EEB/CBA MERMOUD DISCUSSES EPC AND COMMERCIAL

C O N F I D E N T I A L BAKU 000649 SIPDIS E.O. 12958: DECL: 07/03/2018 TAGS: ECON ETRD EINV KCOR PREL AJ SUBJECT: EEB/CBA MERMOUD DISCUSSES EPC AND COMMERCIAL ISSUES WITH AZERBAIJANI OFFICIALS Classified By: Pol/Econ Chief Joan Polaschik per 1.4(b,d). ¶1. (SBU) SUMMARY: In meetings with GOAJ officials, Special Representative for Economic and Business Affairs Frank Mermoud proposed a September 8 meeting of the Economic Partnership Commission; Minister of Finance Sharifov indicated that the date could be difficult due to GOAJ budget preparations but promised a formal response soon. Mermoud also pressed for progress on several outstanding commercial issues. The Ministries of Finance and Transportation emphasized that financing remains key for Bechtel's proposed road project, and the Minister of Finance also indicated that the GOAJ required more proof of U.S. company Cargill's agricultural debt. Minister of Economic Development Babayev was upbeat on prospects for WTO and Azerbaijan's "Doing Business" ranking. End summary. ¶2. (U) During his June 26-27 visit to Baku, Special Representative for Economic and Business Affairs Frank Mermoud met with Minister of Finance Samir Sharifov, Deputy Minister of Transportation Musa Panahov, Minister of Economic Development Heydar Babayev, and Minister of Communications and Information Technology Ali Abbasov. -------------- SHARIFOV ON EPC -------------- ¶3. (C) Minister of Finance Samir Sharifov indicated that he was grateful to EEB A/S Sullivan for proposing dates for the next meeting of the Economic Partnership Commission (EPC) and promised to respond to the proposal soon. Sharifov indicated that early September could be difficult given that his ministry would be submitting a budget to the cabinet and Parliament at that time, but that he would try to accept A/S Sullivan's offered date if at all possible, and if not, to offer alternative dates, possibly around the end of October. (COMMENT: Sharifov had previously indicated that he would be unable to travel to Washington in the first half of October, due to Azerbaijan's October 15 presidential election. End comment.) Sharifov also said that following the Azerbaijani elections on October 15, the entire cabinet would resign, and a new contact for EPC issues could be appointed. -------------- SHARIFOV ON COMMERCIAL ISSUES -------------- ¶4. (SBU) Sharifov outlined several road construction projects in Azerbaijan, including a 200 km road from Baku to the Southern (Iranian) border and a 270 km road from Baku to the Northern (Russian) border. He also said that the GOAJ had decided to rehabilitate the existing two-lane road from Baku to the Western (Georgian) border and to also construct an all-new four-lane highway which could become a toll road. Sharifov recommended Mermoud speak to the Ministry of Transportation for further details. ¶5. (SBU) On the subject of an unpaid debt due to Cargill by the GOAJ Sharifov said "I do not question the relationship between Cargill and Agroincom" but added that he had not been shown sufficient documentation to establish a) that this was indeed a GOAJ debt, b) that this debt was officially incurred by the GOAJ, and c) that the GOAJ should be held liable for this debt. -------------- TRANSPORTATION PROJECTS -------------- ¶6. (SBU) Deputy Minister of Transportation Musa Panahov said that transportation and construction projects would likely be worth about USD 200 million in the next state budget. A Caspian Sea bridge, connecting Baku's Southern and Eastern suburbs has already been awarded to a South Korean company, but Panahov also indicated Bechtel could be a strong contender for other projects, especially the 4-lane highway to Georgia. Panahov said the GOAJ wanted to divide that highway into two sub-projects: a road from Baku to Ganja, and then from Ganja to the Georgian border. Panahov said that the Ministry of Transportation planned to announce a feasibility study this year and then begin construction soon after. He said that the GOAJ "may be able to finance this on its own, and ExIm's terms may not be acceptable to us," but he also said "the problem with Bechtel is the financing." ¶7. (SBU) Panahov said that within the GOAJ there were ongoing discussions about whether to use concrete or asphalt for this 4-lane highway, and said "Concrete for 400 km! That is a lot of cement! Whoever makes the cement factory will be the big winner." Panahov said that design work for a port construction project in Baku had already been short-listed to a Dutch firm, a German firm, and a South Korean firm, but that opportunities for U.S. contractors and subcontractors would likely emerge as things move forward. -------------- BABAYEV UPBEAT ON WTO, BUSINESS CLIMATE -------------- ¶8. (SBU) Minister of Economic Development Heydar Babayev welcomed Mermoud to a meeting that was videotaped by local media and said that following the fifth WTO working party meeting, Azerbaijan had received written questions from the U.S. and EU and was working on its response. Babayev said he thought Bechtel could be an attractive candidate to construct the highway to Georgia, saying Bechtel's work was "first quality," and that current USD exchange rates could make Bechtel even more competitive, but did not comment further, saying the Ministry of Transportation should communicate directly with Bechtel. Babayev said the GOAJ completed work on the World Bank's "Doing Business" report and hoped to see a substantial improvement in its ranking this year. "Although the World Bank's deadline has passed, we hope they will take account of Azerbaijan's efforts," he said. -------------- COMMENT -------------- ¶9. (C) COMMENT: We are eager to pin down the date and substantive agenda for the next EPC meeting, and will follow up with the Ministry of Finance. We also are eager to resolve these long-standing commercial issues and have relayed information from these meetings to the companies. ¶10. (U) Mermoud cleared this message. DERSE