NEW KAZAKHSTAN DRAFT OF AZERBAIJAN-KAZAKHSTAN IGA

C O N F I D E N T I A L BAKU 000742 SIPDIS SIPDIS USDOE FOR FE - SWIFT AND OS - WILLIAMSON USTDA FOR DAN STEIN E.O. 12958: DECL: 05/19/2016 TAGS: EPET ENRG PREL EWWT EINV AJ KZ SUBJECT: NEW KAZAKHSTAN DRAFT OF AZERBAIJAN-KAZAKHSTAN IGA WORRIES INVESTORS REF: LOVELAND-BILGE E-MAILS AND TELCON OF MAY 19 Classified By: Acting DCM Joan Polaschik, reasons 1.4 (b),(d) and (e). ¶1. (C) On May 19, John Dabbar of ConocoPhillips informed Energy Officer of recentdevelopments in the negotiations over the Azerbaijan-Kazakhstan Inter-Governmental Agreement (IGA) for cross-Caspian oil transport. Dabbar said that Kairgeldy Kabyldin of KazMunaiGaz has been removed from his position as Kazakhstan's lead negotiator. He has been replaced by Deputy Energy Minister Kiinov, who has been charged with drafting a brand-new IGA. Kiinov's proposed draft is a very short document, said Dabbar. Essentially, it simply obligates Kazakhstan to deliver oil to Azerbaijan and obligates Azerbaijan to then transport that oil through the BTC pipeline. The issue of the Marine Transporter is not addressed and there are no protections for investors. ¶2. (C) Dabbar said that in his view, Azerbaijan may well sign on to this agreement, and then deal with issues of investor protection and maritime infrastructure in the follow-on Host Government Agreement (HGA). Kazakhstan apparently wants the document to be signed at a regional meeting to be held in Almaty on June 13 (we have heard the same information from a Senior Advisor to Azerbaijan's President Aliyev). Dabbar said that the feeling on the Kazakhstani side is that Azerbaijan was simply taking too long and asking for too much in the negotiations. While he understands this new draft agreement is not Kazakhstan's final position, said Dabbar, it is clear that Azerbaijan will not be getting a deal as good as it was getting in earlier drafts. In Dabbar's view, Azerbaijan will not gain what it could have gained, but may still sign because it has not actually lost anything. ¶3. (C) The picture is different for the international investors, said Dabbar, who are very unhappy with the new draft. Punting to the HGA all the issues that concern the investors will guarantee at least a year's delay in the project. ConocoPhillips is asking both Embassy Baku and Embassy Almaty to engage their respective host countries on the issue. ¶4. (C) Dabbar's description of the situation has been confirmed by Embassy Almaty (ref e-mails and telcon). Post has requested meetings with Presidential Economic Counselor Ali Asadov and with Elshad Nasirov, Vice President of Azerbaijan State Oil Company (SOCAR) and Azerbaijan's lead negotiator on the IGA. Nasirov is returning to Azerbaijan late on May 19, but will return to Kazakhstan on Monday May 22, apparently for further negotiations. HYLAND