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DE RUEHAH #0727/01 1581258
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P 061258Z JUN 08
FM AMEMBASSY ASHGABAT
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UNCLAS ASHGABAT 000727
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB
PLEASE PASS TO USTDA DAN STEIN
ENERGY FOR EKIMOFF/THOMPSON
COMMERCE FOR HUEPER
EAID/W FOR EE/EA
E.O. 12958: N/A
TAGS: PGOV EPET ECON ETRD IN PK AF TX
SUBJECT: TURKMENISTAN: NEGOTIATIONS ON AFGHANISTAN
PIPELINE MOVE FORWARD, SLOWLY
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) SUMMARY: High-level representatives from
Turkmenistan, Afghanistan, Pakistan, and India met in
Ashgabat in late May to resolve some issues that continue to
stand in the way of more substantive negotiations on the
envisaged Turkmenistan-Afghanistan-Pakistan-India (TAPI)
natural gas pipeline project. The group continued to
disagree on issues like pricing, but the parties all appear
to be motivated to try to make the project happen, and
another meeting of senior representatives will take place in
July. The Turkmen have agreed to share the results of their
recently-completed natural gas reserves audit with the other
states when the group meets in September, so that the
project's participants will be more confident that
Turkmenistan will have enough gas to sell to all its
customers. The negotiation process is making progress, but
slowly. END SUMMARY.
3. (SBU) Poloff met June 5 with Asian Development Bank's
(ADB) local representative, Aina Kekilova to hear about the
results of the first technical group meeting for te
Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline
project. She said that deputy oil and gas ministers from
Turkmenistan, Afghanistan, and Pakistan, senior
representatives from the Indian energy company GAIL, and ADB
representatives attended the meeting in Ashgabat May 30-31.
India's deputy minister for oil and gas was conspicuously
absent.
4. (SBU) The meeting's primary purpose was to try to hammer
out remaining impediments on a basic accord that would be
signed by the four heads of state. The group also discussed
three subordinate documents that focused on the rights and
obligations of the parties regarding transit, pricing, and
mechanisms for forming a consortium. There was no discussion
in this forum about the actual construction of the pipeline,
which is hoped to as early as 2010. The deputy ministers
signed a memorandum of understanding, basically agreeing on
the parameters for continued negotiations.
5. (SBU) However, during this meeting, the Afghan
delegation also gave a presentation designed to build
confidence that the government of Afghanistan will be able to
successfully protect the pipeline. One argument the Afghans
made was that the majority of the pipeline would be located
in regions of the country that have seen little conflict.
The Afghan government is enthusiastic about seeing the
project happen, she said. Afghanistan would receive transit
fees and would benefit from the construction of a railway
that is also an element of the project. Officials are also
hoping the project will provide jobs for as many as 40,000
unemployed Afghans.
6. (SBU) Kekilova said that pricing was the most
significant issue, because Pakistan and India each made
pricing proposals that the Turkmen government rejected.
While the two countries accepted that the world market price
should be considered, they sought to include it as only one
element in a formula that would yield more reasonable
pricing. Turkmen government officials appear to be
determined to sell their gas southward at world market
prices, however, and state media reported this stance on the
day of the deputy ministers' meeting. This issue is likely
to continue when the group meets again in July in India.
7. (SBU) A second issue complicating negotiations lies in
the countries' concerns that Turkmenistan will not have
enough gas to supply the TAPI pipeline, given agreements
signed with Russia, Iran, and China over the past two years.
It is hoped that TAPI would transport 30 bcm per year to
India and Pakistan, and to a lesser extent, Afghanistan.
Turkmen officials have assured project participants that they
will have an adequate supply, but the group told the Turkmen
they must share the audit data on Turkmenistan's natural gas
reserves that a British firm completed recently. Kekilova
reported the Turkmen have agreed to share the results of the
audit with the technical group when it meets in September
2008.
8. (SBU) COMMENT: The negotiation process is making
progress, but with small steps. Turkmenistan's pricing
demands have some of the participants wringing their hands
about signing the agreement, but they do not yet appear to be
concerned enough to quit the project. September's meeting is
likely to be more dramatic, and it will be interesting to see
how much information the Turkmen are willing to share with
TAPI participants about Turkmenistan's gas reserves. END
COMMENT.
HOAGLAND