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.

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SHARIFOV ON EPC
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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.

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SHARIFOV ON COMMERCIAL ISSUES
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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.

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TRANSPORTATION PROJECTS
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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.

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BABAYEV UPBEAT ON WTO, BUSINESS CLIMATE
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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.

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COMMENT
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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