by Afghanistan's Energy Minister Ismail Khan and how
the USG might assist the process, if at all, in the future.
3. (U) Dawudov opened by stating that there are no problems with
the existing supply contract. Afghanistan's consumption had
increased by 10-15 percent over last year. Regarding a new contract
for additional supplies, however, several obstacles remained.
Turkmenistan was ready to increase sales by up to 40 percent on the
Serhetabad-Herat line as soon as the voltage on the transmission
line could be increased to 220 KV from the current 110 KV. (Note:
Turkmenistan built its existing line to the border with 220 KV
capacity, but Afghanistan only built a 110 KV line on its side of
the border, so the current line operates at less than full capacity.
Dawudov stated that Afghanistan's work to upgrade the line to 220
KV was 90 percent complete. End Note.)
4. (U) During the most recent negotiations, Dawudov stated, the
parties reached tentative agreement for the proposed new line to
cross the border at Imam-Nazar (Note: Near Khamyab in Afghanistan.
End Note.) on its way to Mazar-i-Sharif. Although the Afghanistan
side wanted the border crossing to be at Kerif, Turkmenistan refused
since it would have crossed the Amu Darya river twice and required
additional expenses. DAS Feigenbaum sought clarification of
whether any agreement had, in fact, been signed at this meeting.
Dawudov hedged his reply by stating that "the content of the
protocol was defined." The minister then confirmed that a general
protocol document containing only limited technical details was
actually signed, and advised that it stated the price and quantity
of any future sales would be determined at a later date.
ASHGABAT 00000660 002.2 OF 003
FRUSTRATED BY AFGHANISTAN'S CHANGING DEMANDS, PEOPLE
--------------------------------------------- -
5. (U) When asked the next step by DAS Feigenbaum, the ministry's
Foreign Economic Affairs Department chief Eziz Berdimyradov said
that the recent Ismail Khan delegation had discussed construction
routes, and that the Turkmenistan side knew what was needed to
complete its obligations. If the Afghanistan side changed its
proposed route, then Turkmenistan needed clarification. Dawudov
added that both sides had exchanged technical documents so that they
can begin working together. In order to increase electricity
supplies in the near-term, Afghanistan must complete its work on the
220 KV line from the border to Herat. Although this would allow
current supply to increase by 40 percent, Berdimyradov highlighted
that a longer term concern was the lack of a local distribution
network for the smaller cities around Herat. Without such a network
-- and paying customers -- the full potential could not be realized.
6. (U) DAS Feigenbaum pressed for ideas on how the USG might be
helpful. Berdimyradov replied that the USG must "provide financing
and construction" for the expected remaining work on the Afghanistan
side. Specifically, the Government of Afghanistan still needed to
complete a new line from Mazar-i-Sharif to Turkmenistan's border
before significant new supplies could be provided. Furthermore,
Berdimyradov asked, who would pay for the electricity? He stated
that, due to the current lack of an identified paying customer,
Turkmenistan sought to clarify technical issues before moving to
commercial points. Dawudov interjected that Turkmenistan's
negotiating team was always the same, but those on the Afghan side
of table were constantly changing. Noting that the USAID technical
expert who participated in past delegations did not join the most
recent discussions, USAID Representative in Turkmenistan, Ashley
Moretz, suggested that USAID advisors could help navigate
complicated technical issues if allowed to participate in the
future.
7. Dawudov further stated that even Afghanistan's power requirements
remained unclear. Although Afghanistan had asked Turkmenistan for
its commitment to sell up to 300 MW of power, the currently proposed
220 KV line to Mazar-i-Sharif would not support deliveries at that
level. For that reason, Turkmenistan had proposed to build a 500 KV
line all the way to Mazar-i-Sharif, but USAID/Afghanistan had only
committed to financing a 220 KV line. Also frustrating to Minister
Dawudov was the apparent position of Ismail Khan during the last
round of negotiations: Khan had asked for up to 700 MW --
Turkmenistan's entire electrical surplus -- for onward sales to
Tajikistan.
ONLY "THE HIGHEST LEVELS" CAN RESOLVE PRICE
-------------------------------------------
8. (U) Reiterating Ambassador Neumann's message to the Turkmen
(Ashgabat 523), DAS Feigenbaum suggested that parallel discussions
regarding cost and technical issues be conducted so that Afghanistan
could make sound financial decisions among its potential suppliers.
Dawudov responded that Turkmenistan must first conduct a feasibility
study, since it could not currently supply the requested 300 MW via
a single line. Berdimyradov stated that pricing for new electrical
sales were set "at the highest levels" anyway, so the ministry still
had to wait for a price agreement before concluding a commercial
Power Purchase Agreement. He added that it was "in their best
interests" for President Karzai to raise this issue when he meets
with President Berdimuhammedov next week.
COMMENT
-------
ASHGABAT 00000660 003.2 OF 003
9. (U) Both Afghanistan and Turkmenistan still seem to be talking
past each other at this point. Afghanistan believes that
Turkmenistan has possibly changed its policy, begun under President
Niyazov, of providing low-cost electricity as a humanitarian gesture
to western Afghanistan, where large numbers of ethnic Turkmen
reside. On the other hand, Turkmenistan's Ministry of Energy and
Industry does not have the authority to set pricing levels and so
has remained focused exclusively on technical issues in recent
discussions. Turkmenistan has been further frustrated by the
changing composition and lack of technical specialists in recent
Afghan delegations, which has prevented clarification of the
outstanding technical questions that are within these delegations'
mandate. These Turkmen complaints ring hollow, however, as the
Afghanistani side at least is open to USG/USAID assistance whereas
in Turkmenistan, direct contact with government bureaucracies still
is largely nonexistent. If President Karzai can secure agreement on
a price level for new electricity sales during his upcoming July 5-7
visit to Ashgabat, a major obstacle to more serious discussions on a
Power Purchase Agreement will be removed. End Comment.
BRUSH