10/23/2008 13:28 08ASHGABAT1399

VZCZCXRO2404
PP RUEHAG RUEHBI RUEHCI RUEHLH RUEHPW RUEHROV
DE RUEHAH #1399/01 2971328
ZNY CCCCC ZZH
P 231328Z OCT 08
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 1758
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 4434
RUEHBJ/AMEMBASSY BEIJING 2246
RUEHKO/AMEMBASSY TOKYO 2111
RUEHIT/AMCONSUL ISTANBUL 2682
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 3003

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 001399

SIPDIS

STATE FOR SCA/CEN, EEB

EO 12958 DECL: 10/22/2018
TAGS PREL, PINR, EPET, EINV, ETRD, EWWT, SCUL, RS, TX
SUBJECT: EXPAT SOURCES SAY THAT ITERA GAVE TURKMENISTAN A YACHT
WORTH 60 MILLION EURO
REF: 07 ASHGABAT 968

Classified By: Charge d'Affaires a.i. Sylvia Reed Curran for
reasons 1. 4 (B) and (D).

¶1. (C) SUMMARY: According to expatriate sources in
Ashgabat, a yacht that recently set sail on the Caspian Sea
-- reportedly worth 60 million euros -- is actually a gift
from Russian company Itera. Itera is working on signing a
deal jointly with Russian state-owned companies Rosneft and
Zarubezhneft and Turkmenistan's Turkmenneft to develop blocks
29, 30, and 31 in the offshore Caspian area at some point in
2008. According to news reports, Itera is also an
enthusiastic partner in the development of the Avaza free
tourist zone located on the Caspian Sea, is funding the
Ashgabat branch of the Gubkin Oil and Gas University, and is
involved in importing farm equipment from Tatarstan, in
competition with John Deere and Case New Holland equipment.
In addition, the government forced a Swedish-owned shipping
company to give up seven of its most valuable employees to
become permanent crew on the yacht. Itera's business
activities are wide-ranging and difficult to isolate, and the
reported gift of the yacht serves as a sign that the
company's willingness to go to great lengths to win business
should not be underestimated. END SUMMARY.

AT FACE VALUE, TURKMENISTAN HAS A NEW YACHT

¶2. (U) The top story in the October 1 edition of official
Russian-language newspaper "Neytralniy Turkmenistan"
announced the acquisition of an Italian-built yacht called
"Galkynysh" ("Revival") that will sail on the Caspian Sea.
President Berdimuhamedov held a meeting of the Cabinet of
Ministers on September 30 on board the ship. The article
implied that the ship would be the first in a fleet of boats
to float in the Caspian in support of the Avaza Free Tourism
Zone (reftel). President Berdimuhamedov appeared in one
photograph sporting a navy blue sailing cap, a French-style
white and blue striped shirt, and binoculars hanging around
his neck.

HOWEVER, ONE EXPAT LOST EMPLOYEES TO THIS YACHT...

¶3. (C) According to the general manager of Swedish-owned GAC
Marine, Greg Flint (please protect), Turkmenistan permanently
took several of his employees to serve as crew on the
presidential yacht. Flint said in a meeting on October 23
that while he was out of the country on holiday, his staff
contacted him with the news that the government wanted to
borrow or take three important GAC employees: a master, a
chief mate, and a chief engineer. The men, however, did not
want to go. Less than three days later, his office called
him again with the news that security officials were boarding
boats as they came into the harbor and taking boat documents,
essentially immobilizing them. Flint flew back from Thailand
and tried calling Turkmenbashy International Seaport Head
Meylis Mutdikov, whose father is a "shadow figure" behind a
minister or chairman in the Cabinet of Ministers. Mutdikov wouldn't
take Flint's phone calls for several days, but Flint
finally made an appointment to meet with Mutdikov in
Turkmenbashy. In the middle of the meeting, Mutdikov acted
oddly: quite abruptly, he stopped talking and swung his
chair around away from Flint to face the wall. After several
moments of awkwardness, Flint asked the interpreter what was
the matter, and the interpreter told Flint that Mutdikov was
upset that Flint had failed to react quickly to the directive
to give up the GAC employees, so now Mutdikov was ignoring
Flint. Flint practically had to prostrate himself to get the
conversation back on track, repeating that the relationship
with the harbor authorities is very important, GAC respects
Mutdikov, Mutdikov should have called Flint directly, etc.
Flint then had to tell Mutdikov that GAC fired the chief
engineer because he refused to take the job on the yacht,

ASHGABAT 00001399 002 OF 003

which Mutdikov accepted. After Flint successfully made
amends with Mutdikov, the government flew the three former GAC
employees to either Mariopol or Rostov to bring the yacht
through the canals to the Caspian Sea, at which time the
government told GAC to supply four more crew to serve on the
yacht. Mutdikov at first said that GAC would only have to
loan the personnel temporarily, but a few days later informed
Flint that they would not return to GAC. Mutdikov also told
Flint that the government is matching the captain's GAC
salary of about $2,000 per month in salary.

¶4. (C) Flint said that personnel on board the presidential
yacht must be ethnic Turkmen, and the professionals must have
internationally recognized certificates. Flint added that
there are few such professional sailors in Turkmenistan, and
there were only four or five in GAC, all of whom were either
trained by GAC or whose certificates were financially
sponsored by GAC.

¶5. (C) Flint said the Turkish company TACO built the ship
bay for the presidential yacht, located by the presidential
palace in Turkmenbashy. Security forces closed off the entire
port for two days for the construction of this ship bay
complex, which includes two helipads.

...AND, ACCORDING TO ANOTHER: YACHT WAS A GIFT FROM THE
COMPANY ITERA

¶6. (C) The Amcit general manager of Bertling Logistics'
Ashgabat office (please protect) said in a meeting on October 16
that this yacht worth 60 million euros was a gift of
Russian firm Itera. He added that the president had
originally wanted a larger yacht similar to one owned by
Russian oligarch Roman Abramovich, but that yacht would not
fit through the canals leading to the Caspian Sea and thus
Berdimuhamedov had to settle for this one. The Amcit added
that Berdimuhamedov's pool of automobiles consists of a
Bentley, a Mercedes Maybach (gift of a German company), a
Range Rover, and a Cadillac Escalade. According to this
source, Itera will build a urea/ammonia plant in Belek,
Bekdash, or Turkmenbashy.

ITERA'S ACTIVITIES IN TURKMENISTAN IN 2008

¶7. (U) According to various open source reports, Itera
officials have frequently met with President Berdimuhamedov
since the end of 2007:
-- On December 27, Itera Holdings Chairman of the Board Igor
Makarov and Berdimuhamedov discussed projects such as
development of oil and gas fields on the Caspian shelf and in
the Karakum, construction of facilities for gas
transportation, a carbamide plant, and creation of
iodine-bromine production. The same report also said that
Itera would fund the Ashgabat branch of the Russian Gubkin
State Oil and Gas University in Ashgabat, implement projects
in Avaza, construct an office building in Ashgabat, and
participate in construction of highways and rail lines.
-- At a meeting on February 18, the president said that Itera
has proven itself as one of Turkmenistan's "old and reliable
partners." Makarov submitted a project for a five-star,
110-room hotel in Avaza. (NOTE: Turkmenistan celebrated "Flag
Day" on the February 19 and held meetings with various
companies the preceding day. END NOTE.)
-- A delegation of Itera's top management held talks with
Turkmen officials on March 9 to discuss a production sharing
agreement for three blocks of the Caspian Sea shelf and to
receive a license to survey and develop a new block. The
article added, "If Itera gets the license, it is likely to
engage Zarubezhneft and Rosneft as partners."

ASHGABAT 00001399 003 OF 003

-- In April, Itera CEO Vladimir Makeyev announced that the
company, within the framework of the Zarit joint venture,
expected to sign a production sharing agreement to develop
blocks 29, 30, and 31 in the offshore Caspian area at some
point in 2008. Zarit was set up in 2002 and is comprised of
Itera, the Russian state-owned companies Rosneft and
Zarubezhneft, and Turkmenistan's Turkmenneft. Makeyev
acknowledged in the April report that issues with Iran -- one
of the blocks is located in a disputed area of the Caspian
Sea -- remain unresolved. Makeyev said that Itera was
discussing working on gas extraction in inland areas as well.
-- On June 11 in Ashgabat, Makarov gave the president a
report on construction of a hotel in Avaza, a stadium in
Turkmenabat, and progress on the carbamide plant construction
project. In addition, Makarov updated Berdimuhamedov on
preparation for joint activities in the Karakum Desert
including development of deposits and construction of
relevant infrastructure, in particular laying gas pipelines.
-- The official Turkmen television news program Watan showed
Makarov visiting President Berdimuhamedov at the guesthouse
in Kazan where Berdimuhamedov stayed during his official
visit to Tatarstan on June 28, 2008.
-- On August 16, MRK Energy DMSS, an Emirati-based subsidiary
of Itera, announced the sale of 400 Russian-made UAZ39629-016
ambulances worth $8 million to Turkmenistan.
-- On the day of the ship's introduction -- September 29
--Berdimuhamedov discussed the construction of a carbamide
plant and a spa, as well as opportunities for Itera's
participation in exploration in offshore deposits with
Makarov at the Serdar Hotel in Turkmenbashy.

"NOTHING IS FREE IN THIS COUNTRY"

¶8. (C) COMMENT: Itera has a deal to build a urea/ammonia
plant, and also an $8 million deal for ambulances, but there
are most likely other deals of which post is not aware. The
company undoubtedly really wants a gas exploration contract,
especially onshore, and the gift of the yacht is a nice
enticement to move the process along. As local businessman
Greg Flint said, "The gift of a yacht might be for an onshore gas
deal, a chicken farm, or works already in progress. Nothing
is free in this country." IPC Group, official distributors of
John Deere and Case New Holland equipment in Turkmenistan,
have had concerns about Itera and the company's ability to
take over the farm equipment market in Turkmenistan at least
since Berdimuhamedov's visit to Tatarstan. Itera's business
activities are wide-ranging and difficult to isolate, and the
reported gift of the yacht serves as a sign that the
company's willingness to go to great lengths to win business
should not be underestimated. END COMMENT.

CURRAN