SCENESETTER FOR MCC VISIT TO ALBANIA

UNCLAS SECTION 01 OF 04 TIRANA 000313

SIPDIS

SENSITIVE
SIPDIS

MCC FOR AMBASSADOR DANILOVICH
DEPT FOR EUR/SCE (BENEDICT/SAINZ)
NSC FOR BRAUN
TREASURY FOR ATUKORALA

E.O. 12958: N/A
TAGS: EAID ECON KMCA OTRA AL
SUBJECT: SCENESETTER FOR MCC VISIT TO ALBANIA


1. (SBU) Summary: The new Government of Albania (GoA),led
by Prime Minister Sali Berisha, took office in September

2005. Berisha's governing coalition, led by his Democratic
Party, was elected largely on a campaign promise to combat
endemic organized crime and corruption. The new GoA has
taken some positive steps to follow through on its promise of
clean government, but ultimate success will depend on the
government's management skill in crafting and implementing
its program, including specifically, achieving political
consensus with the opposition on the major components of its
program.


2. (SBU) Summary (Cont'd) GoA relations with the U.S. are
excellent. Albania, which has been an eager ally in the GWOT,
is working to achieve NATO membership, hoping for an
invitation in 2008. Albania also is also working towards EU
accession -- it is close to finalizing a Stability and
Association Agreement with the European Commission.
Ultimately, Albania's Euro-Atlantic integration aspirations
will depend on how well it addresses rule of law issues and
whether, by doing so, it can improve its business climate to
attract outside investment to bring Albania on par
economically with other NATO and EU candidate countries. End
Summary.

PERCEPTIONS OF THE U.S.


3. (SBU) Albania is one of the most U.S.-friendly countries
in the world -- a recent poll indicated that well over 90
percent of its populace held a favorable view of the United
States. Albanians credit Woodrow Wilson with preserving
Albania's statehood following WWI and are enormously
appreciative of the U.S. led military effort in 1999 to
protect ethnic Albanians in Kosovo. A popular morning DJ
here begins his show with the slogan -- "Love Albania like
you love the United States." Although the U.S. is neither a
major trading partner nor a lead donor, our influence here is
great, and USG actions receive extraordinary attention from
the government, media, and citizenry.

POLITICAL OUTLOOK


4. (SBU) Albania took a major step toward consolidating
democratic change in 2005 by holding parliamentary elections
that, though not fully meeting international standards, were
judged to be a step forward. After eight years in the
opposition, a coalition led by the center-right Democratic
Party (DP) was elected on a campaign in which it promised to
fight corruption and crime and come to government with "clean
hands." The transfer of power in September 2005 occurred
peacefully and relatively smoothly, a welcome first in
Albanian political history.


5. (SBU) The new GoA has taken some steps in keeping its
promises to combat organized crime and corruption. There
have been arrests of key organized crime figures, as well as
indictments against a few former government officials on
charges of corruption. The GoA has also proposed a number of
notable legislative and administrative initiatives -- a
stronger conflict of interest law, increased funding for
witness protection programs, tougher customs enforcement, and
a very tough anti-nepotism law.


6. (SBU) The DP's handling of some aspects of crime and
corruption problems, however, has caused a ruckus in
Parliament, mainly due to the DP's urging for a change of the
Prosecutor General (who is politically independent from the
DP government). The opposition's strategy is now aimed at
making the "fight against corruption" appear to be a gambit
by Berisha to settle political scores.


7. (SBU) To avoid giving ammunition to either side, we

TIRANA 00000313 002 OF 004


suggest you emphasize "respect for the rule of law." The GOA
should be urged to focus on demonstrable results and to
conduct arrests and prosecutions of high-level corrupt
officials and organized criminals in a tough but fair and
transparent way. For the effort against organized crime and
corruption to be credible, these arrests and prosecutions
cannot be seen as politically motivated.

BILATERAL ISSUES


8. (SBU) Albania was among the first countries to answer our
calls for support in the GWOT, and its support has been
unwavering. The Albanians have a contingent of 120 Commando
troops in Mosul, Iraq, and 22 Special Operation Forces troops
in Afghanistan. In addition, There are 68 soldiers from the
Rapid Reaction Brigade in Bosnia. Overall, including troops
in preparation for overseas deployments, Albania has 31
percent of its elite troops committed to the GWOT.


9. (SBU) The desire to join NATO (and the Euro-Atlantic
community in general, including the EU) is very strong in
Albania. Albania wants to receive an invitation to NATO in
2008, but we have been careful to avoid making commitments,
stressing that the door is open, and that the U.S. supports
Albania's aspirations, but it is Albania's achievement of
necessary political, military, economic and political
standards that will determine membership.

ECONOMIC ISSUES


10. (SBU) The GoA recently canceled a USD 80 million railway
modernization contract that had been entered into between the
previous government and General Electric. The World Bank and
IMF had opposed the contract, claiming it was too expensive
and not a spending priority for the government. The Embassy,
however, supported GE's position in the matter and has since
expressed "disappointment" that an important transportation
infrastructure project will not go ahead.


11. (SBU) Albania has enjoyed excellent macroeconomic
stability in recent years, with low inflation (2 to 3 percent
annually the last 4 years),solid growth (6 percent
annually),and a stable currency. To date, much of Albania's
growth has been fueled by remittances from abroad, mainly
from emigrant workers in Greece and Italy. The main
economic challenge is to improve the business climate to
attract badly-needed foreign direct investment. Without
substantial increases in the level of FDI, Albania will
neither sustain its current growth pattern nor will it
achieve the higher rates of growth needed to bring it on par
with credible EU-candidate countries within the next decade.


12. (SBU) Although infrastructure deficiencies (especially
roads and energy) are partially to blame for Albania's
low-ranking on FDI in the region, the main deterrents appear
to be strong perceptions of corruption and weak rule of law
institutions. Although some of these perceptions are
outdated and overly negative, real problems of crime and
corruption remain a major deterrent to foreign investors.


13. (SBU) Support of American business is an increasingly
important function of our mission. Lockheed Martin is
undertaking a $47 million project to modernize the air
traffic system and is negotiating with the GoA for a $17
million coastal surveillance system installation contract.
General Electric has sold medical equipment to the government
and is poised to invest in the energy sector to develop
hydropower resources. Other U.S. affiliated firms, like AMBO
Pipeline and ASG Power are contemplating billion dollar
projects to increase power production and to make Albania a
crucial player in the gas and crude oil pipeline network.


TIRANA 00000313 003 OF 004


REGIONAL ISSUES / KOSOVO


14. (SBU) Your interlocutors may mention Kosovo and regional
issues. Albania has been a stabilizing presence in the
Balkans, particularly on Kosovo, by discouraging extremism
and cooperating with the international community. The new
DP-led government has been somewhat more vocal in support of
Kosovar independence. Foreign Minister Mustafaj recently
roiled the waters by suggesting that other borders might
change if Kosovo were to be divided a comment that was unwise
at best in the current climate. Lest there be any doubt, the
GoA reaffirmed that its Kosovo policy remains unchanged, as
does it support for the Contact Group and international
efforts to decide Kosovo's final status. We therefore
recommend you express appreciation for Albania's constructive
role in the region and urge continued moderation.

OTHER USG ASSISTANCE PROGRAMS


14. (U) Programs administered by USAID, the Department of
Justice, Department of Treasury and the State Department's
Public Diplomacy wing are funded under the SEED program. The
FY06 SEED budget for all countries in the region was cut by
Congress this year -- the current budget for Albania stands
at USD 24.75 million (down from USD 28 million last year).
USDA assistance was terminated in FY 2005.


15. (U) USAID commands the biggest slice of the SEED budget
pie -- roughly USD 19 million -- and focuses its programs on
four areas: Economic Development (mainly programs to make
small and medium size businesses more competitive);
Democratic Reforms (strengthening civil society and rule of
law institutions); Health Care Reform (developing a primary
health care system); and Special Initiatives (an extensive
anti-trafficking program, religious harmony projects and
energy sector reform).


16. (SBU) U.S. Security Assistance programs include FMF (FY
06 USD 3.5 million); IMET (FY06 USD 900,000); Coalition
Solidarity Funding (FY05 USD 6 million); Global Peacekeeping
Operations Initiative (FY06 USD 3.5 million); Peace Keeping
Operations funding for operations in Iraq (FY05 USD 750,000,
FY06 as needed); Humanitarian Assistance, and a number of
smaller programs.


17. (SBU) The U.S. is spending USD 35 million through the
Nunn-Lugar Cooperative Threat Reduction program to destroy
Albania's Communist-era chemical weapons stockpile. The
Department of State has also provided assistance with
destruction of small arms/light weapons (including MANPADS)
and heavy munitions as well as support to humanitarian
de-mining in Albania.

OTHER DONORS


18. (U) The World Bank and IMF have recently extended their
agreements with Albania, signing on to a USD 196 million
four-year package and a USD 24.7 million three year package,
respectively. The Bank considers Albania to be above normal
IDA qualifying maximum income figures, but nevertheless is
extending IDA assistance on a number of projects. Italy,
Greece, Germany, EBRD, EIB and EU institutions also provide
substantial assistance to Albania.

POSSIBLE MESSAGES TO THE GOA


19. (SBU) Although we anticipate that your discussions with
the GoA and any dialogue with the press will likely be
focused entirely on the nature of the Threshold Program
assistance, we include several of our standard talking points
below to address other topics which may come up:


TIRANA 00000313 004 OF 004


--We recognize that Albania is working hard to reform its
institutions, including by fighting corruption, attracting
foreign investment, and consolidating democratic institutions.

--How the government tackles rule of law issues is crucial.
It is essential that the government use the institutional
framework, good police work, and the judiciary to get the job
done in a transparent and fair way. In addition, it is
imperative that the government reach consensus with the
opposition that this is a national objective that must be
implemented and supported by all parties.

--GWOT: Albania has shown itself to be an excellent partner
in Iraq and Afghanistan. The USG is grateful for Albania's
contribution and we look forward to your continuing support.

--We are pleased that economic growth is a key part of your
program. We believe US investment can play an increasingly
important role in this. We strongly support investments by
major US companies like GE, Lockheed Martin, ASG Power and
AMBO. Their success will draw additional foreign capital,
both from the US and the international business community.

--Regional Issues: Albania has traditionally played a
positive and moderating role in Kosovo and Macedonia. The
U.S. will continue to count on this role, particularly as
negotiations progress on Kosovo.
RIES