OFFICIAL VISIT OF PRESIDENT KHATAMI TO ARMENIA

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 002061

SIPDIS

DEPT FOR EUR/CACEN, EUR/ACE EB/ESC, NEA/ARP

E.O. 12958: DECL: 09/13/2014
TAGS: ECON ENRG EPET AM IR
SUBJECT: OFFICIAL VISIT OF PRESIDENT KHATAMI TO ARMENIA

REF: YEREVAN 02019

Classified By: DCM A.F. GODFREY FOR REASONS 1.4 (b) and (d).


1. (C) During Iranian President's Mohammad Khatami's visit to
Yerevan, September 8-9, the Armenian and Iranian governments
signed seven agreements including the agreements concerning
the partial financing and construction of an Armenian-Iranian
gas pipeline. The local press and the Armenian Ministry of
Foreign Affairs (MFA) officials portrayed the visit as
symbolically and economically important. Press reports
claimed that the visit signaled increased political and
economic relations between Iran and Armenia.

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GAS PIPELINE AGREEMENT
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2. (C) On September 8-9 Iranian President Mohammed Khatami
paid an official state visit to Armenia. We met with MFA
officials including Chief of the Middle Affairs division
Karen Mirzoyan and Iran Desk Officer Garnik Badalian after
the official visit to get a briefing on the substance of the
visit. They confirmed the details of the USD 30 million loan
to the Armenian Energy Ministry (reftel). Per the agreement,
the Iranian construction company "Sanir" was named as the
primary contractor. Mirzoyan and Badalian agreed that the
Armenian government still needed approximately USD 70 million
to complete the pipeline and neither had a clear idea of the
origin for the funding. However, both believed that once
pipeline construction was started, it would be easier to find
either GOAM or international funding to finish the project.
Badalian believed that due to weather and bureaucratic
realities, the actual construction of the pipeline would
start in the spring of 2005. Both Mirzoyan and Badalian were
confident that gas would start to be imported from Iran by
the agreed upon 2007 date.

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ARMENIAN-IRANIAN GOVERNMENT AGREEMENTS
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3. (C) Mirzoyan and Badalian confirmed that the Armenian
government and Iranian government signed the following
agreements:
-- Agreement on Principles and Bases for Cooperation
between the Republic of Armenia (GOA) and the Islamic
Republic of Iran (GOI).
-- Memorandum of Understanding on the 5th Joint Session
of Inter-Governmental Commission on Armenian Iranian ties.
-- Cultural Cooperation Programs for 2005-2007 between
the GOA and the GOI
-- Memorandum of Understanding between the Customs State
Committee of Armenia and the Iranian Customs Service on
implementation of the Agreement on Administrative Assistance
in Customs Affairs.
-- Memorandum of Understanding (MOU) on Cooperation
between the Armenian and Iranian Ministries of Energy
-- Agreement on Financing the gas pipeline for
Meghri-Kajaran section
-- Contract on Construction of the gas pipeline.



4. (C) Mirzoyan and Badalian strongly felt that the MOU
between the ministries of energy and the pipeline agreements
were the most critical of Khatami's visit. Mirzoyan
characterized most of the remaining agreements as more
protocolary in nature and said that this visit was primarily
about economic issues. Badalian stated that both sides had
wanted to sign an agreement concerning the Kajaran tunnel,
but due to time constraints and last minute unresolved
details it was not possible. Badalian believed that the
details could be easily worked out and the agreement could be
signed at the ministerial level in the near future. Mirzoyan
wryly observed that as slow as the Armenian MFA works, the
Iranian MFA is twice as slow.

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MFA VIEW OF A SUCCESSFUL VISIT
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5. (C) Mirzoyan and Badalian both felt that the visit was a
success because it was the first visit of an Iranian
president since the independence of Armenia. They believed
it also showed that Iran was able to balance it's political
and economic interests between Azerbaijan, Armenia, and
Turkey. The GOA was also pleased that Khatami agreed to
visit the genocide memorial. Mirzoyan and Badalian were
however concerned about what reaction the United States
Government (USG) would have to Khatami's visit and were
searching for any public or official reaction from the
American press and the Department of State.

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COMMENT
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6. (C) While there is clear evidence that both the GOA and
the GOI have taken concrete steps to try and increase the
level of cooperation between both countries, serious doubts
remain as to whether these joint projects will materialize
and if they have any lasting effect on the economic and
political relations between Armenia and Iran.
EVANS