Identifier
Created
Classification
Origin
07TBILISI1284
2007-06-01 10:53:00
CONFIDENTIAL
Embassy Tbilisi
Cable title:  

PM NOGHAIDELI ON ECONOMIC REFORMS, ENERGY

Tags:  PREL PGOV ECON GG 
pdf how-to read a cable
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DE RUEHSI #1284/01 1521053
ZNY CCCCC ZZH
O 011053Z JUN 07
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6509
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
C O N F I D E N T I A L SECTION 01 OF 02 TBILISI 001284 

SIPDIS

SIPDIS

DEPT FOR EUR DAS BRYZA AND EUR/CARC

E.O. 12958: DECL: 05/31/2017
TAGS: PREL PGOV ECON GG
SUBJECT: PM NOGHAIDELI ON ECONOMIC REFORMS, ENERGY
SECURITY, AND RUSSIA


Classified By: Ambassador John F. Tefft for reasons 1.4(b)&(d).

Summary
-------
C O N F I D E N T I A L SECTION 01 OF 02 TBILISI 001284

SIPDIS

SIPDIS

DEPT FOR EUR DAS BRYZA AND EUR/CARC

E.O. 12958: DECL: 05/31/2017
TAGS: PREL PGOV ECON GG
SUBJECT: PM NOGHAIDELI ON ECONOMIC REFORMS, ENERGY
SECURITY, AND RUSSIA


Classified By: Ambassador John F. Tefft for reasons 1.4(b)&(d).

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

1. (C) In a May 28 meeting with Joseph Wood, Deputy National
Security Advisor to the Vice President, Georgian Prime
Minister Zurab Noghaideli said the Georgian economy was
performing well, and the government was pushing hard to get
major new reforms underway this year so that they would be
well-established before the election year of 2008. He
expressed concern about possible Russian recognition of the
independence of Abkhazia following the resolution of the
Kosovo status issue, and said the key for Georgia in its
relations with Russia would be major progress on NATO
integration in the next twelve months. He encouraged the USG
and Europe to engage more actively with Turkmenistan and
Kazakhstan, adding that it was particularly important for
Georgia that substantial amounts of oil from Kazakhstan flow
through the south Caucasus corridor. End Summary.

Not Resting on Economic Laurels
--------------

2. (C) Wood and the Ambassador began the meeting by asking
Noghaideli about his recovery from recent heart surgery in
the U.S. Noghaideli, who had clearly lost weight since the
operation, said he had resumed a full schedule but still
suffered pains from the large incisions in his chest. His
heart, however, was fine with no residual pain.


3. (C) Noghaideli recounted statistics on Georgia's
impressive economic growth, 9.4% in 2006 despite a direct
loss of 1.5% of GDP due to Russian economic sanctions. He
noted that foreign direct investment was rising rapidly and
that Georgia's business environment had improved dramatically
according to a World Bank survey last fall. For this year he
predicted 12.5% growth, the creation of about 90,000 new jobs
(although 25,000-30,000 would likely be filled by foreigners,
mainly Turkish construction workers),and inflation below
10%. He said the government was continuing to undertake
aggressive reforms, including simplification of the tax
system and further improvement of the business climate. He

said that he knew of no precedent for the pace of Georgia's
health care reform: three months ago all hospitals were
state-owned, and two months from now only three would still
be in state hands. Noghaideli said the government's task was
to manage reforms while maintaining political support. He
noted that there would be elections next year (for both
president and parliament) and said the government wanted to
complete as many reforms as possible this year in order not
to start anything new next year.

Need to Deter Russia
--------------

4. (C) Noting Russian President Putin's statements that
Kosovo should be a precedent for other separatist conflicts,
Noghaideli expressed concern that the Kosovo status process
could be developing in a way that would lead to Russian
recognition of Abkhazia. He said such a step by Russia would
"definitely lead to a confrontation," and it was important to
have a "deterring policy" against it. Noghaideli added that
the key over the next twelve months would likely be NATO
integration, and he stressed the need for a strong signal of
U.S. support to help win over the older European members of
the alliance. He wondered whether Gordon Brown's elevation
to Prime Minister would lead to any "surprises" in British
foreign policy, adding that Georgia would not like to see a
reduction of the British presence in Iraq.

The Politics of Energy
--------------

5. (C) Noghaideli said contradictory signals on plans for
energy supply routes had been coming out of Central Asia, and
he stressed the importance of an active U.S. diplomatic
effort in the region, in coordination with Europe. He said
that more visits by State and Energy Department officials to
Turkmenistan and Kazakhstan would be helpful, as would visits
by senior energy company executives from the U.S. He said
that while the Russian press was hailing the recent
Russia-Kazakhstan-Turkmenistan energy agreement as a triumph
for Putin, there was in fact nothing new or concrete in the
agreement. He said it was clear in discussions with
Tukmenistan's President Berdimuhammedov that he would not
permit any foreign company, including a Russian one, into
on-shore gas fields, where most of Turkmenistan's gas
resources are located. Noghaideli said Berdimuhammedov
wanted to pursue a balancing policy, and was looking for a
way to reach out to the West. He said Berdimuhammedov
responded favorably to Georgian efforts to interest him in
the south Caucasus transit corridor. According to
Noghaideli, Berdimuhammedov did not want to see Russian

TBILISI 00001284 002 OF 002


involvement in the off-shore fields, and was interested in
getting a Georgian state company involved there, probably in
conjunction with Western partners. Noghaideli reiterated
that it would be helpful if the vice-president of a major
U.S. energy firm expressed an interest in these fields.


6. (C) Noghaideli said Georgia was particularly interested in
oil from Kazakhstan, a country that would be a bigger nominal
producer of oil than Russia by 2015. He said Georgia wanted
to see a significant amount of this oil transiting the south
Caucasus corridor. He said Georgia had not been as
successful as it hoped in negotiating market-based mechanisms
for use of the corridor -- Azerbaijan and Turkmenistan
insisted on governments rather than companies deciding on the
exact division of transiting oil -- but he thought there
would be diversity because no one route could handle all the
volume. He said Georgia was seeking to lower tariffs,
especially Azerbaijan's.


7. (U) Joseph Wood did not have the opportunity to clear this
message.

TEFFT