SCENESETTER FOR CODEL WEXLER'S VISIT TO AZERBAIJAN

UNCLAS BAKU 000012

SIPDIS

SENSITIVE
SIPDIS

H PLEASE PASS TO CODEL WEXLER

E.O. 12958: N/A
TAGS: PGOV PREL ENRG EPET MARR MASS PTER KDEM AJ
SUBJECT: SCENESETTER FOR CODEL WEXLER'S VISIT TO AZERBAIJAN

SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION.


1. (SBU) Azerbaijan's pro-Western foreign policy
orientation, geopolitical setting -- sandwiched between Iran
and Russia -- and ability to provide alternative energy
supplies to Europe make it an important U.S. partner. It is
in our interests to have a reforming, stable, pro-western
Azerbaijan, which lies in the Eurasian heartland. Our
bilateral agenda with Azerbaijan includes three
interdependent interests: diversifying European energy
supplies, promoting political and economic reform, and
extending our security cooperation. We hope your visit will
be an opportunity to reinforce the message of Azerbaijan's
growing role as a strategic partner for the U.S. and the need
to continue making mutual progress in our three core
interests.

Energy Links Azerbaijan to the West
--------------


2. (SBU) Azerbaijan is a crucial link in the East-West
energy corridor that aims to diversify Europe's energy
supply. U.S.-Azerbaijan cooperation was critical in
realizing the Baku-Tbilisi-Ceyhan (BTC) pipeline project,
which in July 2006 delivered its first oil to Ceyhan, Turkey.
Azerbaijan's ability to transit gas to Europe increasingly
is the focus of our bilateral energy discussions. With up to
one trillion cubic meters in new gas reserves and the
political will to bring them to European markets,
Azerbaijan's gas could enhance European energy security. At
the same time, Azerbaijan faces pressure from Iran and Russia
not to be too closely linked to the West. Neither Tehran nor
Moscow is interested in seeing Azerbaijan play a supplier and
transit role for sending Caspian oil and gas to Europe. In
your meetings with GOAJ officials, conveying the message that
the U.S. Congress is grateful for Azerbaijan's role in
diversifying Europe's energy supplies -- despite regional
pressures -- will reinforce broader U.S. efforts to let the
government know that Azerbaijan plays an important regional
role.

Robust Security Cooperation
--------------


3. (SBU) Azerbaijan is a steadfast partner in U.S.
counterterrorist efforts. In Iraq, 151 Azerbaijani (Shiite
Muslim) infantry troops stand alongside U.S. Marines guarding
the Haditha Dam. Azerbaijan is also contributing troops in
Afghanistan and peacekeepers in Kosovo. In October, the
Azerbaijani Parliament voted to double the number of
Azerbaijani peacekeepers serving in Afghanistan from 22 to

45. Azerbaijan provides blanket over-flight rights for U.S.
aircraft, as well as strong information sharing and law
enforcement cooperation in fighting terror.


4. (SBU) Azerbaijan is in the process of drafting a second
Individual Partnership Action Plan (IPAP) with NATO.
Azerbaijan's first IPAP began in 2005, promoting defense
sector reforms and Azerbaijan's interoperability with NATO.
The IPAP is a good umbrella for Azerbaijan-NATO cooperation,
although the GOAJ often sends mixed public signals on the
question of whether it wants to join NATO eventually. The
U.S. works extensively with the Azerbaijani Navy and Coast
Guard to increase Azerbaijan's interdiction capabilities
against proliferation and terrorist threats on the Caspian
Sea.


5. (SBU) Security cooperation is one of the strongest
aspects of our bilateral relationship. In your meetings with
Azerbaijani officials, it would be helpful to thank them for
their consistently strong support, despite Iran and Russia's
distaste for such cooperation. Azerbaijani officials may
tell you that the ongoing Nagorno-Karabakh (NK) conflict and
Section 907 of the Freedom Support Act restrain our
cooperation. The OSCE Minsk Group is tasked with helping
Azerbaijan and Armenia resolve their conflict; Department of
State EUR Deputy Assistant Secretary Matt Bryza is one of the
three OSCE Minsk Group Co-Chairs. According to Section 907
of the Freedom Support Act of 1992 (P.L 102-511),the U.S. is
limited in the types of aid it can provide to Azerbaijan
because of the ongoing NK conflict. Since 2001, however, the
U.S. Congress has granted the President the authority to wave
Section 907 on national security grounds, which President
Bush has done on an annual basis.

Promoting Reform is Tough Work
--------------


6. (SBU) Getting the GOAJ to make substantive political and
economic reform is an ongoing challenge that mirrors
difficulties in most other post-Soviet states. The U.S.
engages with the Azerbaijani Government at all levels,
arguing that our three core interests are mutually
reinforcing and interdependent. Cooperation in the areas of
security or energy cannot be divorced from Azerbaijan making
the right steps toward reform. One of the key challenges is
that many in the government do not perceive reforms as
serving their immediate, personal, short-term interests. We
seek to convince these officials that taking difficult
reforms meets Azerbaijan's desired goals of prosperity,
regional prestige, and long-term stability. Azerbaijan
aspires to be a regional leader, but this can only come
through the path of reform.


7. (SBU) We are concerned by a trend of increased government
pressure against the media and critics of the government.
The media environment is heavily restrictive, with
transparently implausible criminal court cases against
journalists and violent attacks against journalists that have
gone unprosecuted and unpunished. Most Azerbaijanis argue
that the media's ability to criticize or question government
policies has significantly deteriorated in the last year.
One piece of good news is that President Aliyev pardoned 119
prisoners -- several of whom (including five high-profile
journalists) appeared to have been jailed because of their
criticism of the government. It would be helpful to
acknowledge the importance of the pardon as a first step
toward allowing a more robust and critical press.


8. (SBU) In addition to the problem of media freedom, the
government since the 2005 elections has restricted the
ability for peaceful groups to assemble, particularly in
central areas of Baku. Moreover, it has put pressure on
opposition political parties by restricting their ability to
rent office space, hold meetings, raise funds and carry out
normal political activities. Civil society representatives
also complain that they increasingly feel under fire and are
nervous that a recent Presidential decree for state financial
support to NGOs is another instrument of government control.

Rapid Economic Growth
--------------


9. (SBU) With GDP growth of 36 percent in 2006, Azerbaijan
has one of the fastest growing economies in the world, driven
nearly entirely by an unprecedented inflow of energy revenue.
The growth rate for 2007 remains and is anticipated to be
between 20-25 percent. The government's economic planning,
and the country's judicial, regulatory and banking sectors
are weak and ill-prepared to manage this enormous influx of
revenue. Corruption is pervasive throughout Azerbaijan.
Significant institutional reform and capacity-building will
be required to manage the stable growth of Azerbaijan's
economy and to prevent Azerbaijan from succumbing to the "oil
curse" experienced by many other energy producers.


10. (SBU) The U.S. is providing technical assistance to help
Azerbaijan manage this transition, primarily through USAID,s
Trade and Investment Program, anti-corruption programs, rule
of law programs and a program to help strengthen the GOAJ's
consolidated budgeting process. Moreover, we believe the
World Trade Organization (WTO) accession process, for which
we are providing technical assistance, is the key vehicle
through which we can promote implementation of successful
economic reform that will keep Azerbaijan's development on a
stable path. While the government has submitted important,
WTO-compliant draft legislation to Geneva, it has not yet
followed through on the long awaited co-financing for the
Trade and Investment Program, an important signal of its
commitment to WTO accession and economic reforms.

Background on Azerbaijan's Jewish Community
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11. (SBU) There are approximately 16,000 Jews living in
Azerbaijan. The Mountain Jewish community is the largest and
oldest Jewish group in Azerbaijan, with approximately 11,000
members. Scholars disagree whether they came to modern-day
Azerbaijan after the destruction of the first Jewish temple
in 722 BC or whether they migrated from Persia several
hundred years ago. The second largest community is the
Ashkenazi Jews (4,300 members),who came to Baku during the
19th century in parallel with the Czarist subjugation of the
South Caucasus. Finally, there are approximately 700
Georgian Jews. There are good working relations between the
Jewish community and the government, and Israel and
Azerbaijan have close ties. We have arranged a meeting for
you with Semyon Ihilov, the leader of the Mountain Jewish
(Sephardic) community in Azerbaijan, who can provide you with
more details on the Jewish community in Azerbaijan.


12. (SBU) In your meetings with officials, we believe it is
important to highlight the interrelationship of our three
interests. Appealing to the government's desire to project
Azerbaijan as a regional leader, Azerbaijan can accomplish
this goal in part through opening up the political and
economic space. The October 2008 presidential election
presents a tremendous opportunity for President Aliyev to
burnish Azerbaijan's democratic credentials by allowing the
opposition, civil society, and the media more political
space. As the Embassy routinely tells the government and the
general public, the U.S. support the process of a free and
fair election and our concerns will focus most heavily on the
process over the result.
LU