Identifier
Created
Classification
Origin
06STATE159998
2006-09-25 20:46:00
CONFIDENTIAL
Secretary of State
Cable title:
A/S FRIED,S MEETING WITH AZERBAIJANI STATE OIL
how-toVZCZCXRO9636 RR RUEHDBU DE RUEHC #9998/01 2682140 ZNY CCCCC ZZH R 252046Z SEP 06 FM SECSTATE WASHDC TO RUEHKB/AMEMBASSY BAKU 2837 INFO CIS COLLECTIVE RHEHNSC/NSC WASHINGTON DC 5795 RUEATRS/TREASURY DEPT WASHINGTON DC 7696 RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 02 STATE 159998
SIPDIS
SIPDIS
E.O. 12958: DECL: 09/24/2016
TAGS: ECON EFIN ENRG EPET AJ
SUBJECT: A/S FRIED,S MEETING WITH AZERBAIJANI STATE OIL
FUND EXECUTIVE DIRECTOR SHAHMAR MOVSUMOV
Classified by EUR A/S Daniel Fried. Reasons: 1.4 (b),(d).
C O N F I D E N T I A L SECTION 01 OF 02 STATE 159998
SIPDIS
SIPDIS
E.O. 12958: DECL: 09/24/2016
TAGS: ECON EFIN ENRG EPET AJ
SUBJECT: A/S FRIED,S MEETING WITH AZERBAIJANI STATE OIL
FUND EXECUTIVE DIRECTOR SHAHMAR MOVSUMOV
Classified by EUR A/S Daniel Fried. Reasons: 1.4 (b),(d).
1. (U) A/S Fried, joined by NSC Director for Eurasia Judy
Ansley, met with Executive Director of the State Oil Fund of
Azerbaijan (SOFAZ) Shahmar Movsumov on September 20 in New
York on the margins of the UNGA. EUR/CARC Director Elizabeth
Rood also attended (notetaker).
2. (U) A/S Fried began the meeting by noting the strong
U.S.-Azerbaijan relationship and President Aliyev's goals for
the nation, which had been advanced through his April visit
to Washington. Noting the massive oil and gas revenues
expected in Azerbaijan in the coming years, A/S Fried asked
Movsumov how Azerbaijan planned to use the flood of money
wisely.
3. (U) Movsumov explained that the Government of Azerbaijan,
understanding that political pressure to spend oil revenues
would increase as the revenues rose, created SOFAZ in 1999 to
divert that pressure and ensure that the revenues would be
used for the benefit of the people. Movsumov explained that
SOFAZ participated in the UK's Extractive Industries
Transparency Initiative (EITI). SOFAZ receives all energy
revenues and transfers them to the state budget, ensuring
that they are expended in a transparent manner through the
budget with approval of Parliament. SOFAZ funds are being
used for large projects of national importance, such as
housing for persons internally displaced by the
Nagorno-Karabakh conflict. SOFAZ itself does not determine
the use of the funds but manages them, with all money
invested overseas, subject to strict auditing and credit
rating requirements and in a fully transparent manner. The
prevailing view for further use of the revenues is for large
infrastructure projects, so as to pass the riches of the
nation's resources to the people and to future generations.
In response to a question from A/S Fried, Movsumov said GOAJ
was considering whether to distribute money from SOFAZ funds
to retirement accounts.
4. (U) Noting Movsumov's previous experience with
Azerbaijan's National Bank, A/S Fried asked his views on the
strength of Azerbaijan's banking system. Movsumov said
Azerbaijan had taken "enormous measures" to build a strong
banking system with stringent supervision. The banking
system is somewhat undercapitalized, he said, but this is
because it is young. Many advisors, including those from
USAID and the National Bank of Switzerland, had helped in
strengthening the system. Asked by A/S Fried whether
Azerbaijan needed additional help in this area, Movsumov said
past assistance had been valuable, and more is needed. A/S
Fried said he would look at how the U.S. could provide
further assistance. Movsumov said TDA's assistance was very
valuable, and he had discussed the previous week with TDA's
Dan Stein moving to Phase Two of that program.
5. (C) A/S Fried recalled that other Azerbaijani officials
had told him Azerbaijan intended to build its military so as
to retake Nagorno-Karabakh, and he had warned these officials
that a new war over Nagorno-Karabakh would mean an end to
energy revenues. A/S Fried asked Movsumov how much of
Azerbaijan's oil and gas revenues would be devoted to
military spending, and how Azerbaijan's spending plans relate
to regional issues. Movsumov replied that this was not his
direct responsibility, but he strongly believed a peaceful
resolution of the conflict was the only way forward.
Economic development can push countries toward peace.
However, without building pressure on Armenia and NK, it
would be impossible to change the status quo; and the only
way to build that pressure was through defense spending. The
U.S. experience in the Cold War provided an example of this,
he added. Fried stressed the dangers of military
brinksmanship.
6. (U) A/S Fried stressed that the U.S. wants Azerbaijan to
succeed, and to work with it to develop democratic
institutions so that it emerges as a "success story" in the
region. An independent, sovereign Azerbaijan with regional
options is good for the region. The U.S. interests in
democracy and energy are one in the same because wise
exploitation of energy resources requires democratic
institutions.
7. (U) In response to Ansley's question of whether the U.S.
could provide additional assistance on the management of
STATE 00159998 002 OF 002
energy revenues, Movsumov said Phase Two of the TDA program
would meet Azerbaijan's needs, and, in addition, Azerbaijan
had applied for a World Bank program.
8. (U) CARC Director Rood praised the progress Azerbaijan
had made through establishment of SOFAZ. As the first
country to join EITI, she said, Azerbaijan had valuable
experience to share with other resource-rich countries.
Despite the cancellation of NSC's Natural Resources/Social
Development Fund roundtable that Movsumov had come to attend,
the U.S. hoped Azerbaijan would find opportunities to help
other countries benefit from its experience. Movsumov
replied that Azerbaijan was already working with Kazakhstan
and was prepared to work with other countries as well.
RICE
SIPDIS
SIPDIS
E.O. 12958: DECL: 09/24/2016
TAGS: ECON EFIN ENRG EPET AJ
SUBJECT: A/S FRIED,S MEETING WITH AZERBAIJANI STATE OIL
FUND EXECUTIVE DIRECTOR SHAHMAR MOVSUMOV
Classified by EUR A/S Daniel Fried. Reasons: 1.4 (b),(d).
1. (U) A/S Fried, joined by NSC Director for Eurasia Judy
Ansley, met with Executive Director of the State Oil Fund of
Azerbaijan (SOFAZ) Shahmar Movsumov on September 20 in New
York on the margins of the UNGA. EUR/CARC Director Elizabeth
Rood also attended (notetaker).
2. (U) A/S Fried began the meeting by noting the strong
U.S.-Azerbaijan relationship and President Aliyev's goals for
the nation, which had been advanced through his April visit
to Washington. Noting the massive oil and gas revenues
expected in Azerbaijan in the coming years, A/S Fried asked
Movsumov how Azerbaijan planned to use the flood of money
wisely.
3. (U) Movsumov explained that the Government of Azerbaijan,
understanding that political pressure to spend oil revenues
would increase as the revenues rose, created SOFAZ in 1999 to
divert that pressure and ensure that the revenues would be
used for the benefit of the people. Movsumov explained that
SOFAZ participated in the UK's Extractive Industries
Transparency Initiative (EITI). SOFAZ receives all energy
revenues and transfers them to the state budget, ensuring
that they are expended in a transparent manner through the
budget with approval of Parliament. SOFAZ funds are being
used for large projects of national importance, such as
housing for persons internally displaced by the
Nagorno-Karabakh conflict. SOFAZ itself does not determine
the use of the funds but manages them, with all money
invested overseas, subject to strict auditing and credit
rating requirements and in a fully transparent manner. The
prevailing view for further use of the revenues is for large
infrastructure projects, so as to pass the riches of the
nation's resources to the people and to future generations.
In response to a question from A/S Fried, Movsumov said GOAJ
was considering whether to distribute money from SOFAZ funds
to retirement accounts.
4. (U) Noting Movsumov's previous experience with
Azerbaijan's National Bank, A/S Fried asked his views on the
strength of Azerbaijan's banking system. Movsumov said
Azerbaijan had taken "enormous measures" to build a strong
banking system with stringent supervision. The banking
system is somewhat undercapitalized, he said, but this is
because it is young. Many advisors, including those from
USAID and the National Bank of Switzerland, had helped in
strengthening the system. Asked by A/S Fried whether
Azerbaijan needed additional help in this area, Movsumov said
past assistance had been valuable, and more is needed. A/S
Fried said he would look at how the U.S. could provide
further assistance. Movsumov said TDA's assistance was very
valuable, and he had discussed the previous week with TDA's
Dan Stein moving to Phase Two of that program.
5. (C) A/S Fried recalled that other Azerbaijani officials
had told him Azerbaijan intended to build its military so as
to retake Nagorno-Karabakh, and he had warned these officials
that a new war over Nagorno-Karabakh would mean an end to
energy revenues. A/S Fried asked Movsumov how much of
Azerbaijan's oil and gas revenues would be devoted to
military spending, and how Azerbaijan's spending plans relate
to regional issues. Movsumov replied that this was not his
direct responsibility, but he strongly believed a peaceful
resolution of the conflict was the only way forward.
Economic development can push countries toward peace.
However, without building pressure on Armenia and NK, it
would be impossible to change the status quo; and the only
way to build that pressure was through defense spending. The
U.S. experience in the Cold War provided an example of this,
he added. Fried stressed the dangers of military
brinksmanship.
6. (U) A/S Fried stressed that the U.S. wants Azerbaijan to
succeed, and to work with it to develop democratic
institutions so that it emerges as a "success story" in the
region. An independent, sovereign Azerbaijan with regional
options is good for the region. The U.S. interests in
democracy and energy are one in the same because wise
exploitation of energy resources requires democratic
institutions.
7. (U) In response to Ansley's question of whether the U.S.
could provide additional assistance on the management of
STATE 00159998 002 OF 002
energy revenues, Movsumov said Phase Two of the TDA program
would meet Azerbaijan's needs, and, in addition, Azerbaijan
had applied for a World Bank program.
8. (U) CARC Director Rood praised the progress Azerbaijan
had made through establishment of SOFAZ. As the first
country to join EITI, she said, Azerbaijan had valuable
experience to share with other resource-rich countries.
Despite the cancellation of NSC's Natural Resources/Social
Development Fund roundtable that Movsumov had come to attend,
the U.S. hoped Azerbaijan would find opportunities to help
other countries benefit from its experience. Movsumov
replied that Azerbaijan was already working with Kazakhstan
and was prepared to work with other countries as well.
RICE