ROADS, MINES AND IRANIANS SURFACE AT KYRGYZ

C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 000216

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (GEHRENBECK)

E.O. 12958: DECL: 02/28/2017
TAGS: EFIN ECON ELTN IR KG
SUBJECT: ROADS, MINES AND IRANIANS SURFACE AT KYRGYZ
INVESTMENT CONFERENCE

REF: A. BISHKEK 155

B. BISHKEK 081

BISHKEK 00000216 001.4 OF 002


Classified By: Deputy Chief of Mission Lee Litzenberger for Reasons 1.4
(b) and (d)


1. (C) Summary: Recently appointed Issyk Kul Governor
Kydykbek Isayev presided over an investment conference which
focused particular attention on mineral deposits in the
eastern Sary Jazz region. The conference also touted
development opportunities in tourism, agriculture and energy
-- as well as infrastructure. In addition to the
long-discussed toll road linking Almaty, Kazakhstan to the
northern shore of Lake Issyk Kul, Isayev talked about Russian
interest in the expansion of the Tamchi airfield. Isayev
also mentioned that Iranian interests were looking into
transforming the airfield into a cargo hub. While Isayev
focused on big projects and generating more revenue, there
was little discussion of environmental concerns. Possible
Iranian interest in the Tamchi airfield merits scrutiny. End
summary.

Issyk Kul Fundamentals
--------------


2. (U) Issyk Kul Oblast Governor Kydykbek Isayev touted
investment opportunities in tourism, food processing, mining,
infrastructure, agriculture and energy during a February 10
presentation to about 20 representatives of the diplomatic
and international assistance community based in Kyrgyzstan.
Diplomats from the Chinese, Russian, Ukrainian, Tajik and
Indian embassies joined us and representatives of the Asian
Development Bank, the European Bank for Reconstruction and
Development (EBRD) and the Japan International Cooperation
Agency at the meeting.


3. (U) Isayev said that with roughly one million mostly
Kyrgyz and Kazakh visitors to Lake Issyk Kul in 2006, tourist
facilities needed expansion. Isayev outlined mining
opportunities without once mentioning the difficulties faced
by the Canadian-run Kumtor gold mine, which represents the
largest single foreign investment in Kyrgyzstan (Ref A).
Instead, he emphasized development in the remote Sary Jazz
region, which abuts China and Kazakhstan, where, he said,
Russia's RAO-UES has agreed to fund a $6 million feasibility
study for a power station. He added that the area had
attracted Russian, Chinese and Kazakh interest for its coal,
tungsten, tin, uranium, molybdenum and vanadium deposits.

Paving the Way for More Kazakh Visitors
--------------


4. (SBU) Isayev highlighted an agreement on the construction
of an Almaty-Issyk Kul highway. (Note: Isayev replaced
Esengul Omuraliyev as Issyk Kul governor in November;
President Bakiyev dismissed Omuraliyev reportedly due to his
long-standing opposition to this road project. End note.)
Local observers believe this project will expand Kazakh
influence and investment in the Issyk Kul region. According
to the conference's private sponsor, foreign financing has
inflated accessible lakefront land values to approximately
$200,000 per hectare. Isayev dodged questions from the
EBRD's Jyldyz Galiyeva regarding the lack of an open tender
for the construction project and the routing of the road. He
also failed to discuss the 200 hectares of lakeshore land,
which the road developer demanded as part of the deal

BISHKEK 00000216 002.2 OF 002


Omuraliyev blocked.

Are Iranians Joining the Fray?
--------------


5. (C) Isayev mentioned that Russian and Iranian interests
separately expressed a desire to transform the Tamchi
airfield, located on the lake's northern shore, into a cargo
transit point or a passenger facility for tourists. (Note:
According to Kyrgyz customs data, trade with Iran grew 62%
from $9.6 million to $15.6 million between 2005 and 2006.
These are small amounts compared to Kyrgyzstan's total 2006
trade activity of $2.4 billion. Iranian investment in 2005
in Kyrgyzstan amounted officially to about $1 million. End
note.) Representatives of the U.S. firm Rauch International
told the Ambassador January 18 that Isayev offered Rauch
control of the Karakol airfield, which is located along the
lake's eastern shore.

Comment
--------------


6. (C) Similar to his conversation with the Ambassador in
January (Ref B),Isayev seemed keen on inking ad hoc deals
outside standard tender channels. Isayev's promotion of
investment opportunities in the Issyk Kul region is not based
on an economic development strategy or improving the
investment climate, but rather an interest in big projects
and in generating more revenue. While the Chinese, Russians
and Kazakhs are actively engaged in Kyrgyzstan, the
suggestion that the Iranians might be interested in the
Tamchi airfield merits careful scrutiny. Given the limited,
but growing, amount of Kyrgyz-Iranian trade, any plan to
transform the airfield into a cargo or passenger facility
raises questions about the commercial merit of any such
proposal.

YOVANOVITCH