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