C O N F I D E N T I A L BAKU 000735

SIPDIS

SIPDIS

E.O. 12958: DECL: 06/07/2017
TAGS: ECON EFIN PREL EPET ENRG AJ
SUBJECT: CITIGROUP CONSIDERING REPRESENTATIVE OFFICE IN
AZERBAIJAN

REF: BAKU 489

Classified By: CHARGE D'AFFAIRES DONALD LU PER REASONS 1.4 (B,D).


1. (C) SUMMARY. Citigroup Europe Chairman Sir Winfried
Bischoff told the Ambassador June 6 that Citigroup is
seriously considering opening a representative office in
Azerbaijan. There currently are no large international
financial institutions with active offices in Baku and
Citigroup's presence would signal Azerbaijan's growing
economic profile. Bischoff briefed the Ambassador on his
meeting with President Aliyev, characterizing it as excellent
and productive. Aliyev also told Citigroup that Azerbaijan
wants to be an East-West energy hub, including as a transit
point for central Asian gas to Europe. END SUMMARY


2. (C) In a June 6 meeting with the Ambassador, Sir Winfried
Bischoff, Chairman of Citigroup Europe, said that Citigroup
was seriously considering opening a representative office in
Baku. There currently are no large American banks operating
in Azerbaijan. He added that other senior Citigroup
officials would visit Baku in the coming weeks in order to
review the commercial opportunities and macreconomic
environment. In the past year, several large European banks
have opened or have considered opening offices in Azerbaijan,
including BNP Paribas and Vneshtorgbank (VTB), in order to
take advantage of the growing financial opportunities
(reftel).


3. (C) Bischoff briefed the Ambassador on his meeting with
President Aliyev, characterizing it as excellent and
productive. President Aliyev outlined to Citigroup his goals
of diversifying the economy and boosting the non-energy
sector. Aliyev recognized that growing inflationary
pressures were a concern but that the GOAJ would work to get
inflation to single-digits. Bischoff stated that Citigroup
was enthusiastic about the opportunities in Azerbaijan but
recognized the many challenges facing the GOAJ, including
combating corruption.


4. (C) Aliyev also told Citigroup that Azerbaijan wants to be
an East-West energy hub, including as a transit point for
central Asian gas to Europe. President Aliyev added that the
current profit split will shift in favor of Azerbaijan next
year, translating into higher energy revenues. Aliyev told
Citigroup that Azerbaijan wants to attract more foreign
investment, especially international banks, in order improve
the overall banking sector.


5. (C) COMMENT: Citigroup's interest in opening an office in
Azerbaijan reflects Azerbaijan's growing economic profile.
Citigroup's interest in Azerbaijan was elevated after BNP
Paribas organized a syndicated loan for SOCAR in 2006 with
several European banks; J.P. Morgan also recently concluded a
debt deal with IBA. We welcome the potential involvement of
U.S. banks in Azerbaijan and believe these leading U.S.
institutions could help promote further reform and
liberalization of the economy. END COMMENT.
LU