In November the law firm CIS Debt Recovery Solutions reported about the debt of the state holding “Turkmenneft” to one of its suppliers. The amount of the debt, which has not be settled so far, amounts to over $8,5 million.
Senior financial advisor of CIS Debt Recovery Solutions Taras Kopiy gave a comment on the situation to “Chronicles of Turkmenistan” and told about the debts of state holdings “Turkmenneft” and “Turkmengas” to partners from all over the world.
Chronicles of Turkmenistan: Was there any feedback from “Turkmenneft” after the information on the debt to a contractor had been published?
Kopiy: Regrettably, even after the publication about the debt “Turkmenneft”is still ignoring our requests.Yet, as a state-run corporation they are obliged to respond to all enquiries.
Over the past few months we have received only one letter from them where they forgot to attach the second page.For a week we tried to obtain a complete document from them.
Since representatives of the state holding refuse to establish contact, we have decided to disclose this information to the public to warn other potential contractors which intend to work with “Turkmenneft” and “Turkmengas”.
After we managed to resolve the issues pertaining to the debt of “Turkmengas” to a Chinese company for the supply of locomotives, we were contacted by numerous companies from France, Russia, China and other countries which the Turkmen state holdings have not repaid the debts to.
According to the information we obtained, “Turkmengas” and “Turkmengas” have unsettled debts for the amounts of $10 million and $15 million respectively.These are only the confirmed debts we are aware of owing to financial documents we reviewed.
The entire oil and gas sector of Turkmenistan is in default and it is likely that the amounts of debts are much bigger.
We forwarded this information (please see a copy of the letter below) to embassies of all the countries in Turkmenistan. We also disseminate reports to trade missions which operate in each embassy.
We are also receiving numerous calls from officials of embassies with a request to provide a detail comment of the situation.They also ask for permission to share this information to stakeholders and companies.
For example, the US Embassy showed active interest in this information.We got a prompt call from the USA, despite the fact that the local time was after midnight.
The Embassy of Japan also demonstrated interest in obtaining the data. The meeting between executives of Japanese companies and the head of Turkmenistan’s Vnesheconombank (Foreign Trade Bank) is scheduled to be held in Ashgabat these days. I believe that they will be discussing debts and our information will be used during negotiations.
Chronicles of Turkmenistan: Were there any consequences for “Turkmengas” after the debt case for locomotives supplies by a Chinese contractor?
Kopiy: Export deals of Chinese companies are insured by the Chinese state insurance group which we worked with.Since “Turkmengas” did not settle accounts, the insurance company had to interfere in the case and demand the debt be settled as they had to pay the insurance proceeds to a supplier.
This insurance company works with 95-99% of all export transactions from China and, consequently, compiles a credit rating and keeps records of all importers.This means that if a supplier receives an enquiry for delivery on a pre-payment basis, it can always contact the insurance company, which will check reliability of an importer and its credit history, outstanding debt, financial problems etc.
This insurance company is our client.We learned from them that “Turkmenneft” owes $6 billion in debts to Chinese companies and there are three more pending cases against “Turkmengas” but we have not been informed yet of the amounts due.
This means that “Turkmenneft” and “Turkmengas” has a zero rating in the records of the insurance company.
As of today, these companies can order merchandise or services from China only on a 100% advance payment basis which may negatively affect business.Usually a 30% prepayment is made and then, within the next six months, the remaining 70% is paid.
This opportunity has not been available for Turkmen state holdings for a year at least.
Chronicles of Turkmenistan: It has been recently announced that “Turkmengas” will settle the dispute with the National Iranian Gas Company (NIFC) in the court.The Turkmen side is trying to “extort” the debt of $1,8 billion.
Can this be related to your activity in the past month?Is “Turkmengas” trying to get the money to settle accounts with their contractors as it had been previously stated that the gas holding was trying to repay the debt by receiving the money from Iran.
T.Kopiy: This is what our client says about the court proceedings with Iran.They supplied the merchandise but received no payment.Throughout the year they were asked to wait.
However, after persistent demands from the client, the Turkmen side offered the scheme with Iran, which was supposed to pay settle accounts with our client as debt repayment to “Turkmengas”.
Iran first agreed to pay back the debt but later refused to conclude this deal. It turned out afterwards that NIGC got a call from “Turkmenneft” which prevented NIGC from repaying the debt. Needless to say, “Turkmenneft” refuted all of this and said there was confusion and misunderstanding.
It should be mentioned that our firm offered the financial controller of “Turkmenneft” that their colleagues from “Turkmengas” repay the debt of $8,5 million to our client I.C.
Intercomplect Ltd.We were informed that “Turkmengas” is a separate business entity and they cannot pay for “Turkmenneft”.At the same time, the “Turkmeneft” official was quite comfortable with the fact that they would get the money from NGIC.
Generally speaking, I do not think that the primary reason behind the court hearing, which might not even be held, was the wish to get the cash to pay back the debts. It appears that this is an attempt to replenish the state budget.