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Viewing cable 07DUSHANBE783, TAJIKISTAN MUST COMPLY WITH INTERNATIONAL NORMS TO SUCCEED

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Reference ID Created Released Classification Origin
07DUSHANBE783 2007-06-01 05:31 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Dushanbe
VZCZCXRO2133
PP RUEHLN RUEHVK RUEHYG
DE RUEHDBU #0783/01 1520531
ZNR UUUUU ZZH
P R 010531Z JUN 07
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC PRIORITY 0335
INFO RUCNCIS/CIS COLLECTIVE
RUEHBUL/AMEMBASSY KABUL 2099
RUEHNE/AMEMBASSY NEW DELHI 2104
RUEHIL/AMEMBASSY ISLAMABAD 2132
RUEHPW/AMCONSUL PESHAWAR 0011
RUEHLH/AMCONSUL LAHORE 0006
RUEHKP/AMCONSUL KARACHI 0009
RUEAIIA/CIA WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEHDBU/AMEMBASSY DUSHANBE 2039
UNCLAS SECTION 01 OF 02 DUSHANBE 000783 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV ECON ENRG EAID TI AF
SUBJECT: TAJIKISTAN MUST COMPLY WITH INTERNATIONAL NORMS TO SUCCEED 
IN ENERGY TRADE 
 
DUSHANBE 00000783  001.2 OF 002 
 
 
1.  (SBU)  Summary. Tajikistan needs to take steps to sign and 
abide by international standard agreements if it wants to 
develop its electricity sector through exports to Afghanistan 
and beyond.  In a series of meetings with top energy and 
economic officials May 28, Senior Advisor for Regional Economic 
Integration Robert Deutsch and Senior Advisor for Afghan Private 
Investment Ed Smith delivered a clear message to the Tajik 
government: Tajikistan cannot do business as usual, with 
bureaucratic hurdles and fuzzy legal agreements, if it wants to 
attract private investment or international financing. 
 
2.  (SBU)  Deutsch reiterated U.S. support for Tajikistan's 
energy sector and interest in the development of Tajikistan's 
coal sector in order to provide year-round electricity for 
domestic use and export.  He noted that U.S. Trade and 
Development Agency grant money already given to Tajikistan for a 
regional project could be transferred to study coal development, 
if the Tajik government presented a clear and sensible plan.  At 
a May 29 meeting for investors and donors on coal (septel), the 
message had clearly sunk in, when Tajikistan's Energy Czar, 
Deputy Prime Minister Asadullo Ghulomov, repeatedly pledged 
Tajikistan would meet all international standards in the energy 
sector. End Summary. 
 
3.  (SBU)  In meetings with Presidential Advisor for Economic 
Policy Matlubkhon Davlatov, Minister of Energy and Industry 
Sherali Gulov, Deputy Prime Minister Asadullo Ghulomov, and 
Minister of Transportation and Communications Abdurahim Ashurov, 
Deutsch briefed the Tajik officials on the May 22-23 
Multi-Country Working Group meeting in Jeddah concerning 
regional energy trade.  The Jeddah meeting set out key issues to 
ensure that the working group made progress towards trading 1000 
megawatts of electricity from Kyrgyzstan and Tajikistan to 
Afghanistan and Pakistan -- a project know as "Central Asia 
South Asia (CASA) 1000."  One critical step will be 
demonstrating commitment to a higher standard of transparency 
and contracting by signing a solid power purchase agreement 
between Tajikistan and Afghanistan for their bilateral 
electricity trade to enable ABD financing for the 
interconnection.  (Note:  The Afghans have proposed a standard 
power purchase agreement, to which the Tajiks had responded that 
they preferred to continue previous month-to-month arrangements 
that were governed by memoranda of understanding and Tajik law. 
End Note.)  Deutsch's message to the Tajik officials centered on 
the following points: 
 
--  A USTDA grant from June 2006, intended to study transmission 
networks to Afghanistan, could be used instead to study the 
feasibility of coal, provided the Tajiks had a comprehensive 
plan of action. 
 
-- The United States could support Tajikistan's energy sector in 
several other ways: Overseas Private Investment Corporation 
(OPIC) would be available for insurance and financing if U.S. 
companies participated in the project.  Export-Import Bank of 
the United States (EXIM) is closed to Tajikistan but could 
potentially support a third party purchaser, like Pakistan. 
 
-- Although Tajikistan had successfully sold power to 
Afghanistan on a monthly basis under the framework of a simple 
memorandum of understanding, international financiers and 
investors require a more definitive agreement on supply and 
export prices that includes a mechanism for neutral dispute 
resolution.  Tajikistan must be prepared to sign specific, 
binding agreements that go beyond Tajik law and adhere to 
international standards. 
 
-- Providing electricity to Afghanistan is a U.S. policy 
priority, but the United States will not invest in mega-projects 
like the proposed 4000 megawatt hydropower station at 
Dhasti-Jhum.  The Tajik government will need to take many 
smaller steps to establish a market and build investor 
confidence in such projects over the coming years. 
 
4.  (SBU)  Presidential Advisor Matlubkhon Davlatov called 
energy a development priority and noted it was a regional, not 
just a national issue.  In response to Deutsch and Smith's 
nine-hour journey on bad roads (at times, off-road) to a coal 
field in northern Tajikistan the day before, Davlatov observed 
that Tajikistan would still need to develop its road and rail 
infrastructure to use coal efficiently.  He promised to follow 
 
DUSHANBE 00000783  002.2 OF 002 
 
 
through on a draft power purchase agreement that Afghanistan had 
sent to Tajikistan, and ensure that the Tajik side accepted the 
standard international terms for selling electricity. 
 
5.  (SBU)  Deutsch also raised Canargo, a U.S. firm trying to 
sign an agreement with the Tajik government for gas exploration. 
 When Davlatov suggested that the Tajik government would sign 
the production sharing agreement after Canargo had done its 
exploration, Deutsch reminded him that Western investors want 
the terms in advance of the risks and investment.   Davlatov 
said that Tajikistan would adhere to international business 
norms, and when Tajik law did not match international standards, 
they would change their laws. 
 
Minister of Energy and Industry 
------------------------------------------ 
 
6.  (SBU)  Minister of Energy and Industry Gulov thanked Deutsch 
for his support for Tajikistan's coal sector and noted that a 
U.S.-funded feasibility study would go a long way to ensure a 
year-round supply of electricity for domestic use and export. 
Like Davlatov, he also asked for U.S. assistance in developing 
more generation capacity, particularly a hydropower station at 
Dhasti-Jhum.  Gulov also pledged to clear up a 
"misunderstanding" on the draft power purchase agreement with 
Afghanistan, and ensure that it included international dispute 
resolution and a long term-commitment to supply power at 
established rates. 
 
Deputy Prime Minister Ghulomov 
--------------------------------------------- 
 
7.  (SBU)  As Tajikistan's key official for energy and 
industrial policy, Ghulomov assured Deutsch that Tajikistan 
would meet all international standards to ensure the regional 
electricity project was successful.  Because the electricity 
supply situation could change in 2008, when Sangtuda-I comes on 
line, Ghulomov said he was reluctant to commit Tajikistan now to 
an agreement with Afghanistan, but understood that for 
international financing, they would fulfill the expected legal 
obligations.  He observed that even if Tajikistan had the 1000 
megawatts to export now, Afghanistan did not yet have a 
distribution network to take the power.  "The Afghans have 
colossal work ahead of them." 
 
8.  (SBU)  Moving beyond the CASA 1000 project, Ghulomov pitched 
key points in Tajikistan's energy dreams, including the need for 
a second high voltage line to Pakistan that would carry 
electricity produced at new generation projects, like 
Dhasti-Jhum.  He noted that the May 29 coal conference would be 
an important step in developing year-round electricity and that 
Tajikistan needed more help in the coal sector. 
 
Minister of Transportation and Communication 
--------------------------------------------- ------------------- 
 
9.  (SBU)  Minister Ashurov repeated comments from the other 
three officials thanking the United States for the bridge at 
Nizhniy Pyanj.  Calling it a significant step in linking Central 
and South Asia, he looked forward to the proposed August 
opening.  He welcomed the opportunity for Tajikistan to 
participate in a fiber optic project to link the Central Asian 
republics directly to global fiber optic networks, and he 
promised that his telecommunications experts would provide full 
information on Tajikistan's infrastructure and plans for further 
discussion of regional fiber optic interconnections. 
 
10.  (SBU)  COMMENT:   Deutsch's visit was a timely reminder to 
Tajik officials that although the United States strongly 
supports Tajikistan's energy sector development, Soviet-style 
business practices will not help them build regional electricity 
networks or attract financing and investment.  Whether his 
message sticks will only become clear if Tajikistan actually 
signs the mountain of paperwork necessary for a successful power 
purchase agreement.  The pleas for U.S. development of power 
stations, specifically Dhasti-Jhum, were expected, and also 
demonstrate that our emphasis on attracting private investment 
through a more attractive business climate hasn't yet hit its 
target.  The August bridge opening will be another opportunity 
to reinforce that message.  END COMMENT. 
JACOBSON