Cablegate: Azerbaijan: Moed Ready to Re-Engage On Next Round

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P 080820Z JAN 10
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC PRIORITY 2233
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3757
RUEHSI/AMEMBASSY TBILISI PRIORITY 1917
RUEHIT/AMCONSUL ISTANBUL PRIORITY 0191
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

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COMMERCE FOR D.STARKS
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DEPT PLEASE PASS TO USTR FOR C. MORROW AND P. BURKHEAD

E.O. 12958: N/A
TAGS: EINV ETRD BTIO EFIN KCOR KIPR AJ TU GG
SUBJECT: AZERBAIJAN: MOED READY TO RE-ENGAGE ON NEXT ROUND
OF ECONOMIC PARTNERSHIP COMMISSION

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1. (U) SUMMARY: The U.S. - Azerbaijan Economic Partnership
Commission last met in November 2008; prior to that, meetings
took place roughly annually, alternating between Baku and
Washington. These meetings were successful in sending a
message about U.S. commitment to a more transparent business
climate, development of a free market, and the importance of
fighting corruption and money laundering. We believe a
meeting under the new administration would be equally
successful. GOAJ officials are willing to discuss these
topics, but the absence of a U.S. Ambassador to Azerbaijan
has made it difficult for the Embassy to deliver this message
to high-level officials. A meeting of the EPC would give us
a renewed opportunity to send this key message. End Summary.

2. (U) The Charge d'Affaires met with Deputy Minister of
Economic Development Sevinj Hasanova on January 5, 2010.
Hasanova expressed satisfaction with USAID assistance
programs in the economic sphere and said that she would like
to expand her Ministry's engagement with the USG and is
looking for ways to do that. She expressed an interest in
doing what she can to re-energize Azerbaijan's WTO accession
effort, in conjunction with the Ministry of Foreign Affairs,
and pledged to re-start her Ministry's participation in the
Economic Partnership Commission (EPC). Hasanova, besides
highlighting WTO, noted that President Aliyev has designated
2010 as the "Year of Ecology" in Azerbaijan, and asked for
USG assistance in environmental initiatives and sustainable
development. Embassy agreed that such an initiative would be
constructive, and noted that another round of the EPC this
winter or spring could be the single best way for President
Obama's new international economic team to reach out to
high-level actors in the GOAJ.

3. (U) Embassy Baku has had few high-level economic contacts
with the GOAJ in recent months, with the exception of
Treasury A/S Cohen's visit last fall. Moreover, the absence
of a U.S. Ambassador to Azerbaijan since July has left
policymakers here wondering about the commitment of the USG
to Azerbaijan and its economic development. Embassy believes
that a renewed EPC, hosted by the Minister of Finance in
Baku, would give us an important opportunity to revive those
contacts and to stress our commitment to encouraging
Azerbaijan's free-market development, improving its business
climate, strengthening its fight against money laundering and
corruption, and re-energizing its WTO accession efforts.
These meetings, which have previously taken place in Baku and
Washington, were successful in sending that message during
the previous administration; we believe they can be equally
successful under the current administration.

4. (U) Azerbaijan's economy continues to be dominated by the
energy sector, with one million barrels of oil per day
exported through the Baku-Tbilisi-Ceyhan pipeline and natural
gas production set to surge. Currency reserves here have
reached about USD 20 billion, with the State Oil Fund (SOFAZ)
holding around USD 13 billion, essentially in a sovereign
wealth fund. 2009 economic growth, despite a worldwide
financial crisis, held at 9 per cent, with inflation reduced
to 2 per cent. Real incomes in Azerbaijan last year expanded
by 7 per cent, according to President Aliyev. U.S companies
are active in Azerbaijan's energy sector, with the oil majors
invested in offshore activity and services companies adding
support. Additionally, U.S. companies have signed agreements
to construct Azerbaijan's first telecommunications satellite
and to build segments of the East-West Highway to Georgia.
Azerbaijan also purchases construction services and
agricultural equipment from U.S. firms.

5. (U) GOAJ participation in the EPC would include the
Ministry of Finance, Ministry of Economic Development and the
State Oil Fund, and would likely also be attended by the
Central Bank, Ministry of Energy, Ministry of Agriculture and
Ministry of Communications. We expect the GOAJ would also
use the meeting as an opportunity to share the President's
regional development plan and non-energy sectors
diversification strategy, as well as to raise Jackson-Vanik,
FSA Section 907, MCC, and as always, all things
Nagorno-Karabakh.

6. (U) Our goals for the EPC would include further developing
and targeting our economic assistance programs; addressing
corruption and the non-transparent nature of the business

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climate; advancing our work with the Central Bank and
Financial Monitoring Unit on anti-money laundering and
compliance with the Financial Action Task Force; promoting
U.S. trade and development, with an emphasis on explaining
Export-Import Bank and Overseas Private Investment
Corporation financing schemes; discussing regional oil and
gas developments; and advocating renewable/alternative energy
programs, including recycling.
GARVERICK

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