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Identifier
Created
Classification
Origin
07BISHKEK984
2007-08-03 07:54:00
CONFIDENTIAL
Embassy Bishkek
Cable title:  

VIEWS FROM BISHKEK ON UKRAINIAN-KYRGYZ WTO TALKS

Tags:   ETRD  WTRO  PREL  KTIA  ECON  KG 
pdf how-to read a cable
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						C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 000984 

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (GEHRENBECK), DEPT PASS TO USTR

E.O. 12958: DECL: 08/03/2017
TAGS: ETRD WTRO PREL KTIA ECON KG
SUBJECT: VIEWS FROM BISHKEK ON UKRAINIAN-KYRGYZ WTO TALKS

REF: KYIV 331

BISHKEK 00000984 001.2 OF 002


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



1. (C) Summary: A Ukrainian memorandum proposing $14 million
in humanitarian and technical assistance to cover an
outstanding $27 million Ukrainian debt to Kyrgyzstan may not
unlock obstacles preventing the conclusion of bilateral
negotiations relating to Ukraine's WTO accession. The
Ukrainian ambassador to Bishkek dismissed complaints
concerning Kyrgyz light bulb and agricultural exports to
Ukraine as "artificial issues" designed to support the Kyrgyz
position in the debt negotiations. While the Kyrgyz are
reviewing the Ukrainian debt memorandum, a Kyrgyz trade
official, who criticized the Ukrainian debt proposal,
maintained there were still trade issues to be resolved.
Even if, as the Ukrainian ambassador suggested, other
countries are behind Kyrgyzstan's intransigence on the trade
and debt issues, the Kyrgyz will likely have difficulties
accepting a Ukrainian proposal that only covers roughly half
the debt through a multi-year barter arrangement masked as
assistance. End summary.

Ukrainian Ambassador: We've Made an Offer...


--------------------------





2. (C) Ukrainian Ambassador to Kyrgyzstan Vladimir Tyaglo
told emboff August 1 that the "oral agreement" reached at the
May 15 Kyrgyz-Ukrainian joint commission meeting regarding
the $27 million Ukrainian debt to Kyrgyzstan had since been
presented to Kyrgyz authorities in a written memorandum.
However, Ambassador Tyaglo conceded that the humanitarian and
technical assistance envisioned in the memorandum is "less
than expected )- slightly more than half -- which would be
supplied over a three-year period." He confirmed that
Ukraine had no plans to offer foreign assistance to
Kyrgyzstan to cover the remaining debt, and repeated the
Ukrainian position that there is no "state debt." (See
reftel for more background on the debt's origins.) He added
that the Kyrgyz have been asked to select Ukrainian products,
which the Kyrgyz would receive as humanitarian and technical
assistance.



3. (C) Ambassador Tyaglo discounted the agricultural and
light bulb trade disputes raised in the context of Ukraine's
World Trade Organization (WTO)-related talks with Kyrgyzstan
as "artificial issues" designed to support the Kyrgyz hand in
the debt discussion. While highlighting the current
tariff-free bilateral trade regime between Ukraine and
Kyrgyzstan, he noted that an existing five-year "embargo" on
Kyrgyz light bulbs would lapse in early 2008. Ambassador
Tyaglo said Ukraine had requested some light bulb data in
order to expedite the expiration of this embargo, but had not
yet received any response. He argued that Kyrgyzstan did not
export agricultural products to Ukraine, and stated that the

$46 million in 2006 bilateral trade consisted mostly of
alcohol, tobacco, candy and industrial equipment.



4. (C) While citing "strong external pressure on Kyrgyzstan"
for Kyrgyz intransigence, Ambassador Tyaglo conceded that he
was not aware of any bilateral presidential or prime
ministerial discussions of these issues since March. He
noted that any debt memorandum would require parliamentary
approval in both states, and therefore would not estimate
when final resolution might be reached.

...that the Kyrgyz Can Refuse


--------------------------





5. (C) Deputy Foreign Minister Sarbayev told the DCM July 31
that "the WTO issue with Ukraine is being resolved and only
details need to be worked out," adding that the two sides had

BISHKEK 00000984 002.2 OF 002


agreed on the amount of the debt, and Ukraine was now
determining whether to resolve it as a foreign debt (which
would require parliamentary approval) or as a "cash and kind"
assistance offering. However, Anarkan Rakhmanova, the
Ministry of Economic Development and Trade official
responsible for WTO issues, advised Embassy August 1 that the
Ukrainian debt memorandum offer is "nonsense." Rakhmanova
argued that the $14 million Ukrainian proposal contained a
ten-year payment period, and seemed very similar to a deal
Ukraine signed, but did not honor, with Moldova several years
ago. While acknowledging that the Kyrgyz Ministry of Finance
handled the debt issue, Rakhmanova believed that the Kyrgyz
would eventually insist on a full cash payment of the debt as
part of a formal agreement, and not a memorandum, more
strongly obligating Ukraine to pay. (Note: Ambassador Tyaglo
confirmed to emboff earlier that Kyrgyz Finance Minister
Japarov had requested a delay in responding to the Ukrainian
proposal. End note.)



6. (C) Despite the tariff-free bilateral trade regime,
Rakhmanova claimed that Ukraine imposed a 37% duty on Kyrgyz
light bulbs three years ago and ignored Kyrgyz requests to
eliminate taxes on Kyrgyz produce. In response to Ambassador
Tyaglo's comment about seeking light bulb data, Rakhmanova
conceded that the Russian-owned Kyrgyz light bulb firm had
"not been cooperating" with her ministry recently.

Comment


--------------------------





7. (C) Even if external (Russian) pressure on Kyrgyzstan is
hindering a Kyrgyz-Ukrainian WTO agreement, there appear to
be underlying issues which need resolution. While Kyrgyz
arguments in favor of light bulb and agricultural exports may
be suspect, Kyrgyz perceptions that Ukraine is attempting to
dodge the full debt obligation will not win converts in the
Kyrgyz government for concluding a market access agreement.
Even if Kyrgyz officials favored the proposed debt
memorandum, a barter transaction covering only half of the
debt will face obstacles in the Kyrgyz parliament. Kyrgyz
"concessions" on trade issues may only occur when the
Ukrainians present a more acceptable debt deal. Rakhmanova's
observation to Embassy that this issue will remain for quite
a long time if Ukraine does not propose something more "fair
and realistic" could well reflect reality.

YOVANOVITCH