TAJIK BANKING DINNER TURNS INTO SERIOUS TALK TO RESOLVE

C O N F I D E N T I A L SECTION 01 OF 02 DUSHANBE 000043

SIPDIS

SIPDIS

STATE FOR SCA/CEN, ECA

E.O. 12958: DECL: 1/9/2032
TAGS: PGOV PREL ECON EINV ETRD TI
SUBJECT: TAJIK BANKING DINNER TURNS INTO SERIOUS TALK TO RESOLVE
COMMERICAL DISPUTE

REF: 06 DUSHANBE 2243

CLASSIFIED BY: Tracey Ann Jacobson, Ambassador, U.S. Embassy,
Dushanbe, State.
REASON: 1.4 (b),(d)




1. (C) Summary: In Tajikistan, singing and dancing alongside
the President's brother-in-law while discussing business earns
the United States diplomatic goodwill. At a private dinner
January 8 to talk about banking supervision and economic reform,
President Rahmonov's brother-in-law Hasan Sadulloev and the
deputy director of the Tajik state Aluminum company (TadAZ),
Sherali Kabirov pressed the Ambassador with their side of the
Gerald Metals dispute, emphasizing the strides Tajikistan had
made in improving the investment climate. The Ambassador
underscored the need for TadAZ to communicate directly with
Gerald Metals and encouraged a resolution similar to the one
made with Norwegian Aluminum giant Norsk Hydro (reftel) in
December. Sadulloev and his companions stressed the need for
education assistance, particularly in English, and welcomed the
establishment of an American Chamber of Commerce in Dushanbe as
an important step to attract foreign investment. They thanked
the Ambassador for the opportunity "to sit at the same table and
talk about real issues" and applauded Embassy participation in
the evening's traditional dance and music program.


2. (C) Comment: Face time and personal rapport matter a great
deal in Tajikistan; the dinner provided an important opportunity
to bond with a key member of Rahmonov's inner circle, and some
of the most forward-leaning economic officials. Underlining the
importance of developing "personal relationships," the Tajik
hosts lauded Assistant Secretary Boucher's attendance at the
December 24 funeral of Turkmen President Niyazov and his meeting
with President Rahmonov. They noted with disappointment that
European countries failed to send a representative to
Turkmenistan. The United States cannot compete with China or
Russian in terms of investment, but we can remain solidly
engaged with Tajikistan through personal interaction at all
levels, including high-level visitors from Washington. Should
Sadulloev participate in the Department's Interanational
Visitors Program on banking as hoped-- he has promised to inform
us of his schedule within the week-- we ask that Washington give
special attention to this influential visitor.


3. (C) Norsk Hydro's success may provide a model for Gerald
Metals to resolve its dispute with TadAZ, but only if Gerald
Metals recognizes that it will need to put in the effort to
establish a less confrontational working relationship. Post
will meet with TadAZ to flesh out concrete steps to bring the
two sides closer together. End Summary and Comment.


4. (C) Sadulloev's invitation came in response to the
Ambassador's request to discuss his participation in a Banking
Supervision International Visitors program. As the head of
Tajikistan's largest commercial bank, Orionbank, Sadulloev's
influence extends beyond his status as "First Brother-in-Law" --
husband of President Rahmonov's younger sister. Other guests
included Mahmadamin Mahmadaminov, head of the Tajik State
Savings bank Amonatbank, Sherali Kabirov, Deputy Director of
TadAZ, and TadAZ lawyer (and former USAID commercial law project
officer) Akbar Muratov. (Comment: Sadulloev and Kabirov are
close friends, but Kabirov's presence, along with the TadAZ
legal advisor, immediately suggested that the dinner
conversation would be about more than banking. End Comment.)

DOWN TO BUSINESS: TADAZ


5. (C) The discussion quickly turned to TadAZ's recent
settlement with Norsk Hydro over a $150 million dispute.
Kabirov noted that TadAZ is repaying Norsk with aluminum out of
its current profits, and is also suing the London-based trading
company Ansol to try to recover some of the lost funds.


6. (C) Kabirov asked if he could brief the Ambassador on the
state of affairs with Gerald Metals. "I know Gerald Metals has
said a lot of bad things about us in Washington, but the money
they lost didn't end up in TadAZ's pockets." Gerald Metals
signed an agreement with previous TadAZ management and Ansol
that Kabirov claims was never valid because it failed to go
through an interagency approval process. (Note: One of the major

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sticking points between Gerald Metals and the Tajik government
has been that the government must honor all contracts signed by
state-owned enterprises. End Note.)


7. (C) Kabirov noted that Gerald Metals has lost every hearing
and appeal to date, in Tajikistan and London, and predicted the
upcoming January 18 hearing in Moscow would be no different. He
stated clearly that TadAZ was open to negotiating with Gerald
Metals, and finding a solution similar to that with Norsk Hydro.
Would a phone call with Gerald Metals start the negotiation
process? Kabirov wrinkled his nose. "It's too hard to
communicate on the phone -- and they've never bothered to come
out here." In contrast, he noted that Norsk Hydro visited
Dushanbe several times. Sadulloev suggested that during the
banking international visitor program in February, he or
Mahmadaminov could meet with Gerald Metals and invite them to
Dushanbe, "to sit at the table, like we are now," he proposed.


8. (C) Kabirov boasted to PolOff about TadAZ's significant
accomplishments in 2006. "Not just the Norsk deal," he said.
The aluminum plant registered record production, upped salaries
by 40%, paid their electricity bills and introduced
international standards of bookkeeping and accounting. "We are
working towards becoming a real international company," he said
with pride. (Note: Kabirov came on board as deputy director in
2004, after the previous director absconded. End Note.)

WELCOME, AMCHAM!


9. (C) Sadulloev and the others called the establishment of an
American Chamber of Commerce an important sign for international
investors that Tajikistan was open for business. They brushed
off concerns that the Tajik Chamber of Trade and Industry may
feel threatened by the American Chamber of Commerce and pose
bureaucratic hurdles. "The Tajik Chamber belongs to the old
Soviet economic system," said Sadulloev. He agreed the
"American Chamber of Commerce" was a brand name that would help
draw investors to Dushanbe. "The Tajik Chamber will not oppose
this," assured Mahmadaminov.

EDUCATION AND ENGLISH


10. (C) President Rahmonov placed great importance on educating
the next generation of Tajiks, reported Sadulloev. Kabirov
believes that English, not Russian, is much more important for
Tajik students, and lamented the lack of good English language
opportunities in Tajikistan. He praised Kazakhstan for
providing thousands of scholarships to Western universities, but
noted that the Tajik budget could not support that effort and
relied on other countries to help with exchanges.

BUSINESS CLIMATE


11. (C) The only other guests (in a restaurant rumored to be a
Sadulloev favorite for its singers and dancers) were a party of
Chinese energy experts, hosted by Sharifhon Samiev, head of
Barqi Tojik, the state-owned electrical utility. Sadulloev
reported that in addition to the 120 MW Yavan hydropower station
project expected to be announced during Rahmonov's January 15-21
visit to China, the Chinese were considering building another
four hydropower stations.


12. (C) The Ambassador emphasized that the United States could
not directly finance infrastructure projects, like the Chinese,
but instead tried to attract private investment by helping
countries reform their business and investment climates.
Sadulloev and the others agreed that corruption and excessive
bureaucracy still made Western investors nervous.
JACOBSON