SCENESETTER FOR CODEL BROWNBACK'S VISIT TO

UNCLAS BAKU 000149

SIPDIS

SIPDIS
SENSITIVE

PLEASE PASS TO CODEL BROWNBACK

E.O. 12958: N/A
TAGS: PREL PGOV PHUM ENRG ECON AJ
SUBJECT: SCENESETTER FOR CODEL BROWNBACK'S VISIT TO
AZERBAIJAN, FEBRUARY 20-21

REF: STATE 15016

SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION -
PLEASE HANDLE ACCORDINGLY.


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 and to use its energy resources to drive
growth and development in the region, make it an important
U.S. partner. It is in our interest to have a reforming,
stable, pro-western Azerbaijan, in the Eurasian heartland.
As you know, the bilateral agenda with Azerbaijan is based on
three interdependent interests: diversifying European energy
supplies, promoting political and economic reform, and
extending our security cooperation. Our security and energy
cooperation is strong, but promoting reform
remains challenging.

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.
Azerbaijan and Israel also are discussing potential gas
deals. 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.


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


6. (SBU) With GDP growth of 25 percent in 2007, Azerbaijan
has the fastest growing economy in the world, driven nearly
entirely by an unprecedented inflow of energy revenue. 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.


7. (SBU) We believe the WTO accession process is the key
vehicle through which we can promote GOAJ implementation of
successful economic reform that will keep Azerbaijan's
development on a stable path. The Ministry of Economic
Development has been tasked to lead the WTO accession
process. The Government has recently accelerated its WTO
accession efforts, and hopes to have a WTO Working Party
meeting in Geneva by early spring with the goal of completing
the accession process by late 2009. Creating a stable and
predictable business environment is especially crucial for
attracting investment to the non-energy sector. At present,
however, Azerbaijan remains a challenging market in which to
do business. Following international recommendations, the
Government of Azerbaijan established a new business
registration mechanism on principles of a one-stop-shop at
the Ministry of Taxation. The time to register new
businesses has dropped from several weeks to three days. The
2008 World Bank/IFC "Doing Business" report ranks Azerbaijan
at 96 (out of 178). According to Transparency International,
corruption worsened in 2007 and the country ranked 157 out of
180 countries (compared to 130 of 163 in 2006). The
government this year launched a new strategy for fighting
corruption which, if implemented, provides a basis for
progress.

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


8. (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 situation
is complicated by the fact that U.S. reform assistance began
late in Azerbaijan, relative to other CIS countries, due to
section 907 for the Freedom Support Act. The U.S. engages
with the Azerbaijani Government at all levels, arguing that
our three core interests are mutually reinforcing and
interdependent. Cooperation and progress in the areas of
security and energy reform are mutually supporting. We seek
to convince th GOAJ that reform, though difficult, will
advanc Azerbaijan's goals of independence, regional
infuence, and long-term stability.


9. (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
implausible criminal charges against journalists and attacks
against journalists that have gone unprosecuted and
unpunished. Many argue that the media's ability to criticize
or question government policies has significantly
deteriorated in the last year. On the other hand, 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.
The GOAJ and media representatives under OSCE auspices are
also working on a strategy and action plant to defuse the
tension in the media environment and improve government-media
relations.


10. (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. 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.
At the same time, the GOAJ is working with both the OSCE and

COE, and civil society representatives, on revisions to the
Law on Freedom of Assembly and a joint GOAJ-NGO task force on
pardons.


11. (SBU) In your meetings with officials, we believe it is
important to highlight the interrelationship of our three
interests. Political and economic reform will support the
government's aims of ensuring Azerbaijan's independence and
projecting Azerbaijan as a regional leader. The October 2008
presidential election presents a tremendous opportunity for
Azerbaijan to take an important step forward on democratic
reform by allowing the opposition, civil society, and the
media more political space. As the Embassy regularly notes
to the government and the general public, the U.S. supports
the process of a free and fair election and our concerns will
focus most heavily on the process over the result.
DERSE