Identifier
Created
Classification
Origin
07TASHKENT438
2007-03-16 11:07:00
CONFIDENTIAL
Embassy Tashkent
Cable title:  

RUSSIAN PRIME MINISTER DISCUSSES ECONOMIC ISSUES

Tags:  PREL ECON RS UZ 
pdf how-to read a cable
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PP RUEHDBU
DE RUEHNT #0438/01 0751107
ZNY CCCCC ZZH
P 161107Z MAR 07
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC PRIORITY 7217
INFO RUCNCIS/CIS COLLECTIVE
RHEHNSC/NSC WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RHMFISS/HQ USCENTCOM MACDILL AFB FL
RUEHNO/USMISSION USNATO 1640
RUEHVEN/USMISSION USOSCE 1952
C O N F I D E N T I A L SECTION 01 OF 02 TASHKENT 000438 

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/16/2017
TAGS: PREL ECON RS UZ
SUBJECT: RUSSIAN PRIME MINISTER DISCUSSES ECONOMIC ISSUES
WITH THE GOU


Classified By: Amb. Jon R. Purnell for reasons 1.4 (b) and (d).

-------
Summary
--------

C O N F I D E N T I A L SECTION 01 OF 02 TASHKENT 000438

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/16/2017
TAGS: PREL ECON RS UZ
SUBJECT: RUSSIAN PRIME MINISTER DISCUSSES ECONOMIC ISSUES
WITH THE GOU


Classified By: Amb. Jon R. Purnell for reasons 1.4 (b) and (d).

--------------
Summary
--------------


1. (C) Russian Prime Minister Mikhail Fradkov's visit to
Tashkent focused primarily on economic issues, including
difficulties faced by Russian firms doing business here. The
two sides also discussed the production of Russian aircraft
in Uzbekistan. Russia and Uzbekistan did agree to establish
a joint venture, with a Russian controlling interest, to
repair Russian military helicopters. The two sides are close
to signing several bilateral agreements intended to
regularize the treatment of Uzbek labor migrants in Russia.
The Russian Ambassador said that Fradkov's visit was the
first of his tenure focused on concrete results rather than
broader political symbolism. The visit also demonstrated
that Uzbekistan's relationship with Russia is not as smooth
as the Uzbeks would like to portray. End summary.


2. (C) Russian Ambassador Farit Mukhametshin gave the
Ambassador a readout of Russian Prime Minister Mikhail
Fradkov's March 6-7 working visit to Tashkent. The visit
focused primarily on bilateral economic issues, although some
discussion of the Eurasian Economic Community (EurasEC) and
regional security also took place. The Russian Ambassador
said that this was the first high-level Russian delegation in
his tenure to come to Tashkent with a focus on making
concrete progress rather than signing agreements and other
symbolic gestures. During his one working day in town,
Fradkov met with President Islam Karimov and Prime Minister
Shavkat Mirziyaev.

--------------
Business Climate
--------------


3. (C) Mukhametshin said that much of Fradkov's visit focused
on the business climate. The Uzbeks, he said, were critical
of the slow pace of Russian investment, particularly in the
oil and gas sector. However, the Russians reminded them that
Gazprom had received its license only in December and that it
was unrealistic to expect that $200 million in investment
would take place in just two months. (Note: It took almost a
year for the Uzbeks to grant Gazprom's license for gas

exploration. End note.)


4. (C) The Russians pressed the Uzbeks to make it easier for
Russian businesses to work here, Mukhametshin said. Currency
conversion in particular is a problem, he continued, giving
the example of Russian telecommunications company Beeline,
which has been unable since October to convert $20 million in
Uzbek soum to hard currency, and as a result has been unable
to import equipment needed to upgrade its cellular network.
Mukhametshin agreed with the Ambassador's comment that Uzbek
actions against Newmont Mining had undermined Uzbekistan's
reputation as a good place to do business, and added that
COSCOM's recent problems had not helped either. (Comment:
Very interesting comment, considering reports that U.S.-owned
COSCOM is being pressured to sell out to a Russian
telecommunications company. End comment.) The Russian
Ambassador said that he thought it would be important to work
on improving the business climate in Uzbekistan through the
G-8.

--------------
Airplane Manufacturing
--------------


5. (C) Mukhametshin confirmed press reports that the two
sides also had discussed production at the Chkalov Aircraft
Factory (a.k.a. TAPOiCh) on the outskirts of Tashkent. The
factory is a relic of Soviet times, the Russian Ambassador
said, and even today relies on factories in Russia for its
supply of parts, which it then assembles into completed
airframes. The Uzbeks want to preserve the past with Chkalov
operating independently and providing jobs for a grossly
oversized work force (Note: During Soviet times, the factory
reportedly employed upwards of 13,000 workers. Current
employees number about 5,000, most of whom have relatively
little to do as the factory is idle much of the time. End
note.) Mukhametshin did not address press reports that
Russia has decided to shift future production of IL-76 cargo
planes away from Tashkent. However, he said that the Russian

TASHKENT 00000438 002 OF 002


delegation told the Uzbeks that the Chkalov factory currently
is obsolete and needs to be integrated into the wider
(presumably Russian) world of aircraft production if it is to
survive.


6. (C) The Russian Ambassador also confirmed that Russia and
Uzbekistan agreed to form a joint venture to repair Russian
military helicopters on the basis of an existing helicopter
repair facility in Chirchik. Russia will have a controlling
interest in the joint venture (51 percent to the Uzbeks' 49
percent). Mukhametshin told the Ambassador that the Russians
had insisted on a controlling interest because they feared
that nothing would be done if left to the Uzbeks.

--------------
Immigration Issues
--------------


7. (C) Russia and Uzbekistan are close to signing three
bilateral agreements which, taken together, should help to
regulate the flow of migrant Uzbek labor. The agreements
will deal with issues surrounding the migrants' legal status,
payment of taxes, and receipt of social benefits while in
Russia. Mukhametshin said that he had been trying to get the
Government of Uzbekistan to engage on these issues for over
two years; however, it was unwilling to do so until recently
when changes were made at senior levels of the Ministry of
Labor. Now, progress is finally being made.

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


8. (C) Mukhametshin's description of Uzbek officials saying
repeatedly that all is well and that there are no problems in
the Russian-Uzbek relationship sounds familiar. Fradkov's
visit shows that the Uzbek-Russian relationship is not as
smooth as the Uzbeks like to portray, and that the Russians
have many of the same problems as other countries in working
here. The Russians know that the business environment here
is bad, and that it is in our common interest to see what can
be done to improve it. An agreement to establish a framework
for dealing with the large number of Uzbek labor migrants
working in Russia should be a step forward, as it presumably
would convey some sort of official status, which should help
to reduce abuses.
PURNELL