Identifier
Created
Classification
Origin
06BAKU1682
2006-11-17 13:49:00
CONFIDENTIAL
Embassy Baku
Cable title:  

EB/CBA SPECIAL REPRESENTATIVE MERMOUD MEETS WITH

Tags:  ECON ETRD PREL AJ 
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ZNY CCCCC ZZH
R 171349Z NOV 06
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 1729
INFO RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 1841
RHEHNSC/NSC WASHDC
RUEHGV/USMISSION GENEVA SZ 0230
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/CDR USEUCOM VAIHINGEN GE
C O N F I D E N T I A L SECTION 01 OF 04 BAKU 001682 

SIPDIS

SIPDIS

DEPT FOR EB/CBA SPECIAL REPRESENTATIVE J. FRANK MERMOUD
DEPT PLEASE PASS TO USTR FOR SHAUN DONNELLY, BETSY HAFNER
AND PAUL BURKHEAD
NSC FOR MATT PALMER
GENEVA FOR AMBASSADOR ALLGEIER
TREASURY FOR CLAY LOWERY, NANCY LEE AND JEFF BAKER
USDOC FOR U/S LAVIN

E.O. 12958: DECL: 11/17/2016
TAGS: ECON ETRD PREL AJ
SUBJECT: EB/CBA SPECIAL REPRESENTATIVE MERMOUD MEETS WITH
CUSTOMS COMMITTEE CHAIRMAN AND MINISTER OF EMERGENCY
SITUATIONS TO DISCUSS ECONOMIC REFORM AND COMMERCIAL
OPPORTUNITIES

REF: (A) BAKU 1475 (B) BAKU 1327

Classified By: AMBASSADOR ANNE E. DERSE PER REASONS 1.4 (B,D)

C O N F I D E N T I A L SECTION 01 OF 04 BAKU 001682

SIPDIS

SIPDIS

DEPT FOR EB/CBA SPECIAL REPRESENTATIVE J. FRANK MERMOUD
DEPT PLEASE PASS TO USTR FOR SHAUN DONNELLY, BETSY HAFNER
AND PAUL BURKHEAD
NSC FOR MATT PALMER
GENEVA FOR AMBASSADOR ALLGEIER
TREASURY FOR CLAY LOWERY, NANCY LEE AND JEFF BAKER
USDOC FOR U/S LAVIN

E.O. 12958: DECL: 11/17/2016
TAGS: ECON ETRD PREL AJ
SUBJECT: EB/CBA SPECIAL REPRESENTATIVE MERMOUD MEETS WITH
CUSTOMS COMMITTEE CHAIRMAN AND MINISTER OF EMERGENCY
SITUATIONS TO DISCUSS ECONOMIC REFORM AND COMMERCIAL
OPPORTUNITIES

REF: (A) BAKU 1475 (B) BAKU 1327

Classified By: AMBASSADOR ANNE E. DERSE PER REASONS 1.4 (B,D)


1. (C) SUMMARY. During his trip to Azerbaijan November 7-11,

J. Frank Mermoud, the Department of State's Special
Representative for Business and Commercial Affairs, met with
Government of Azerbaijan (GOAJ) ministers and officials to
discuss economic reform, World Trade Organization (WTO)
membership, commercial opportunities for U.S. companies and
the upcoming Economic Partnership Commission. At the Customs
Committee, Mermoud discussed the importance of efficient and
transparent customs operations in order to develop and
strengthen Azerbaijan's economy and increase international
trade. Customs Committee Chairman Aliyev told Mermoud that
Azerbaijan wanted to join the World Trade Organization and
that Customs had recently updated its customs code to be WTO
compliant. In addition, he told Mermoud that the Customs
Committee would like to purchase cutter ships from the U.S.
in order to patrol the Caspian Sea borders.


2. (C) SUMMARY CONTINUED: During a meeting with Minister of
Emergency Situations, Mermoud received an overview briefing
of the new ministry's operations and areas of responsibility,
including several thousand military-style troops. Mermoud
told Minister of Emergency Situations Heydarov that the U.S.
could provide the know-how to modernize and update the
ministry's departments using U.S. technology. Heydarov told
Mermoud that MES "was ready to move forward" with purchases
from the U.S. Mermoud requested from Minister Heydarov a
list of all the equipment, goods, and technologies he planned
to purchase in order to formulate a commercial plan.
Minister Heydarov said he would compile a list of articles

and equipment that the ministry required and forward it to
the Embassy. In addition, Mermoud invited Minister Heydarov
to the U.S. in order to review U.S. emergency facilities,
meet with USG officials and visit with U.S. companies.
Heydarov told Mermoud that his ministry was "ready to
cooperate" with the U.S. in all areas, including equipment
purchases and training. Both Ministers Aliyev and Hedayrov
supported elevating the economic dialogue between the U.S.
and Azerbaijan. In a separate meeting at the State
Investment Company, Mermoud discussed with Executive Director
Anar Akhundov the company's plans to invest in the non-oil
sector. The State Investment Company is a newly created
state-owned company with USD 100 million in capital designed
to invest in non-oil sector companies and ventures. Mermoud
raised the possibility of U.S. private equity cooperating and
investing with the State Investment Company in Azerbaijan.
END SUMMARY.

MERMOUD AND CUSTOMS COMMITTEE CHAIRMAN
--------------


3. (C) On November 9, J. Frank Mermoud, the Department of
State's Special Representative for Business and Commercial
Affairs, accompanied by the Ambassador, met with Customs
Committee Chairman Aydin Aliyev to discuss the important role
Customs plays in trade facilitation, economic growth and
overall security for Azerbaijan. Aliyev briefed Mermoud and
the Ambassador on the Custom Committee's good cooperation
with the U.S. Customs and Border Protection Service,
highlighting the upcoming training for Customs officers by
CBP trainers in December. He said that the new customs code,
designed with assistance from UNDP and the EU, would be
completed and presented in November. (NOTE: The Customs
Committee and UNDP presented the draft customs code November
16.) Aliyev stated that he hoped the U.S. and Azerbaijan
would sign the Customs Mutual Assistance Agreement in early
2007 during the inaugural Economic Partnership Commission
(REFTEL A). Aliyev stated that the GOAJ was busy with
hearings at Parliament regarding the 2007 state budget and
that Customs in 2007 would contribute 25 percent more
(approximately USD 143 million) to the government's revenue.

BAKU 00001682 002 OF 004



CUSTOMS AND WTO
--------------


4. (C) Building on the recent visit of U.S. Ambassador to the
WTO Peter Allgeier, Mermoud discussed the role of the Customs
Committee in the WTO process, noting that accession to the
WTO will assist the Customs Committee to develop into a world
class organization. Aliyev told Mermoud and the Ambassador
that President Aliyev had issued instructions regarding the
WTO and that Customs was working to implement the necessary
reforms to be ready for WTO accession. Aliyev told Mermoud
that inauguration of a new customs code had been delayed but
would be presented shortly. Three teams, including
international experts from New Zealand, Canada and Turkey,
had provided critical expert advice in drafting the new
customs law. Aliyev said that the Customs Committee is
working hard to meet WTO standards, especially on
intellectual property rights protection and enforcement
against counterfeits. Aliyev said that the new customs code
includes a chapter on IPR protection. He stressed that
private companies needed to work together with the Customs
Committee to stop illegal counterfeiting and protect
intellectual property.


5. (C) Mermoud stated that Customs is critical to build
stronger trade ties between the U.S. and Azerbaijan. Mermoud
recounted the business lunch hosted for President Aliyev in
Washington in April 2006, noting President Aliyev's interest
in WTO membership and Azerbaijan's development as a regional
trade hub. Aliyev agreed, stating that President Aliyev
attached a great deal of importance to improving economic
cooperation and trade development between the U.S. and
Azerbaijan. The Ambassador stated that a "strong and
transparent" Customs Committee is important for the non-oil
sector. Mermoud also highlighted the need to diversify the
non-oil sector, adding that this topic would be discussed at
the upcoming EPC meeting. Mermoud said that the EPC would
facilitate a constructive bilateral dialogue in order to
improve the facilitation of trade and investment between the
U.S. and Azerbaijan.

CUSTOMS AND COMMERCIAL OPPORTUNITIES
--------------


6. (C) Mermoud raised with Chairman Aliyev U.S. commercial
activities, noting that U.S. equipment, goods, and
technologies can offer a wide-range of services and
opportunities. Mermoud stated that President Aliyev during
his U.S. visit highlighted the need for Azerbaijan to pursue
new technology for the government and citizens as part of his
goal to modernize and upgrade the country. Mermoud requested
that Chairman Aliyev alert the Embassy to any future
commercial opportunities. Aliyev stated that the Customs
Committee had already purchased U.S. equipment from SAIC,
adding that new equipment was scheduled to arrive in
December. In 2007, Customs will receive an additional two
pieces of inspection equipment from SAIC. Aliyev stated that
Soviet-era machinery and technology were inadequate and that
Azerbaijan was looking to update to new technology, per
President Aliyev's modernization objectives.


7. (C) Aliyev told Mermoud that Customs would like to
purchase U.S.-made "cutter" ships to patrol and monitor
Azerbaijan's Caspian Sea borders. Aliyev recounted how the
Customs Committee did not have enough money in previous years
to purchase new equipment but now, with growing revenues,
wanted to upgrade to "inexpensive but high quality"
equipment. Aliyev requested from Mermoud contacts in with
appropriate companies in order to establish contact for
possible purchases. In addition, Aliyev told Mermoud that
the U.S. should organize a trade exhibition in order to
display U.S. telecommunication, transportation and other
goods and technologies in Azerbaijan. Aliyev noted that

BAKU 00001682 003 OF 004


Azerbaijan's budgets were growing quickly and that the
country was importing new technologies from many countries,
but not from the U.S. He stated that the entire GOAJ needed
new and more modern equipment, an excellent opportunity for
U.S. companies.

MERMOUD AND MINISTER OF EMERGENCY SITUATIONS
--------------


8. (C) Frank Mermoud and Ambassador Derse met with Minister
for Emergency Situations (MES) Kemalladin Heydarov November 9
to discuss possible areas where U.S. companies, technology
and know-how could assist the new ministry in meeting its
critical national responsibilities. Minister Heydarov, who
had recently returned from an urgent trip to Mingeshevir to
review a landslide that threatened a cooling canal to a
critical power station, briefed Mermoud on the new ministry's
mandate and needs. Heydarov stated that MES had
responsibility for many different areas, including civil
defense, fire fighting, water rescue, sea rescue,
construction quality oversight and state grain reserves. He
said that he had a wide-range of authority and
responsibility, including several thousand armed officials
(REFTEL B). Heydarov mentioned that four of his ministry
officials planned to travel to the U.S. for training in the
coming weeks.

COMMERCIAL OPPORTUNITIES AT MES
--------------


9. (C) Heydarov told Mermoud that he was interested in
purchasing new equipment from the U.S., noting that
Soviet-era technology was "outdated and dangerous." Mermoud
stated that the U.S. could provide the know-how to modernize
and update the ministry's departments, using U.S. equipment,
goods, and technologies. Mermoud cited the possibility of
upgrading the ministry's telecommunications capabilities to
facilitate better communication, noting that quick and
reliable communication was key to resolving many emergencies.
Heydarov agreed and related that when he was Chairman of the
Customs Committee his employees actively participated in U.S.
training programs and the committee had purchased U.S. made
equipment. Mermoud requested from Minister Heydarov a list
of al the equipment and material he planned to purchasein
order to formulate a commercial plan. In addtion, Mermoud
invited Minister Heydarov to the US. in order to review U.S.
emergency facilities,meet with USG officials and visit with
U.S. compnies.


10. (C) Heydarov told Mermoud that MES "was ready to move
forward" with purchases from the .S. and would compile a
list of articles and equipment that the ministry required and
forward it to the Embassy. He stated that MES had already
opened commercial negotiations with several different
countries to purchase equipment and material. He said it
would be easier to work with the U.S. Department of State to
identify possible deals and to ensure that prices are on a
"mutual beneficial base." Heydarov stated that MES is a
semi-military organization and therefore needed to work
through official channels for sales and training. Heydarov
also discussed his ministry's aviation safety and sea rescue
responsibilities, noting that MES "is ready to cooperate in
all areas, including training" with the U.S.


11. (C) Heydarov said that MES was responsible for
construction quality standards, adding that the construction
boom in Baku had produced many structures that are not safe,
well-planned or beneficial for the city. Mermoud told
Heydarov about a U.S. architecture firm that participated in
President Aliyev's business lunch in Washington that could
assist MES with city planning and preservation of Baku's
historical architecture. The Ambassador raised the
Department of Energy's initiative to use energy efficient and
earthquake resistant building materials to build affordable

BAKU 00001682 004 OF 004


housing. Minister Heydarov welcomed the concept, noting that
it fit well with work done by MES's research facilities and
earthquake specialists.


12. (C) Mermoud also briefed Minister Heydarov on the
inaugural Economic Partnership commission planned for early
2007, noting that the Ministry of Emergency Situations would
be invited to participate. Heydarov stated that it was
important for him to participate, adding that his ministry
"protected many economic areas."

STATE INVESTMENT COMPANY
--------------


13. (C) In a separate meeting at the State Investment
Company, Mermoud discussed with Executive Director Anar
Akhundov the company's plans to invest in the non-oil sector.
The State Investment Company is a newly created state-owned
company with USD 100 million in capital designed to invest in
non-oil sector companies and ventures. The GOAJ eventually
plans to privatize the State Investment Company. The company
is also seeking "co-financing" from international investors
seeking to invest in Azerbaijan. Mermoud raised the
possibility of U.S. private equity cooperating and investing
with the State Investment Company in Azerbaijan. Akhundov
gave a brief overview of the company's goals and objectives,
noting, however, that the relative newness of the company
meant that many operational details had yet to be finalized.
Akhundov explained that the company was focusing on financing
companies and ventures in the agricultural sector as well as
a new project to build a petrochemical plant close to Baku.
(NOTE: The Minister of Finance has also briefed the
Ambassador on the GOAJ plans to build a new petrochemical
plant.) Akhundov and the deputy executive director, Riad
Gasmiov, plan to visit New York in the near-term to give a
presentation on the State Investment Company and its
investment opportunities to several private equity and hedge
funds. Mermoud offered to assist Akhundov arrange other
possible meetings while they are in the U.S.


14. (U) EB/CBA Mermoud cleared this message.
DERSE