Identifier
Created
Classification
Origin
06BAKU1614
2006-11-06 15:18:00
CONFIDENTIAL
Embassy Baku
Cable title:
BOEING NEGOTIATIONS ON TRACK
how-toVZCZCXRO0749 PP RUEHDBU DE RUEHKB #1614/01 3101518 ZNY CCCCC ZZH P 061518Z NOV 06 FM AMEMBASSY BAKU TO RUEHC/SECSTATE WASHDC PRIORITY 1630 INFO RUCNCIS/CIS COLLECTIVE PRIORITY RUEHAK/AMEMBASSY ANKARA PRIORITY 1813 RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RULSDMK/DEPT OF TRANSPORTATION WASHDC PRIORITY RHEHNSC/NSC WASHDC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 BAKU 001614
SIPDIS
SIPDIS
DEPT FOR EB, EUR/CARC, EB/TRA/AN, EB/CBA MERMOUD
E.O. 12958: DECL: 07/21/2016
TAGS: ECON EAIR PGOV PREL ETRD AJ
SUBJECT: BOEING NEGOTIATIONS ON TRACK
REF: BAKU 1570
Classified By: AMB ANNE E. DERSE; REASONS 1.4 (B,D)
C O N F I D E N T I A L SECTION 01 OF 02 BAKU 001614
SIPDIS
SIPDIS
DEPT FOR EB, EUR/CARC, EB/TRA/AN, EB/CBA MERMOUD
E.O. 12958: DECL: 07/21/2016
TAGS: ECON EAIR PGOV PREL ETRD AJ
SUBJECT: BOEING NEGOTIATIONS ON TRACK
REF: BAKU 1570
Classified By: AMB ANNE E. DERSE; REASONS 1.4 (B,D)
1. (SBU) SUMMARY: At a November 3 meeting with the
Ambassador, Boeing's Sales Director for Europe and Central
Asia Serdar Gurz said he is "cautiously optimistic" about the
sale of five Boeing airplanes to Azerbaijan. He said that
AZAL's Director General Janhangir Askerov is following
Boeing's action plan, but cautioned that Airbus has heard
"Boeing is here" and now plans to visit Azerbaijan in
November. Gurz and Boeing's Regional Director Tibet Giray
said potential issues could be Askerov's expectations of EXIM
commitment as a prerequisite for the deal, the loan
percentage that EXIM will fund, the exposure fees EXIM will
charge, and perhaps the country of registration for any
purchased Boeing airplanes. The Ambassador said she supports
Boeing's efforts and reiterated her commitment to help,
including her willingness to discuss a ceremonial signing
with Askerov when she meets with him. END SUMMARY.
2. (SBU) During his November 3 meeting with the Ambassador,
Boeing's Sales Director for Europe and Central Asia Serdar
Gurz said the negotiations with Azerbaijan's Civil Aviation
Authority and state airline (AZAL) "are going according to
plan." AZAL's Director General Jahangir Askerov is following
the action plan Gurz set out, he said. Gurz also noted that
eight or nine Boeing engineers are in Azerbaijan configuring
the planes' designs to AZAL's specifications so that Boeing
can determine what price to quote AZAL for the planes.
Boeing's Regional Director for Aircraft Contracts, Commercial
Airplanes Group Tibet Giray, added that the specifications
should be finished in late November and the price set by
early December, allowing for the possibility of Boeing and
AZAL to sign by the end of 2006. Gurz told the Ambassador
that Airbus has deployed its A-30s and A-50s and is sending
representatives to Baku next week after hearing about
Boeing's presence, but said he remains "cautiously
optimistic."
Possible Hurdles: Lending and Registration
--------------
3. (C) Gurz said he has contacted EXIM Bank about the
funding, but there are potential problems because of EXIM's
negative perception of AZAL's dealings with Sikorsky on a
helicopter contract three years ago. Gurz said he will be
meeting with EXIM's David Fiori November 8 to request a
"letter of enthusiasm." Giray explained that Askerov wants a
commitment from EXIM Bank as a prerequisite for the Boeing
deal, but Giray said he is not sure if the "letter of
enthusiasm" would be enough. EXIM normally reviews a
contract for lending six to nine months before delivery,
Giray continued, but despite AZAL's previous experience
borrowing from EXIM, Giray said, he is unsure Askerov will
remember that timeline. According to Giray, two other
possible issues will be 1) Askerov is expecting EXIM to
finance the maximum 85 percent of the total price, but EXIM
may decide to lend a smaller percent and 2) EXIM charges an
exposure fee between 3.5 and 8 percent based on country risk
and Askerov may be unhappy if the fee is too high. Gurz said
that in the past, Askerov has also been reluctant to promise
a sovereign guarantee for loans, but it should not be an
issue this time since Askerov reiterated November 2 that the
sovereign guarantee is "no problem."
4. (SBU) Country of registration may also be a problem, Giray
said, since Azerbaijan has not signed the Cape Town
Convention which would allow the lender to reposess and
reregister the airplanes if AZAL defaults on payments. The
problem may be, Gurz explained, that Airbus allowed AZAL to
register in Azerbaijan but EXIM will not.
Ambassador Offers Support
--------------
5. (SBU) The Ambassador thanked Gurz and Giray for the
update and reiterated her support for Boeing, especially in
the face of increased Airbus presence and competition. She
offered to help with the ceremonial signing in January or
February, noting that Foreign Minister Mammadyarov had
expressed his enthusiasm to her for a public signing
ceremony. The Ambassador asked Gurz and Giray to keep her
updated on progress with AZAL and EXIM and offered her
support as problems arise.
BAKU 00001614 002 OF 002
DERSE
SIPDIS
SIPDIS
DEPT FOR EB, EUR/CARC, EB/TRA/AN, EB/CBA MERMOUD
E.O. 12958: DECL: 07/21/2016
TAGS: ECON EAIR PGOV PREL ETRD AJ
SUBJECT: BOEING NEGOTIATIONS ON TRACK
REF: BAKU 1570
Classified By: AMB ANNE E. DERSE; REASONS 1.4 (B,D)
1. (SBU) SUMMARY: At a November 3 meeting with the
Ambassador, Boeing's Sales Director for Europe and Central
Asia Serdar Gurz said he is "cautiously optimistic" about the
sale of five Boeing airplanes to Azerbaijan. He said that
AZAL's Director General Janhangir Askerov is following
Boeing's action plan, but cautioned that Airbus has heard
"Boeing is here" and now plans to visit Azerbaijan in
November. Gurz and Boeing's Regional Director Tibet Giray
said potential issues could be Askerov's expectations of EXIM
commitment as a prerequisite for the deal, the loan
percentage that EXIM will fund, the exposure fees EXIM will
charge, and perhaps the country of registration for any
purchased Boeing airplanes. The Ambassador said she supports
Boeing's efforts and reiterated her commitment to help,
including her willingness to discuss a ceremonial signing
with Askerov when she meets with him. END SUMMARY.
2. (SBU) During his November 3 meeting with the Ambassador,
Boeing's Sales Director for Europe and Central Asia Serdar
Gurz said the negotiations with Azerbaijan's Civil Aviation
Authority and state airline (AZAL) "are going according to
plan." AZAL's Director General Jahangir Askerov is following
the action plan Gurz set out, he said. Gurz also noted that
eight or nine Boeing engineers are in Azerbaijan configuring
the planes' designs to AZAL's specifications so that Boeing
can determine what price to quote AZAL for the planes.
Boeing's Regional Director for Aircraft Contracts, Commercial
Airplanes Group Tibet Giray, added that the specifications
should be finished in late November and the price set by
early December, allowing for the possibility of Boeing and
AZAL to sign by the end of 2006. Gurz told the Ambassador
that Airbus has deployed its A-30s and A-50s and is sending
representatives to Baku next week after hearing about
Boeing's presence, but said he remains "cautiously
optimistic."
Possible Hurdles: Lending and Registration
--------------
3. (C) Gurz said he has contacted EXIM Bank about the
funding, but there are potential problems because of EXIM's
negative perception of AZAL's dealings with Sikorsky on a
helicopter contract three years ago. Gurz said he will be
meeting with EXIM's David Fiori November 8 to request a
"letter of enthusiasm." Giray explained that Askerov wants a
commitment from EXIM Bank as a prerequisite for the Boeing
deal, but Giray said he is not sure if the "letter of
enthusiasm" would be enough. EXIM normally reviews a
contract for lending six to nine months before delivery,
Giray continued, but despite AZAL's previous experience
borrowing from EXIM, Giray said, he is unsure Askerov will
remember that timeline. According to Giray, two other
possible issues will be 1) Askerov is expecting EXIM to
finance the maximum 85 percent of the total price, but EXIM
may decide to lend a smaller percent and 2) EXIM charges an
exposure fee between 3.5 and 8 percent based on country risk
and Askerov may be unhappy if the fee is too high. Gurz said
that in the past, Askerov has also been reluctant to promise
a sovereign guarantee for loans, but it should not be an
issue this time since Askerov reiterated November 2 that the
sovereign guarantee is "no problem."
4. (SBU) Country of registration may also be a problem, Giray
said, since Azerbaijan has not signed the Cape Town
Convention which would allow the lender to reposess and
reregister the airplanes if AZAL defaults on payments. The
problem may be, Gurz explained, that Airbus allowed AZAL to
register in Azerbaijan but EXIM will not.
Ambassador Offers Support
--------------
5. (SBU) The Ambassador thanked Gurz and Giray for the
update and reiterated her support for Boeing, especially in
the face of increased Airbus presence and competition. She
offered to help with the ceremonial signing in January or
February, noting that Foreign Minister Mammadyarov had
expressed his enthusiasm to her for a public signing
ceremony. The Ambassador asked Gurz and Giray to keep her
updated on progress with AZAL and EXIM and offered her
support as problems arise.
BAKU 00001614 002 OF 002
DERSE