KERKORIAN'S LINCY FOUNDATION ROLLS OUT LATEST (60

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 001797

SIPDIS

DEPARTMENT FOR EUR/ACE, EUR/CACEN, INR

E.O. 12958: DECL: 10/04/2015
TAGS: EAID PREL PGOV AM
SUBJECT: KERKORIAN'S LINCY FOUNDATION ROLLS OUT LATEST (60
MILLION) PROGRAM


Classified By: DCM A.F.Godfrey for reasons 1.4 (b,d).

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SUMMARY
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1. (C) Representatives of Amcit philanthropist and corporate
mogul Kirk Kerkorian's Lincy Foundation told us September 25
that their latest set of programs in Armenia would begin no
later than mid-October. The USD 60 million, two-year package
of projects will include renovation of a major highway along
the Armenia-Turkey border in the north of the country,
physical upgrades for twenty of the country's most
dilapidated schools and reconstruction of Yerevan's second
tier ring roads. As with earlier Lincy projects, only
President Robert Kocharian and a core group of close advisors
-- minus the MFA -- were involved in the planning phase of
this latest program. According to one Lincy representative,
Kocharian initially wanted all of the USD 60 million budget
to go to projects in Yerevan but eventually relented when one
advisor counseled him that "ignoring the poor rural areas
would look bad" in light of USG plans to invest heavily in
the rural sector through the Millennium Challenge Account and
other programs. End Summary.

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60 MILLION FOR HIGHWAYS, SCHOOLS AND STREETS
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2. (C) Representatives of Amcit philanthropist and corporate
mogul Kirk Kerkorian's Lincy Foundation told us September 25
that their latest set of programs in Armenia would begin no
later than mid-October. A team of Lincy specialists will
arrive in Armenia October 15 to finalize grant documents,
ensure full political buy-in for the project, and begin
issuing the first tranche of funds. This much-anticipated
second round of projects comes two years after the Lincy
Foundation donated USD 110 million in a nationwide
construction program that refurbished the country's major
highways and cultural institutions (theaters and monuments)
in downtown Yerevan.


3. (C) The latest USD 60 million package of projects will
include renovation of a major highway along the
Armenia-Turkey border in the north of the country, physical
upgrades for 19-20 of the country's most dilapidated schools
and reconstruction of Yerevan's second tier ring roads. Each
of the project's three components boasts a USD 20 million
budget. One of the most ambitious projects is a new access
road that will connect downtown Yerevan with the Komitas
district in the city's northwest quadrant. (Note: While
there is clearly a need to reduce traffic congestion in this
part of the city, it is still unclear to us how this road
expansion project will be implemented. There have not been
detailed feasibility studies of which Post is aware and
Yerevan's Mayor has been relatively quiet about the project.
End Note.) Press reports have criticized this element of the
project, claiming it will improve road access to the luxury
homes of wealthy GOAM ministers but will do little to improve
the lives of average citizens. Lincy has not reacted
publicly to these accusations to date.

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CORE GROUP, MINUS THE MFA, CALLS THE SHOTS
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4. (C) As during the first set of Lincy projects, a small
group close to President Kocharian appears to be making the
important decisions regarding this latest program. Lincy
Foundation representatives told us that Kocharian,
Presidential Advisor Armen Gevorkyan, and Cabinet Chief of
Staff Manuk Topuzian were the sole decision-makers and
continue to manage Lincy-related information tightly within
the GOAM. One important difference this time around is that
Minister of Foreign Affairs Vartan Oskanian has reportedly
been excluded from the decision-making process after a 2004
tussle in the press with Lincy Co-Chairman Harut Sassounian
(Amcit) in which the two battled over who should take credit
for the success of the first installment of Lincy projects.
(Note: Oskanian has been publicly supportive of Lincy's
latest plans and has not hinted to Post that there is any
tension between the MFA and Lincy. Economic Development and
Diaspora Relations Department contacts in the MFA, however,
are mostly unaware of the details of this latest project,
which seems to confirm the rumor about the MFA's exclusion.
End Note.)

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SENSITIVITIES MOVE LINCY TOWARD RURAL PROJECTS
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5. (C) According to one Lincy representative, Kocharian
initially wanted all of the current USD 60 million budget to
go to projects in Yerevan but relented when one advisor (we
assume Gevorgyan) counseled him that "ignoring the poor rural
areas would look bad" in light of USG plans to invest heavily
in the rural sector through the Millennium Challenge Account
and other ongoing programs. (Comment: USG efforts in rural
Armenia have also influenced the MFA to focus its 2006
Diaspora Conference -- the largest gathering of Diasporans
worldwide -- on rural poverty reduction. MFA Senior Advisor
Salpi Ghazarian, an Amcit, consulted informally with the
Embassy before announcing the theme of the conference. She
said the MFA hoped a focus on rural poverty would create
synergies with the USG's USDA and MCA programming. End
Comment.) In addition, local Lincy office chief Armen
Gyulkhasian told us earlier this year that there was a
perception among some in Armenia that Lincy's first tranche
of Yerevan projects was designed to create an "illusion of
prosperity" and bolster the Kocharian administration. He
hinted that Lincy chose the current slate of projects in an
effort to counter this perception.

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COMMENT: READY OR NOT, HERE COME THE DOLLARS
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6. (C) The Lincy Foundation's decision to move quickly on the
next tranche of projects will further strengthen Armenia's
2005 economic indicators. As with the previous Lincy
program, the injection of funds into the construction sector
will create jobs, keep a number of related businesses liquid
and will certainly not hurt Yerevan's hot real estate market.
Political ramifications, while harder to quantify, are no
less likely. Kocharian can tout his ongoing relationship
with Kerkorian and the Lincy Foundation as evidence of his
friendly relations with the Armenian Diaspora community
beyond Russia. The Lincy projects will come to a close as
Kocharian ends his second term in 2008 and will likely be
part of the "legacy" he and his advisors will choose to
publicize -- and/or use as a convenient campaign tool for
what we expect to be a hand-picked successor.
EVANS