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Wednesday Meeting Brings Fresh Perspective to Turkmenistan-Japan Relations

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SAPARMURAT TURKMENBASHY THE GREAT (1940-2006)

Ashgabat, 15 June 2006 (nCa) --- It was obvious after a meeting of the Japanese businessmen Wednesday with President Niyazov that Turkmenistan has taken a fresh position on its future relations with Japan. The underlying message was that nothing should be taken for-granted.

By chiding Japan for recently making unilateral offer to participate in Trans-Afghan Pipeline (TAP), refusing to accept credit lines that involve high rate of interest, and drawing consequential parallels with similar dealings with China
, President Niyazov made it very clear that the future dealings must be based on mutually acceptable terms.

Niyazov said that the recent remarks by the Japanese foreign minister about Japan’s readiness to participate in TAP had given political twist to a purely economic project. The remarks came during the Japan plus Central Asia forum where Turkmenistan was not present.

Recalling similar announcements by some western countries and Kazakhstan about the possibility of exporting Turkmen gas to Europe via Trans-Caspian pipeline, Niyazov said that no one has contacted Turkmenistan so far about the possibility of any such project. He reminded that Turkmenistan doesn’t believe in politicization of economic projects and natural resources.

It was evident that the gas pipe China would retain top priority while TAP and Trans-Caspian would have to wait for better climate.

The Turkmen president declined the Japanese offer of a credit line with 6.5% interest rate. He said that Turkmenistan is a young country and cannot afford such expensive credits. He mentioned that China offers credits at 2% interest.

Niyazov said that a modernization unit offered by Japanese companies for the Turkmenbashy refinery was not acceptable under the present circumstances because of its high price. He said Turkmenistan would wait for a year or so for the project price to come down.

Expressing gratitude to the Japanese businessmen for their long-term cooperation with Turkmenistan, Niyazov said that although more orders worth US $ 30 million would be placed for the construction machinery, the suppliers must hasten with the orders that are already in the pipeline. He said that payments would be made immediately on delivery of the machinery.

The Japanese delegation, led by Minoru Murofushi was composed of representatives from Itochu, Komatsu and JGC. Minoru Murofushi is the former chairman of Itochu and he co-chairs the Turkmenistan-Japan relations council.

Here is the transcript of the meeting:
Murofushi [addressing President Niyazov]: Today early morning I arrived in Ashgabat and we visited the [Kypchak] mosque and laid a wreath to the tombs of your mother and brothers. I felt that this mosque, constructed under your supervision, unites you and the nation in general.  This is my first impression. Your Excellency, first of all I would like to thank you for close attention paid by you to our projects. This visit coincides with some memorial dates – Your election anniversary and 15th anniversary of independence. The implementation of many projects is planned to this significant date – 15th anniversary of independence. I would like to wish you their successful realization.

Let my touch upon some projects between Turkmenistan and our country. I wish these mutual projects to yield big fruits to Turkmen people.

I have several topics. Let me start from projects of road-building equipment supply. I’d like to thank for continual purchase of equipment from Komatsu. I remember, that in my last visit in September 2005 we have made contract on purchase of construction equipment for oil and gas branch. In accordance with contract, the works on expansion of after-sales service is continued. Moreover, the opening of service centers in Mary and Balkanabat city is planned in August of this year. Our cooperation is built on mutual profit. And I hope this year Komatsu would get the same big order for equipment supply.

One of the main purposes of our present visit is signing of additions to the Memorandum on project of expansion of capacity of Turkmenbashy oil refinery, which were concluded three years ago. The text of the addition to the Memorandum was drafted together by our and your specialists. We would like to add the following two clauses:
- state guarantee from the government of Turkmenistan
on financing project;
- 20 % prepayment by cash.

Concerning the reconstruction of Seydi oil refinery, on the basis of our investigations in the plant, conducted in January 2006, we have submitted report in February. The report says that the project is sticky (difficult for implementation). There are technical difficulties in supply of raw materials.

I’d like to tell about JGC company.  It is not just a major company in sphere of oil and gas refining. JGC has also participated in a number of projects on exploitation and processing of gas. It has huge experience in this sphere. In particular, it is experienced in sulphorization of gas and on exploitation of gas fields. Let me remind the work done by JGC in Algeria thirty years ago. The total cost of projects, committed in that country was near 10 billion USD. The company was concerned with construction and acted as contractor on drafting of feasibility study. It was concerned with working out of plans on development of gas industry. The government of Algeria highly estimates the JGC company. I was engaged for a long time with projects in Algeria. I was chairman of the committee of economic cooperation between Japan and Algeria. So, I know the work which was done by company in Algeria. JGC has also worked in Qatar, Malaysia, Indonesia, Nigeria, Saudi Arabia. The company also was connected with projects for production of LPG and compressed gas. JGC is number one in the world in gas output and reefing. I wish your ministries would take advantage of great experience of JGC.

The next point is supply of equipment on sulphorization of gas. We understand that this project is very important for your country. JGC is interested in this project and it is ready to send its experts for further researches. I’d like to ask you to present more detailed information from Turkmen side.

Concerning the purchase of polypropylene. Our company made contract for purchase of polypropylene in1998. In the beginning of this project we conducted market research for this kind of production. The ways of optimal methods of transportation have also been worked out. On regular basis we have purchased this product and so we have contributed to the high reputation of Turkmen production. Unfortunately, from December 2005 the sale of polypropylene to our company has been suspended. Now we have seriously studied the reasons for this situation. We are long term partners and together we gave birth to this product. We would like to renew the polypropylene supplies and to expand our relations in different directions. And even if there would be market recession, Itochu Corporation will not abandon Turkmenistan. We will buy polypropylene at market prices. We just would like to determine the quantities on regular basis.

President: But the market prices have changed…The price in the contract is lower.

Murofushi: We will purchase polypropylene at market prices. We just want to determine the quantity.

President: No problem with quantity. We have no obligations to others. I mean, for supplying the product to you, we have no obligations with somebody else.  But the price will be the market [price]. We have Exchange [State Raw Materials and Commodity Exchange, the national clearinghouse of most products]. There we also sell polypropylene but at a little bit higher price. So the competition has occurred there.  So…no problem let’s sell at market price. If market price would decline, we also will decrease our prices. …Any other questions? (laughing)

Translator: Mr. Murofushi is interested in sports – Judo. Komatsu company has a strong women’s Judo team. It consists of world champions. Turkmen women also have been trained in Komatsu team. I have heard that now women’s judo tournament is being conducted in Ashgabat. And tomorrow final games will take place. I will offer gift prize to the winner. I also brought judo clothes for Turkmen sportsmen from Komatsu.

Representative of JGC: Now Mr. Mirofushi in general told about project of expansion of capacity of Turkmenbashy oil refinery. Within 3 years we have studied the possibility of introduction of this project to Turkmenbashy oil refinery. But we have heard that the project for increase of capacity of polypropylene unit will be considered for Seydi oil refinery. It is unexpected.

President: There is no question. Somebody led you astray. There is the matter is of polyethylene. Not polypropylene.

Representative of JGC: So…can we sign addition to memorandum on increase of capacity of polypropylene plant on Turkmenbashy oil refinery?

President: No! Not now…After one year we will discuss it again. Your project is a little bit expensive. Japan is a rich country. Turkmenistan is just 15 years old as independent country.
Without us, without our participation, Japanese minister of foreign affairs said in the Central Asian meeting, that Japan will participate in TAP project. We don’t know. Japanese party didn’t conduct negotiations with us. Or in Europe…they talk about supply of Turkmen gas to Europe. We have heard about intentions of Turkey. They are considering Trans-Caspian gas pipeline.  But nobody speaks about that with Turkmenistan. Seemingly, they consider that Turkmenistan is isolated. It is not so. We consider that we should discuss the matters on bilateral basis. But collective discussion of such matters without preliminary analysis of opportunities is a political measure – political action. We as neutral state do not participate in political action. Many big and small countries say that they are ready to construct pipelines and purchase Turkmen gas. But nobody speak concretely. In nearest days Russian delegation will arrive in Ashgabat to sign the contract for next half-year. We have opportunities – they have pipeline, transportation possibility. We will agree on volumes and prices and will sign contract. Some Kazakh leader stated that they are ready to transport Turkmen gas through Caspian and Trans Caspian gas pipeline. It is just political statement. And I feel…(laughing) that in this matter Japan also has made political statement. Japanese foreign minister stated about that during the meeting of foreign minister of Central Asia. Such issues are caught by mass media and interpreted in different ways. We ourselves choose the partners. We chose China. We have signed big General agreement. China will work on four blocks of gas fields on right bank of Amudarya. There is reserve of 1.7 trillion [cubic meters]. And we will supply 30 bcm to China
annually from 2009. Today Chinese delegation will arrive.

Representative of JGC: Excuse me for interruption. You said that the project is expensive. But the prices of energy reserves have sharply increased in the world market. So, the cost of materials has also increased. 

President: We know about that. So we’ll wait for the prices come down a little bit. The cost of your project also will decrease. The second issue – we cannot give state guarantee and 20% advance payment. And your credits are very expensive. We took credit for textile industry. You gave us 8 % per annum. It is very expensive! Do you want to help or do you want just to earn money from us? We are a young country. For another factory – 6.5 %. And besides, you request governmental guarantees. But government doesn’t participate in that. It is a joint-stock company. Your credits are expensive. China gives us credit! They supply cars, drilling equipment, metal. They give credits at 2 % per annum. Most of the credits are grants. 2 % of China…and yours…6-8 %. And you say that you help us. Such credits are one-sided. China now works in all spheres here.

Representative of JGC (interrupting): But in the course of negotiations we are going to offer 4.2%.

President: 4.2 %? Before yesterday we were informed that 6.2 %. Anyway we would not take such credit.

Murofushi: I regret about the statement of foreign minister. I didn’t know the content of meeting and statement of Foreign minister. Our ministry should meet before [with the Turkmen side] and discuss such matters in advance.

President: We don’t worry. We do not feel hurt. But mass media started to inform that Japan desires with China to participate in TAP pipeline. It turned into a political matter. As neutral state we consider such issues in economic aspect.

Murofushi: No matter where gas pipeline will go  - to China, India or via Afghanistan or Iran, Itochu corporation is always with you.

Representative of JGC: Id’ like to return to polypropylene.  You said that we will discuss this matter after one year.

President: dependant on market prices. For 1.6 billion USD it is expensive.

Representative of JGC: You said about 8 %....Only private banks can offer such interest rates.

President: 4 % is also expensive. It would take long time to repay such credit. 2 % Chinese is suitable.

Representative of JGC: You said China…But China has no technology on polypropylene production.

President: No…not in this sphere. China worked for example on well recovery. They worked for a long time. They work [here] in rail road transport, in communication sphere, in mobile communication. You have mobile communication. But no Japanese came to Turkmenistan. We have Turkmen, Russian, American, Chinese mobile communication. Their interest rates are low. They give grants. And you know nothing about grant credits.

I thank Komatsu for the equipment that they supply. It is reliable equipment. Ministry of water economy will make contract with Komatsu for supply of equipment for the total sum of 20 million USD. Ministry of energy will make contract for 10 million USD. The previous supplies are running with delays. Ministry of oil and gas didn’t receive part of the equipment. If it is possible make the supplies faster. The payment will be made right at the moment of supply.

Representative of Komatsu: Now in the world there is shortcoming of equipment and technologies. And Komatsu company has decided to construct two more factories. It is planned that construction will take 2 years. But I take into consideration your request to speed up the supplies to Turkmenistan.

President: About Seydi refinery. After one and half year I think the oil output will reach 3 million [tons]. And for reconstruction it is necessary have 2 million. So, we will discuss the issue of reconstruction. On Caspian shelf we have oil sources. A lot of companies work there. There is competition. I think it would be profitable for Japanese companies as well.

Murofushi: I am very thankful for the meeting with you and the sincere conversation. I thank you for listening to me with patience.

President: We highly estimate you for wonderful reconstruction of Turkmenbashy oil refinery. We are always ready to cooperate with you. We highly estimate your technologies. Each house here has Japanese equipment – TV-sets, cameras, furnishings. In Africa even your Toyota cars…I wish you success!

Murofushi: You are for me old friend. I just want that you are glad with us always.

[After the meeting, Murofushi talked briefly to the Turkmen media]
Murofushi:  My last visit was in September 2005. This time we met with President [along] with [representatives of] Komatsu, JGC and Itochu corporation. Today before meeting with President we visited the mosque. I learned a lot. I felt that this Mosque is symbol of unity of President with people. We discussed – increase of capacity of polypropylene output, supply of Komatsu equipment and purchase of polypropylene.  The issue of exploration of Caspian shelf fields was also touched upon. The issue of reconstruction of Seydi oil refinery was also discussed. We also exchanged opinions on development of women’s judo team in Turkmenistan
. President also gifted me the second book of Rukhnama in Japanese. I will read it and after reading I think I will become closer to the Turkmen people. Principles of Rukhama are close to Japanese people.

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