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Viewing cable 07ASHGABAT1039, CATERPILLAR EXEC NOTES CHALLENGES, BUT "IN

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Reference ID Created Released Classification Origin
07ASHGABAT1039 2007-09-27 09:40 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ashgabat
VZCZCXRO9513
PP RUEHAG RUEHAST RUEHBI RUEHCI RUEHDBU RUEHDF RUEHIK RUEHLH RUEHLN
RUEHLZ RUEHPW RUEHROV RUEHVK RUEHYG
DE RUEHAH #1039/01 2700940
ZNR UUUUU ZZH
P 270940Z SEP 07
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 9442
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 2802
RUEHBJ/AMEMBASSY BEIJING 0624
RUEHKO/AMEMBASSY TOKYO 0500
RUEHIT/AMCONSUL ISTANBUL 1076
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHGV/USMISSION GENEVA 1324
RUEHVEN/USMISSION USOSCE 1789
RUCNDT/USMISSION USUN NEW YORK 0575
UNCLAS SECTION 01 OF 02 ASHGABAT 001039 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ETRD JA TX
SUBJECT: CATERPILLAR EXEC NOTES CHALLENGES, BUT "IN 
TURKMENISTAN TO STAY" 
 
REF: ASHGABAT 925 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  During a September 26 meeting, Vladimir 
Naumov, General Manager of Zeppelin Caterpillar Turkmenistan 
JV said while President Gurbanguly Berdimuhamedov continues 
his predecessor's hands-on habits in terms of making most 
sales-related decisions, he nonetheless is focusing less on 
business than his predecessor, complicating Zeppelin 
Caterpillar's efforts to move business forward.  Zeppelin 
Caterpillar is also facing a number of other challenges in 
adjusting its strategy for Turkmenistan's new business 
environment Naumov said.  For example, the company  is facing 
growing competition from Komatsu, which both offers 
lower-priced products and benefits from the Japanese 
government's more business-oriented foreign policy.  That 
said, Caterpillar plans to stay in Turkmenistan for the long 
term.  It also is hoping to break into new local markets by 
collaborating with U.S. oil and gas firms, perhaps through a 
contract offering licensing, financing, and equipment, all in 
one.  END SUMMARY. 
 
BERDIMUHAMEDOV HAS OTHER PRIORITIES...SO WHO IS DOING 
BUSINESS? 
 
3.  (SBU) Over lunch with econoff September 26, Vladimir 
Naumov, General Manager of Zeppelin Caterpillar Turkmenistan 
JV, a long-time player in Ashgabat's expatriate business 
circles, shared observations on the changes in the business 
climate which have taken place since Gurbanguly 
Berdimuhamedov became president of Turkmenistan in February 
2007.  According to Naumov, Berdimuhamedov is paying less 
attention to business and more to politics.  Pointing out 
that Berdimuhamedov did not meet with a visiting Caterpillar 
executive in March, Naumov claimed that the president is 
meeting with fewer foreign companies than his predecessor, 
Saparmyrat Niyazov.  This had lead to a longer delay than in 
the past on reaching decisions on contracts.  Naumov 
estimated that 90% of Zeppelin's ministry partners or 
government contacts have changed since Berdimuhamedov became 
president.  Because new ministry officials are hesitant to 
develop relationships with foreigners or foreign business 
contacts, Naumov now has trouble finding someone who can 
discuss deals. 
 
TRYING TO MAKE SENSE, WHERE THERE IS NONE.  BUT DON'T WORRY, 
WE DON'T PAY BRIBES. 
 
4.  (SBU) Naumov said that Turkmenistan's officials, who 
under Niyazov knew they would only rarely spend more than a 
few months in any one office, often may make shortsighted 
business decisions because they will not have to deal with 
the consequences.  As a result, a ministry official may 
indicate one thing in a meeting, then make a business 
decision that does not make sense or contradicts signals in 
the meeting.  Naumov also suggested that Zeppelin, which 
practices U.S. business standards, may be at a disadvantage 
in the bidding process because it does not pay bribes. 
 
DESPITE CHALLENGES, HERE TO STAY 
 
5.  (SBU) Naumov claimed ministers are not in a position to 
make informed business decisions, and price is their only 
consideration.  Lower-level officials understand day-to-day 
needs and value Caterpillar's quick-response and on-site 
customer service -- one of the company's main strengths -- 
but many higher-level Turkmenistan officials are reluctant to 
pay for this service.  Naumov agrees with other foreign 
businessmen in Ashgabat that the government of Turkmenistan 
deliberates on contracts for a long time, but expects 
immediate delivery when it reaches a decision.  This can 
 
ASHGABAT 00001039  002 OF 002 
 
 
create difficulties, since the construction industry is 
currently exploding worldwide, and keeping adequate stock of 
Caterpillar's wide product line on hand is a challenge. 
However, if Caterpillar cannot supply the requested 
equipment, a competitor -- in Turkmenistan, the Japanese 
company, Komatsu -- will find a way to fill the order on 
short notice.  (NOTE:  Turkmenistan recently gave Komatsu a 
contract for $54 million of road construction equipment.  END 
NOTE.)  Despite these challenges, Zeppelin has long-term 
plans to remain in Turkmenistan. 
 
PLEASE ADVOCATE FOR US 
 
6.  (SBU) Naumov stated several times that Japanese 
government diplomacy is basically economic advocacy work on 
behalf of Japanese business, which gives Komatsu a large 
advantage.  He also said that Japanese companies write 
contracts for projects, and include financing and equipment 
in the contract.  Naumov showed interest in the oil sector, 
and in partnering with U.S. firms, pointing out that 
Caterpillar otherwise may miss opportunities in 
Turkmenistan's unique business climate.  Naumov also 
enthusiastically mentioned that, during a lunch with U.S. 
business leaders in New York this week, Berdimuhamedov 
expressed interest in establishing a business council for the 
United States, similar to the Japanese governmental 
organization which promotes Japanese business in Turkmenistan. 
 
7.  (SBU) COMMENT:  Post has been hearing rumors that 
Zeppelin Caterpillar, which did a profitable business under 
the prestige name-oriented Niyazov, is now facing more 
difficulties than Naumov let on.  At the heart of this may be 
a wish on Berdimuhamedov's part to try to wean Turkmenistan 
away from large-ticket purchases from prestigious companies 
in cases where minimal differences in quality do not justify 
paying higher costs -- a policy which we are also seeing in 
the areas of agricultural equipment.  That said, 
Turkmenistan's uniquely difficult business climate and 
inefficient financial sector as exemplified by the 
top-centered power structure and the dual exchange rate may 
require creative support from the Commerce Department going 
beyond what is currently or usually offered to assist U.S. 
businesses in gaining a foothold.  END COMMENT. 
HOAGLAND