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 -------------- ¶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 -------------- ¶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