SCENESETTER FOR CODEL KOLBE'S APRIL 12-14 VISIT TO

UNCLAS BAKU 000536

SIPDIS

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL PHUM KDEN ECON EAID MARR AJ
SUBJECT: SCENESETTER FOR CODEL KOLBE'S APRIL 12-14 VISIT TO
AZERBAIJAN


SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION.


1. (U) Chairman Kolbe, I warmly welcome you and Congressman
Garrett to Baku next week. This visit will be a superb
opportunity to deliver a strong message of support for political
and economic reform, and to enhance further our strong security
cooperation with Azerbaijan. Your visit comes at a particularly
crucial time in our efforts to increase our strategic cooperation
with the Government and to push for continued democratic
progress, building on last November's parliamentary elections and
one month before parliamentary rerun elections.. I want to
provide you background on the situation in Azerbaijan and
highlight the important strategic equities the United States has
in this country and region.

THE STRATEGIC CONTEXT
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2. (SBU) The United States has several core strategic equities in
Azerbaijan, including counter-terrorism, energy security,
regional stability, and democratic and economic development.
Azerbaijan is in a key geographic position to assist our efforts
on the Global War on Terrorism, and has consistently been willing
to provide the necessary support and cooperation to advance our
efforts. This commitment includes deployment of troops to both
Afghanistan and Iraq, as well as the provision of blanket over-
flight rights for U.S. military aircraft.

ENERGY AND REVENUE MANAGEMENT
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3. (U) Our partnership extends to the energy sector as well, and
last May, Energy Secretary Bodman represented the United States
at the First Oil ceremonies of the Baku-Tbilisi-Ceyhan (BTC)
pipeline. These ceremonies marked the culmination of ten years
of focused U.S. efforts to promote the East-West Energy Corridor,
creating a major export pipeline that does not pass through
Russian or Iranian territory. Eventually, one million barrels of
oil a day will flow from Azerbaijan to the Mediterranean, and
from there to world markets. Next phases could see increased
carriage of Kazakhstan volumes and movement of natural gas to
Western Europe, a development that could be critical to ensuring
Europe's energy security.


4. (U) Azerbaijan's massive influx of energy revenue poses
massive challenges to the economy. A pioneering member of the
Extractive Industries Trasnparency Initiative (EITI),Azerbaijan
has established an internationally audited State Oil Fund that
will safeguard Azerbaijan's energy revenues and invest in its
development. Expenditures to-date have focused on construction
of schools and IDP housing; future plans include a water system
for Baku and a new investment fund to spur growth in the non-oil
sectors. The real challenge will come in managing the growth of
Azerbaijan's econonomy, ensuring that inflation remains at
acceptable rate and preventing the onset of Dutch disease.
Corruption, which is pervasive in Azerbaijan, further complicates
matters. With Freedom Support Act funds, the USG is providing
technical assistance to help Azerbaijan manage this transition,
with technical advisors in the Ministries of Tax and Finance,
anticorruption programs, rule of law programs and a program to
help strengthen the GOAJ's consolidated budgeting process


5. (SBU) A just, lasting, and peaceful resolution of Azerbaijan's
unresolved conflict with Armenia over Nagorno-Karabakh remains
the government of Azerbaijan's stated top priority. Ambassador
Steven Mann and the other OSCE Minsk Group Co-Chairs continue
their active support of settlement negotiations, and we have seen
some recent progress in this area. While the February
Rambouillet meeting between President Kocharian and President
Aliyev did not yield the results we had hoped for, it is critical
to urge both sides to continue talks within the structure of the
Prague Process. We believe this year presents a golden
opportunity to make necessary steps to resolve this long
conflict; you may wish to ask the Foreign Minister what
constructive approaches he feels would be beneficial to the
process. In other areas, we are providing millions of dollars in
assistance to promote economic reform and development, to enhance
Azerbaijan's ability to interdict WMD through the Cooperative
Threat Reduction Proliferation Prevention Initiative, and to
improve security cooperation and increase interoperability with
NATO. Our interests are widespread and varied and our policy
toward Azerbaijan should and does reflect this diversity of
interests.

DEMOCRATIZATION CONTINUES WITH NEW PARLIAMENT, NEW ELECTIONS
-------------- --------------


6. (SBU) On May 13 Azerbaijan will hold rerun parliamentary
elections in ten constituencies that were canceled due to fraud

after last November's elections. The November elections failed
to meet international standards, as have previous elections,
although the conduct was an improvement over previous elections.
The Government accepted key recommendations of the international
community to accept exit polling, finger inking to prevent
multiple voting, and to do away with a requirement that forced
domestic observer organizations to register as individuals,
instead of as an organization. The ten May reruns will be a key
test of the Government's stated commitment to clean elections and
we believe this is still possible. While candidates have yet to
begin the campaign in earnest, reports from the ten districts
indicate government interference in the process is low. You
should urge the Foreign Minister to stay the course and ensure
that the May reruns erase the scourge of November's fraudulent
vote count.


7. (SBU) Meanwhile, the MPs elected in November are already hard
at work in their new positions and we are seeing positive signs
from the new Parliament. The current body is Azerbaijan's third
Parliament and appears to be shedding some of the "rubber stamp"
tendencies for which its predecessors were notorious. You will
meet eight MPs key to this process from the opposition, the
ruling party, and independents. We believe these MPs represent
the future of Parliament's ability to exercise its jurisdiction
as a separate governing institution and a check on executive
power. I encourage you to engage these MPs in discussions on
legislative reform, increased numbers of professional staff, and
ways to exert an independent voice in the Government.


8. (SBU) A concerning human rights development, however, has been
the detention and subsequent trial of key individuals separately
accused of coup plotting in the leadup to the November
parliamentary election. Last summer three youth activists were
detained and are currently on trial for plotting the violent
overthrow of the government; in a disturbing step, the court
proceedings were closed due to national security concerns.
Separately, two former sitting ministers and a handful of high
level government officials were detained in a separate coup
charge. These individuals remain in detention with no trial date
in sight. I recommend that you urge the Foreign Minister to
respect rule of law and each defendant's due process rights in
your meeting with him.


9. (SBU) We strongly believe that through encouraging steady
democratic change, the United States will best be able to protect
and expand its very real equities in Azerbaijan. We are actively
promoting democratic reform and a civil society, and providing
technical assistance to support it. Last year we introduced two
new AID programs aimed at strengthening civil society and are
currently drafting a concept paper for a multi-year parliamentary
assistance program. We are also continuing work to
professionalize political parties and candidates and enhance the
technical capabilities of the election commissions. You will
have the opportunity to hear from the individuals implementing
these programs on the ground; I encourage you to engage in a
frank exchange of ideas on the way forward in Azerbaijan.

A STEADILY DEEPENING SECURITY RELATIONSHIP
--------------


10. (SBU) Our steadily deepening security relationship makes
Azerbaijan a key partner to the United States. Our mutual
security interests with Azerbaijan include close cooperation in
Iraq and in fighting the Global War on Terror. 151 Azerbaijani
Shiite Muslim infantry troops stand alongside U.S. Marines to
guard the Haditha Dam in Iraq, and Azerbaijan has also
contributed troops in Afghanistan and peacekeepers in Kosovo.
Azerbaijan provides blanket over-flight rights for U.S. aircraft,
as well as strong information sharing and law enforcement
cooperation in fighting terror. An aviation fuel supply problem
at Kyrgyzstan's Manas Airbase last year significantly increased
the air traffic flow through Azerbaijan, and the closing of K2 in
Uzbekistan may further increase this traffic.


11. (SBU) In looking to the future, Azerbaijan recently completed
an Individual Partnership Action Plan (IPAP) with NATO that has
promoted more extensive cooperation in a number of areas. For
example, the US has provided equipment to Azerbaijan's
peacekeeping battalion. The US is also working extensively with
the Ministry of Defense to develop a "NATO compatible" military
airfield that could be used by US aircraft as a "gas and go"
location for operations in Central Asia. The US is assisting the
Azerbaijani Navy to upgrade the capabilities of five ships and a
naval commando unit to assist in interdicting trans-national
threats on the Caspian Sea. The last area is defense reform, in
which the US is providing assistance in the areas of English
language training, NCO professional development, and US-NATO
staff training. These efforts are funded by a variety of US
security assistance programs including Foreign Military Financing

(FMF),Coalition Support Funds (CSF),Individual Military
Education and Training (IMET),and the Counter-Terrorist
Fellowship Program (CTFP).


12. (SBU) The Proliferation Prevention Initiative encompasses the
Coast Guard, and the recently-added participation of the Navy to
complete the mission requirements to surveill the Azerbaijani
sector of the Caspian Sea, and to detect and interdict WMD. The
Cabinet of Ministers recently directed the Joint Command and
Control Center be located at the Coast Guard Base in Baku and for
the Navy to staff the JC3 jointly with the Coast Guard. This
program represents a historic first for Cooperative Threat
Reduction (CTR) programs. Rather than disabling and destroying
WMD, CTR money will be used to detect and prevent proliferation.
Sheparding this complex and first-ever undertaking is a major
priority for this mission.

POST-SETTLEMENT RECONSTRUCTION NEEDS
--------------


13. (SBU) A resolution of the Nagorno-Karabakh conflict in 2006
would present the GOAJ with the staggering task of organizing the
repatriation of over half a million Internally Displaced Persons
(IDPs) to the occupied territories. The donor community UNHCR
believes that any IDP repatriation plan would require a thorough
needs assessment of the occupied territories infrastructure,
largely obliterated over the past decade of conflict. The GOAJ
does not have the capacity to develop a robust repatriation plan
and would be unprepared for an IDP return in the event of
settlement. Consequently, an international organization under
the auspices of the OSCE Minsk Group would need to undertake any
future needs assessment.


14. (SBU) On the eve of the Ramboiullet talks, Deputy Prime
Minister Ali Hassanov (who heads the State Committee on Refugee
and IDP Issues) held a widely publicized conference with
international donors, during which he announced the Government's
intent to start planning for an eventual IDP return to the
occupied territories. We strongly support the DPM's initiative as
it is a welcome sign that the GOAJis prepared to work with the
international community to begin planning for an IDP return in
the context of a negotiated settlement. At the conference, UNHCR
also announced that it would take the lead in drafting a
statement of principles for IDP repatriation in conjunction with
the GOAJ. Despite the failure of the Ramboiullet talks, we
believe there is a need to continue moving the IDP planning
process forward. In the event of a resolution of the conflict,
the USG would be expected to take a lead role in implementing a
post conflict IDP repatriation plan as an integral part of the
settlement.

KEY POINTS TO RAISE
--------------


15. (SBU) Below are key points that we suggest you raise:

Strategic relationship

-- We appreciate our countries' broad strategic partnership and
welcome opportunities to deepen it.

-- Thank you for your support in Iraq and Afghanistan.

Democracy

-- We support a democratic process and are encouraged by recent
reform efforts, in particular the improved November parliamentary
elections. Azerbaijan should continue these efforts and ensure
the May rerun elections are free and fair.

-- We are concerned, however, about certain human rights cases
that appear to contradict your government's reform agenda. I
urge you to ensure that rule of law and due process rights are
respected with regard to the detention and trial of all
individuals charged in connection with coup plotting last year.

REVENUE MANAGEMENT AND ANTICORRUPTION

-- Azerbaijan has made great strides toward responsible
management of its energy resources by signing on to EITI and
creating a State Oil Fund.

-- Azerbaijan needs to demonstrate similar leadership by
establishing sound macroeconomic policies and procedures,
ensuring proper oversight of government spending by empowering
parliament, and fighting corruption.

Nagorno-Karabakh

-- 2006 represents a watershed year to solve the prolonged
Nagorno-Karabakh conflict. I urge you to take the bold steps
necessary to set in motion post-conflict settlement plans,
especially as they relate to the large scale IDP repatriation
plan that would be required in the aftermath of the conflict.
Similarly, I urge you to prepare your citizens for the steps your
government will need to take to ensure a lasting peace.

-- As you prepare for an eventual end to this conflict, know that
the USG stands ready to assist you in implementing an IDP
repatriation plan as well as in addressing the massive
reconstruction needs that you will facing. We look forward to
continued dialogue as this process moves forward.


16. (U) Your visit next week provides an outstanding opportunity
to advance the USG's agenda in Azerbaijan. I look forward to
welcoming you.

HARNISH