AZERBAIJAN: BECHTEL SVP MEETS WITH PRESIDENT

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000385

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/02/2017
TAGS: ECON EINV ETRD ELTN PREL PGOV AJ
SUBJECT: AZERBAIJAN: BECHTEL SVP MEETS WITH PRESIDENT
ALIEV, MINISTERS

Classified By: Ambassador Anne E.Derse, Reasons 1.4 (b,d)


1. (C) SUMMARY. In a March 29 meeting with Ambassador
Derse and Bechtel Senior Vice President (Amb) Charles Redman,
President Aliyev said that "it would be good for Azerbaijan"
if Bechtel could find a project to do here. In this meeting
and in a subsequent separate meeting with the Transportation
Minister, Redman explained that Bechtel was seeking a major
road infrastructure project of strategic importance that
needed to be done quickly and up to world class standards.
Although the Transportation Minister could not find a project
about which Redman was enthusiastic, Redman agreed to send an
expert to Baku for further discussions. END SUMMARY


2. (C) On March 29, Bechtel Senior Vice President and Region
President for Europe/Africa/Middle East/South West Asia
(Ambassador - Retired) Charles E. Redman visited Azerbaijan
to see if there were business opportunities for Bechtel.
After a breakfast meeting with selected members of the
American Chamber of Commerce, he met President Ilham Aliyev
(accompanied by Ambassador Derse and Econ/Commercial
Officer). He also had separate meeting with Economic
Development Minister Haydar Babayev, Transportation Minister
Ziya Mammadov, Emergency Situations Kamaladdin Heydarov, and
Presidential Advisor Ali Asadov. In all meetings other than
the Presidential one, he was accompanied by Commercial
Officer and Embassy Commercial Assistant.

PRESIDENT ALIYEV WANTS BECHTEL...
-------------- --------------


3. (C) In meeting with President Aliyev and his economic
advisor Ali Asadov, Redman briefed President Aliyev on
Bechtel, adding that he was responsible for Bechtel business
operations in over 150 countries. He said he came to Baku
because he sensed that with Azerbaijan's dawning economic
prosperity there might be an opportunity for Bechtel to help
modernize its infrastructure. Redman explained that Bechtel
only initiated a few projects worldwide each year, and that
certain conditions had to be present in order for Bechtel to
engage. He said that Bechtel was looking for a situation
where there was a large and complex project of strategic
importance that had to be accomplished quickly and to
world-class standards. He said that a typical Bechtel
project would be a greenfield highway project where a
government needed it built quickly. He contrasted this
'Bechtel method' with what he described as the usual method
of road construction, where different parts of a
strategically important major road are built by different
companies funded by different entities such as the World Bank
or EBRD, with the financing and construction taking so long
that ultimately it takes ten to fifteen years for the road to
be built, in contrast to the three years it would have taken
Bechtel. Additionally many of the roads built in this manner
require repair soon after their construction, negating any
'savings' on the front end. Redman also pointed out that
Bechtel, along with Boeing, is a major client of the Exim
Bank, which would traditionally provide credit for up to
thirty percent of a Bechtel project, to say nothing of
secondary financing that Exim Bank presence usually made
possible.


4. (C) President Aliyev said he was well aware of Bechtel's
excellent reputation and was eager for Bechtel to play a role
in developing Azerbaijani infrastructure. Pointing out that
Azerbaijan had three major roads (one to Georgia, one to
Russia and one to Iran) Aliyev said there were many major
road projects where Bechtel could find an appropriate
opportunity. "Over one thousand kilometers of road are being
or need to be built," Aliyev emphasized. There are also
major inter-city roads that need to be built. In general,
Aliyev said that Azerbaijan "needs to modernize the entire
road structure." Aliyev wryly agreed with Redman that the
normal method of road construction, doled out among
contractors and financial institutions and dragged out over
years as Azerbaijan had done thus far, was unsatisfactory,
adding that EBRD and World Bank worked "too slowly" for his
taste.


5. (C) Aliyev said that Azerbaijan was investing a lot in
infrastructure, to include having amounts allocated in the
budget. If financing were slowing a project down, the GOAJ
would fund the project itself. Aliyev repeated that Bechtel
could easily find a project in Azerbaijan to suit its
criteria, adding that Bechtel could choose a

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thousand-kilometer project that has to be done by 2010. Given
Bechtel's reputation, it would be very good for Azerbaijan if
Bechtel were active in Azerbaijan. Alluding to a follow-on
meeting later in the day between Redman and the
Transportation Minister, Aliyev said that the MOT would
present what has been done and what remains to be done, and
that his economic advisor Ali Asadov would be the POC for
Redman.

...BUT TOUGH FINDING A FIT?
--------------


6. (C) In the subsequent meeting with Transportation Minister
Mammadov, it was clear that the Minister had been told by the
President to find a project for Bechtel; indeed he told
Redman that he had been briefed by the President's office
just before the meeting. Also present at the meeting was
Javid Ghorbanov, Member of Parliament and head of
AzerRoadService Open Joint-Stock Company ("Azeryol"). Redman
repeated the presentation he had made earlier to President
Aliyev. Transportation Minister Mammadov seemed fixed less
on the possibilities of strategic infrastructure upgrade that
Bechtel could bring and more on what financing and sources of
money a deal with Bechtel could bring with it. However, when
Redman made clear that Exim funding would come only with a
specific Bechtel deal, and would probably be no more than
thirty percent of overall funding, Mammadov lost interest in
the topic of financing.


7. (C) Ghorbanov pressed Redman on a "typical price" for any
proposed Bechtel road project. After extensive caveats,
Redman said that a typical 'greenfield' type road could cost
approximately five to six million dollars per kilometer, an
amount that struck Minister Mammadov and Ghorbanov as quite
expensive. Transportation Minister Mammadov told Redman that
the major road projects (Georgia, Russia, Iran) had been
already contracted out or put to tender, although given
President Aliyev's interest, the MOT could always find
sections of road for Bechtel, a proposal to which Redman
seemed less than enthusiastic. Redman was similarly
unenthusiastic about the Transportation Minister's proposed
project for Bechtel: a new ring road around Baku, with
construction on existing roads through heavily populated
parts of the Baku peninsula. After much back and forth, the
Transportation Minister and Redman agreed that a Bechtel
expert would come to Baku for further discussion of road
infrastructure possibilities.


8. (C) In a subsequent meeting with Presidential Advisor Ali
Asadov, Redman briefed him on his meeting with the
Transportation Minister. He explained that there was
"nothing wrong nor anyone to blame" if there were no 'fit'
for Bechtel currently in Azerbaijan, and that Bechtel didn't
want to waste Azerbaijan's time and money just for the sake
of "finding something to do" in Azerbaijan. After hearing
him out, Asadov agreed that the next step would be having a
Bechtel expert travel to Azerbaijan to discuss possible
projects with MOT.


9. (C) COMMENT: Clearly President Aliyev wants Bechtel to
engage in Azerbaijan. As he himself said, Bechtel has a good
reputation for quality, and he can trust Bechtel to do a good
job. No doubt he is also fully aware that Bechtel's presence
in Azerbaijan would be a strong signal that major Western
companies can do business in Azerbaijan. Just as clearly,
Bechtel's Redman was less than enthused about the projects
pitched to him by the Transportation Ministry. Given the
rather limited criteria that Redman stipulated for a project
in Azerbaijan, combined with the fact that most major road
projects have already been doled out, it remains to be seen
whether Bechtel and Azerbaijan can find a fit. Embassy will
work with Bechtel and with the GOAJ to help find this fit.
END COMMENT.
DERSE