AZERBAIJAN PRESIDENT TELLS COMMERCE DEPUTY

C O N F I D E N T I A L SECTION 01 OF 03 BAKU 000769

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/06/2011
TAGS: PREL PGOV ECON ETRD KCOR PARM AJ
SUBJECT: AZERBAIJAN PRESIDENT TELLS COMMERCE DEPUTY
SECRETARY HE WANTS MORE US COMPANIES

SIPDIS

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


1. (C) SUMMARY. In a June 4 meeting with Commerce Deputy
Secretary Sampson, President Aliyev reviewed Azerbaijan,s

SIPDIS
business climate and said the GOAJ would "have finished all
the necessary implementation" for WTO accession by year's
end. Aliyev lauded Azerbaijan's recent economic progress, to
include a lowering of the poverty rate from 49 to 20 percent,
and said Azerbaijan's new national strategy on combating
corruption would contain specific deadlines and goals for the
GOAJ to meet its existing international obligations.
Although he believes "the more US companies in Azerbaijan,
the better," Aliyev said that Bechtel's current
"Trans-Azerbaijan National Expressway" proposal was unlikely
due to already existing projects, although a modified
proposal might be acceptable. However, upon hearing the
details of the proposal, he agreed to review it in greater
detail.He agreed with Deputy Secretary Sampson that the idea
of a Business Entrepreneurial Council that met regularly with
the President to give "unfiltered opinion" from the business
community was a good one. Sampson raised the American Bureau
of Shipping,s problems with CASPAR, and urged Azerbaijan to
pass legislation implementing the Chemical Weapons
Convention. END SUMMARY.


2. (U) On June 4 Deputy Secretary of Commerce Sampson and
Ambassador Derse met President Aliyev. Sampson was
accompanied by Commerce Deputy Assistant Secretary Paul Dyck,
Chief of Staff Aimee Strudwick and Caucasus and Central Asian
Affairs Desk Officer Danica Starks. Pres Aliyev was
accompanied by accompanied Head of the Presidential Apparat's
International Relations Department Novruz Mammadov. Econoff
was notetaker.


3. (C) Deputy Secretary Sampson thanked Aliyev for
Azerbaijan,s cooperation in the War on Terrorism and
provision of troops to Iraq, Afghanistan and Kosovo.
Azerbaijan had both the human capital and the abundant
natural resources to diversify its economy, and Sampson,s
trip to Azerbaijan was a signal of USG desire to strengthen
bilateral commercial ties. Referring to his meeting with the
American Chamber of Commerce Board of Directors, Sampson said
that he sensed there was "great optimism" about Azerbaijan's
business potential. The U.S. looked forward to engaging
Azerbaijan on economic and democratic reform. Deputy
Secretary Sampson lauded Azerbaijan's efforts to improve its

SIPDIS
business environment, to include the nascent "one-stop
shopping" initiative for registration and licensing of
businesses and entrepreneurs. He asked President Aliyev for
his thoughts on WTO, which he termed as foundational for
Azerbaijan's transformation.

WTO AND ECONOMIC PROGRESS
--------------


4. (C) President Aliyev said current USG-GOAJ bilateral
relations, based on the three pillars of security
cooperation, reform and energy security, were strong. He
wanted to concentrate on developing Azerbaijan's non-energy
sector, and welcomed US companies' cooperation, especially in
the IT, transportation and agriculture fields. Azerbaijan
has made great progress in economic development: it has
reduced poverty from 49 to 20 percent in just three years,
and the non-energy sector had 12 percent growth the previous
year. The GOAJ supports SME's with 100 million dollars worth
of loans available annually. It gives loans and leases
equipment at low rates to farmers, in addition to providing
100 million dollars worth of agricultural subsidies this
year. Azerbaijan is committed to a free market economy while
still establishing good strong social programs and a
commitment to regional development. It has established a
State Investment Company to direct investment in the
non-energy sector.


5. (C) On WTO, Aliyev said the GOAJ will have "finished all
the necessary arrangements" for accession by year's end.
Responding to Deputy Secretary Sampson's question as to how
the USG and Commerce Department could best help Azerbaijan,
President Aliyev said that the U.S. was "Azerbaijan's
strongest supporter," and that the U.S. should help the GOAJ
in WTO negotiations to minimize risks for Azerbaijani
businessmen, as he anticipated difficulties for Azerbaijani
producers, who are just starting to develop.

CORRUPTION
--------------


6. (C) Deputy Secretary Sampson said Azerbaijan could be a
regional platform for business, but he pointed out that U.S.
business has to work within a rigid framework mandated by

BAKU 00000769 002.2 OF 003


legislation like FCPA and Sarbanes-Oxley. Increased
transparency and serious measures to combat corruption will
help Azerbaijan attract Foreign Direct Investment. As such,
he said he hoped that Azerbaijan's new national strategy on
combating corruption would contain specific deadlines and
goals for the GOAJ to meet its existing international
obligations.


7. (C) President Aliyev said there would be definite programs
and time frames stipulated. He pointed out that the former
Soviet Union now comprised 15 nations, all of which are
plagued by corruption. Azerbaijan was seeking to combat
corruption via a mixture of punishment and improving the
overall economic environment, and it is "reducing." He said
that traffic police, who used to routinely receive small
bribes, now receive a salary equivalent to 500 USD/month,
which greatly decreased corruption. On the other hand,
judges, who receive an average salary of USD two
thousand/month, can receive huge bribes for deciding cases in
a particular manner, so raising their salaries would not be
effective. The key to solving the corruption problem was a
"general political and economic transformation." Integration
with international organizations like the EU would be
important in this regard. (COMMENT: In a brief aside with the
President after the meeting, the Ambassador noted that the
widespread perception in the business community is that
corruption is getting worse, not better, to which the
President replied, "thank you for telling me." END COMMENT).


8. (C) President Aliyev alluded to the high degree of
transparency in the oil and gas sector, to include the Oil
Fund, concluding that "no one would say there is any
corruption in the oil and gas sector." Having BP, ExxonMobil
and other international energy companies in Azerbaijan was a
"good experience," so "the more U.S. companies in Azerbaijan,
the better." In this regard, he had met with the heads of
Microsoft, Cisco and Intel in the hopes of developing
Azerbaijan's IT sector. He was also quite happy about
Azerbaijan,s experience with U.S. agricultural company
Valmont.


9. (C) Deputy Secretary Sampson said that American companies
in Azerbaijan are good inculcators of solid
corporate values, and recounted the story he had heard during
the previous night's AmCham dinner about how a young
Azerbaijani businessman gained a strong set of business
morals and learned to "work to the highest standards" while
working for a U.S. firm in Baku. In this regard, Bechtel's
proposed Trans-Azerbaijan National Expressway would be good
not only for improving Azerbaijan's strategic infrastructure
but also for inculcating solid business practices into
Azerbaijanis who would become involved in the project.
President Aliyev said that he was aware of the Bechtel
proposal but that all of Azerbaijan's construction projects
had been started: "We do not need two east-west highways; we
only need one." Aliyev suggested that perhaps Bechtel could
widen the existing highway, or otherwise modify its proposal
in accordance to projects already being carried out by the
Ministry of Transportation. Sensing that the President was
not fully informed about the Bechtel proposal, Ambassador
Derse explained its general parameters, to include sources of
funding. She asked if President Aliyev would be willing to
meet with Bechtel SVP Ambassador Redman again, to hear more
about the project, and President Aliyev said he would.

ABS
---


10. (C) Deputy Secretary Sampson mentioned that the American
Bureau of Shipping (ABS),which was seeking to be able to
certify shipping but was being "shut out" by the Azerbaijan
State Caspian Sea Shipping Company ("CASPAR"). Laughing,
President Aliyev said that most of CASPAR's ships don't meet
international standards, so that if Azerbaijan had to meet
ABS standards it would lose its fleet. He suggested that
perhaps ABS might have a "grandfather clause" that would
allow existing CASPAR ships to remain in operation.

CW CONVENTION
--------------


11. (C) Deputy Secretary Sampson said that for the tenth
anniversary of the signing of the Chemical Weapons Convention
(CWC),there was a push for all signatories to pass
implementing legislation. Azerbaijan was one of the few
remaining signatories not to have done so. President Aliyev,
unaware of the GOAJ's tardiness in this regard, Said, "Mybe
we forgot about it; let me know what to do." Ambassasdor
Derse said that the Embassy would follow up with the
appropriate GOAJ entity.

BAKU 00000769 003 OF 003



WISEMAN,S COUNCIL
--------------


12. (C) Deputy Secretary Sampson referred to the success
then-Texas Governor Bush had with his Business
Entrepreneurial Council, with whom he used to regularly meet.
President Bush still keeps up the practice, as a forum of
this sort was invaluable for providing "unfiltered input"
from the business community to government leaders. As such,
the Deputy Secretary recommended that President Aliyev seek
to establish a "Business Entrepreneurial Council," comprised
of foreign and local business leaders, to help provide him
input into existing business conditions and problems.
President Aliyev said the idea was a good one.


13. (C) COMMENT: Deputy Secretary Sampson's visit and call on
the President sent a strong signal of US interest in
Azerbaijan's development and opportunities, and provided us a
forum to raise at a high level concerns with the business
environment and suggestions on how to address them. Working
with Commerce Department and with AmCham, we will follow up
with the GOAJ MFA on the CW Convention, and will work with
the GOAJ and AmCham in developing the idea of the 'Business
Entrepreneurial Council.'


14. (U) This cable has been cleared by the Commerce
Department.
DERSE