MINISTER OF ECONOMIC DEVELOPMENT SEEKS MORE U.S.

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000715 SIPDIS SIPDIS E.O. 12958: DECL: 01/01/2016 TAGS: PREL PGOV ENRG EPET ETRD KDEM PINR AJ SUBJECT: MINISTER OF ECONOMIC DEVELOPMENT SEEKS MORE U.S. INVESTMENT IN MEETING WITH DOS SPECIAL REPRESENTATIVE MERMOUD REF: BAKU 684 Classified By: Charge d'Affaires Jason P. Hyland per 1.4 (b,d). ¶1. (C) SUMMARY: The State Department's Special Representative for Commercial and Business Affairs Frank Mermoud and Charge met May 4 with Azerbaijani Minister of Economic Development Heydar Babayev. Babayev expressed a strong interest in purchasing U.S. products and having more U.S. products, specifically U.S.-made automobiles available in the Azerbaijani market. He also touched on the issue of a trans-Caspian gas pipeline from Kazakhstan to Azerbaijan. Babayev was pleased and energized by President Aliyev's late April 2006 trip to Washington, particularly meetings between the Azerbaijani leadership and U.S. government and business officials. END SUMMARY. STRENGTHENING RELATIONS -------------- ¶2. (C) In a May 4 meeting with visiting State Department Special Representative for Commercial and Business Affairs Frank Mermoud and Charge, Minister of Economic Development Babayev reviewed President Aliyev,s meetings in Washington April 25-28. He thanked Mermoud for visiting Azerbaijan so quickly after this visit, which would help continue the positive momentum begun in Washington, and expressed his appreciation and satisfaction for the business leaders lunch Mermoud hosted for President Aliyev in Washington. Mermoud thanked the Minister for his participation in the meetings in Washington and said that the U.S. business community wanted to learn more about the investment opportunities in Azerbaijan. Mermoud said that while the political and security sides, including the strengthening of democracy, were critical parts of U.S.-Azerbaijani relations, the business and commercial sides could not be ignored. By strengthening the business and commercial side of the relationship, the other parts or the relationship would benefit as well. ROLE FOR U.S. BUSINESS -------------- ¶3. (C) Mermoud emphasized that rule-of-law is critical for increasing U.S. investment. While the Azerbaijani market offered many advantages, it was important for U.S. businesspersons to know that they will have a fair and transparent legal structure in which to work. Mermoud made the point that there were several roles for U.S. business to 
play in the Azerbaijani economy, specifically in strengthening the non-oil sectors of the economy, such as agriculture and high technology. U.S. companies also frequently play a role as worldwide providers of business services. Babayev agreed, and singled out specifically the agriculture sector and the high quality of U.S. manufactured agriculture equipment as something that the Azerbaijani market needed. Babayev said that Azerbaijan had, in the past, purchased agricultural equipment from China, but that, while the prices were good, the quality was poor. For this reason, Azerbaijan did not plan to purchase more agricultural equipment from China. ENERGY ISSUES -------------- ¶4. (C) Mermoud then raised energy issues, specifically the issue of a trans-Caspian gas pipeline between Kazakhstan and Azerbaijan. Babayev said that the GOAJ strongly supported such a proposal, and that Kazakhstan also wanted to move forward quickly with a gas pipeline but would have to have U.S. guarantees before moving forward with such a project. Babayev said that in addition to the gas pipeline there would be the possibility of running tankers. Babayev said that Azerbaijan had no intention of becoming more reliant on Iran for gas or using Iran as a transit point, because such transit routes could easily be shut off at any time by Iran. CONCERN OVER IRAN -------------- ¶5. (C) Babayev said that the GOAJ remained concerned about Iran and gave his personal opinion that Iranian President Mahmud Ahmedinejad was a puppet of the Iranian clerical establishment. He lamented the recent restrictions that the Iranian government had placed on the Azerbaijani language in Iran and emphasized that there were no Azeri-language schools in Iran, despite the fact that a large percentage of the BAKU 00000715 002 OF 002 Iranian population is ethnic Azeri. He said that while Azerbaijan is concerned about the nuclear issue, Iran could easily destroy Azerbaijan with conventional weapons, so the nuclear issue is not as important. CREATING SMALL BUSINESS -------------- ¶6. (C) Babayev told Mermoud that the GOAJ had established a USD 100 million National Entrepreneurship Fund. The National Entrepreneurship Fund would provide loans at a 7 percent rate for industrial projects and a 4 percent rate for small businesses. BABAYEV DELIGHTED WITH APPOINTMENT OF NEW FINANCE MINISTER; COMMENTS ON NEW CURRENCY -------------- -------------- ¶7. (C) Babayev said that the MED has good relations with the new Minister of Finance Samir Sharifov. He said that the first meeting that they had after his appointment was "the best day of my life." He commended the good job that Sharifov had done at the State Oil Fund, noting its transparency. Babayev also said that he was against the issuance of the new Azerbaijani manat coins (kopeks). He estimated that inflation in 2006 would increase by one to three percent because no one wanted to use the coins. DESIRE FOR MORE U.S. GOODS -------------- ¶8. (C) As the meeting drew to a close, Babayev asked Mermoud and the Charge why more U.S. goods, specifically U.S.-made automobiles were not being sold in Azerbaijan. Babayev said that at this point he was only interested in the sale of U.S. goods and was not proposing that a plant or other production facility be opened. He expressed his desire for the current USD 174 million trade figure to be increased. He said that there was a &huge8 market for U.S. goods, specifically automobiles, in Azerbaijan. ¶9. (U) Special Representative Mermoud cleared this message. HYLAND