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04BRUSSELS758 2004-02-23 10:05:00 CONFIDENTIAL Embassy Brussels
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					  C O N F I D E N T I A L SECTION 01 OF 03 BRUSSELS 000758 



E.O. 12958: DECL: 02/20/2009


Classified By: USEU Poloff Van Reidhead for reasons 1.5 (b) and (d)

1. (C) SUMMARY: On February 9 in Brussels, EUR DAS Lynn
Pascoe -- accompanied by EUR/ACE Deputy Dan Rosenblum and
EUR/ERA Director Kathy Allegrone -- discussed US-EU
cooperation in Central Asia and the South Caucasus with the
EU's COEST Troika. This cable covers the South Caucasus
portion of the consultations. The discussion of Central Asia
is reported ref. A.

-- Wider Europe Initiative (WEI): Decision will be made by
end of June on whether to include South Caucasus in WEI;
Irish FM Cowen, EUSR Talvitie and Enlargement Commissioner
Verheugen all support South Caucasus inclusion, and are
pushing others to do so; EU remains concerned about Russian
reaction and overly high expectations of South Caucasus

-- Georgia: EU remains confident in Saakashvili's efforts to
reform public institutions; EU has 30 million euros budgeted
for assistance in 2004; US and EU to enhance on-the-ground
coordination even further.

-- Armenia: Kocharian making positive strides toward meeting
conditions of Council of Europe membership; EU agrees that
progress should be made toward opening the Turkish-Armenian
border, but doubts whether this can happen without progress
on Nagorno-Karabakh.

-- Azerbaijan: Ilham Aliev tells EU he "can wait" on
resolving Nagorno-Karabakh; EU agrees that recent positive
attention on Georgia creates an opening for increasing
pressure on Azerbaijan, which worries about being forgotten
after Georgia's dramatic turnaround. END SUMMARY.


Wider Europe Initiative:
Momentum Growing to Include South Caucasus


2. (C) COEST Troika members told Pascoe that moves to include
the three South Caucasus states in the EU's Wider Europe
Initiative (WEI) were gaining ground. Commission rep
Reinhold Brender said that a decision would have to be taken
by the end of June, and noted that Armenian President
Kocharian made a direct plea for WEI inclusion during a visit
to Brussels in December (at which time he also invited
Enlargement Commissioner Verheugen to visit Yerevan). The EU
had two serious concerns about expanding WEI into the South
Caucasus, he said: first, how would Russia react? And
second, how could the EU gently deflate the unrealistic
expectations of the three countries regarding benefits of WEI
membership? The Council Secretariat's Michael Swann echoed
this concern by explaining that the EU is nervous about
comments by Georgian President Saakashvili and Azeri
President Ilham Aliev that EU membership is an ultimate
policy objective of their countries. Wouldn't inclusion in
the WEI reinforce this unrealistic objective? Pascoe replied
that the EU should tell Russia that the South Caucasus states
are independent, and free to choose their own sovereign
policies. The benefit of expanding WEI into the region would
be too great to abandon just because the Russians might get
upset. Of the second concern, Pascoe said that the high
expectations of regional leaders was to be expected and
provided a powerful impetus to reform. There would be time
to deal with these issues after WEI expansion and as reforms

3. (SBU) Irish Presidency rep Barbara Jones said that
maximizing the WEI's value as a point of leverage over
included countries was an issue of great concern to the EU.
Council Policy Planning advisor William Boe illustrated the
concern by pointed out that Syria has been in the WEI for
over a year now, yet has made little progress. In that
context, he asked, why should the EU expect more of Armenia
after WEI inclusion? Jones noted that Commissioner Verheugen
is briefing other Commissioners on the issue this month. She
said that while some FMs remain wary -- arguing that the EU
"doesn't need a policy driven by enlargement" -- many others
are increasingly supportive of inclusion of the South
Caucasus in the WEI. Among the notable supporters of
inclusion were Irish FM Cowen (who "will manage the Council
debate," she said), Enlargement Commissioner Verheugen, and
EU Special Rep Heikki Talvitie.

4. (C) COMMENT: The EU clearly has serious issues to resolve
-- notably about scope, precedence, and managing expectations
-- before signaling any decision to the region's leaders.
Yet based on signals we have been receiving since December
from Council, Commission and member state officials, it seems
clear that the EU's momentum has shifted from debates about
whether to include the Caucasus in WEI, to discussions about
when, how, and to what end. Skeptics remain but are rapidly
being outpaced by advocates of WEI expansion. END COMMENT.


Georgia: A Success for US-EU Cooperation


5. (SBU) Jones said the EU remains optimistic about the new
Georgian administration and anticipates positive outcomes
from the new reform initiatives and the upcoming
parliamentary elections. She said it was important to
maintain the momentum and to continue cooperating on
difficult issues like Abkhazia, Adjara and IMF restructuring.
Pascoe agreed, observing that Georgia represented a stunning
success for US-EU cooperation. On Russia, Jones said the EU
was maintaining a strong line with Moscow on the need to
cooperate; Irish FM Cowen told FM Ivanov in a recent meeting
that Russia must take Georgia's territorial integrity more
seriously. Pascoe agreed that Russia must learn to deal with
Georgia as a normal, sovereign country. Solutions to
difficult issues like Abkhazia would not be found without
serious Georgian progress and some Russian help. Quoting a
statement by NATO SYG de Hoop Scheffer that the South
Caucasus were as much a part of Europe's near abroad as
Russia's, Pascoe urged the EU not to acquiesce to Russia's
effort to treat Georgia as a privileged sphere of influence.
While recent public statements by Russian officials seemed
positive, it was important to maintain the pressure to keep
Moscow moving forward. Boe said that compromise would be the
key to resolving the Russian basing issues. The Russians
know the proposed payment of USD 500 million is a nonstarter,
he said, and will probably seek to use the presence of US
forces (conducting Georgia's train and equip program) to
their advantage during negotiations.

6. (SBU) Boe said that HiRep Solana and EUSR Talvitie are
focused on the development of basic state structures as the
primary priority in Georgia. He noted that the EU budgeted
30 million euros for assistance to Georgia in 2004.
Commission rep Brender said the EU currently has 5 million
euros available now for food security, and said the 2004
budget would provide for 12 million euros for the EU's TACIS
(Technical Assistance to the CIS) program in Georgia, 12
million euros for food security, 4 million euros for
rehabilitation projects in South Ossetia and Abkhazia, and
2.5 million euros for an EU initiative on democracy and human
rights. EUR/ACE Deputy Rosenblum noted that the US FY2005
budget request for assistance to Georgia was higher than the
amount requested for any other FSU state. The US is
prioritizing revenue collection, anti-corruption, and job
creation. He also noted that the US is considering
supporting projects we have never before done in Georgia,
such as helping mitigate the employment impact of public
sector reform, adding that in this area the US will follow
the World Bank lead. Rosenblum noted that the US
contribution for upcoming parliamentary elections will amount
to about one quarter of Georgia's self-assessed need of USD
3.4 million. The US was also looking for help from others to
fund a USD 500,000 computerized voter registration system, he

7. (SBU) Pascoe urged the EU to maintain the pressure on
Georgia to reform. We should not be any softer on
Saakashvili than we were on the last group, he said.
Saakashvili's positive start needed to be bolstered, and
outside pressure should be maintained to keep the new
government on track. Jones agreed, and said she would carry
the message to EU member states to "keep the spotlight on"
Saakashvili and his new administration. Pascoe said that
US-EU cooperation on the ground should be increased even
further. We should build on our success during the run up to
the January election and carry our coordination into
additional aspects of regional assistance, he said. Jones
said the EU welcomed the enhanced coordination and would
direct its Missions to continue these efforts.




8. (SBU) Pascoe noted that while the US continues to press
Turkey on the need to make progress with Armenia, Azeri
President Ilham Aliev continues to plead with Turkey not to
abandon its defense of Azeri interests in Nagorno-Karabakh
(NK). Turkish PM Erdogan seems interested in beginning
discussions on opening the Turkish-Armenian border, but is
caught between Turkey's commitments to Azerbaijan and its
partnerships with the West. Pascoe estimated that Armenian
President Kocharian will eventually compromise with the
Azeris over NK, but perhaps Ilham Aliev is not yet a strong
enough Azeri partner. Boe voiced skepticism that the that NK
could be delinked from the issue of Turkish-Armenian
relations, and asked rhetorically how it would be possible to
open the Turkish-Armenian border without first resolving NK.
Pascoe said that the US and EU needed to set out a series of
arguments to push home resolution of NK as soon as possible,
rather than just letting it simmer on indefinitely.

9. (SBU) Jones assessed as positive Kocharian's recent
progress toward meeting the conditions of Council of Europe
(CoE) membership. Pascoe agreed, underscoring that CoE
membership remained a useful point of leverage over Armenia.




10. (C) Boe noted that Ilham Aliev told EUSR Talvitie during
a recent visit (January 20 to February 5) to the region that
he (Aliev) could wait for a solution to NK. He was young and
not in a hurry like his father had been, Ilham reportedly
said. Boe said that it was unclear whether Ilham's remarks
signaled a shift in policy or a sign of his weakness as he
tries to consolidate power in Baku. Boe also remarked that
he and Talvitie had been hearing conflicting stories about
Ilham's personal interest in power. "Some say he wants
power, and some say he only wants to play," Boe said. In
either case, the Azeris seem to playing up the image of Ilham
as a professional by boasting to Talvitie that Ilham now
shows up for work at 9:00 every day.

11. (C) Pascoe said the US was trying to strengthen Ilham and
assist him with reform efforts because, while far from
perfect, he is the most progressive figure available from a
pool of unimpressive candidates. Boe asked how we intended
to do that. Pascoe responded that the US was exploring ideas
with Ilham and would want to discuss these issues during
Talvitie's March 1-2 visit to Washington. Boe pointed out
that Georgia's recent and dramatic progress -- which has the
Azeris complaining that the Georgians are getting all the
attention lately -- provided a useful point of leverage over
Ilham. Pascoe agreed that Georgia's about-face had had a
profound impact on Azerbaijan, and said the US and EU should
use this new leverage for maximum benefit.