PRESIDENT ALIYEV WELCOMES HIGHEST-LEVEL USG

S E C R E T SECTION 01 OF 04 BAKU 000739

EUR ASSISTANT SECRETARY FRIED, EUR DAS BRYZA, EEB SPECIAL
ENVOY BOYDEN GRAY

E.O. 12958: DECL: 08/05/2018
TAGS: PGOV PREL ENRG AJ
SUBJECT: PRESIDENT ALIYEV WELCOMES HIGHEST-LEVEL USG
VISITS, COMPLAINS OF ENERGY IMPASSE AND CONGRESSIONAL
CRITICISM

Classified By: Ambassador Anne E. Derse per 1.4(b,d)


1. (C) Summary: In an August 4 meeting with the Ambassador
and visiting OVP Deputy Assistant for National Security
Affairs Joe Wood, President Aliyev welcomed the proposed
visit of the Vice President, expressing general satisfaction
with the U.S.-Azerbaijan relationship. Identifying
Nagorno-Karabakh as "issue number one" Aliyev asked that the
United States push Armenia for a solution in accord with the
"norms and standards of international law." He outlined at
length his deep concern that Nabucco and the southern gas
corridor are at risk of failure, and with "time running out,"
urged rapid development and implementation of a concrete plan
to bring them to fruition. He re-emphasized the need for
Turkmenistan to be a key partner on energy and sought USG
assistance to win Turkey's cooperation in this project of
"common strategic interest." He underscored again that
Azerbaijan "does not agree with and cannot accept" recent
public characterizations of Azerbaijan's democratic
development lagging that of others in the region. Aliyev said
the OSCE can bring "as many observers as it wants" to monitor
the October Presidential elections. End summary.

VP Visit
--------------

2. (C) In an August 4 meeting with the Ambassador and
visiting OVP Deputy Assistant for National Security Affairs
Joseph Wood, President Aliyev welcomed a visit of the Vice
President to Baku as a "very important signal," saying it
will be "instrumental" from the point of view of practical
bilateral cooperation. Noting that "cooperation continues
successfully on important joint projects in the region" and
that he is "in general very satisfied with our level of
relations," Aliyev said he looks forward to broad discussions
touching on all aspects of the relationship.

Nagorno-Karabakh is Issue Number One
--------------

3. (C) Aliyev underscored that Nagorno-Karabakh is "the
number one issue" for Azerbaijan today. Unfortunately, there
has been "no breakthrough, no final solution8 in the five
years in which he has been actively engaged on the issue,
although there has been "progress in the process." It is
clear, Aliyev said, that "there will be no independence for
NK. The Armenian leader agreed, and now they understand the
status quo won't become permanent." Hence, in Aliyev's view,
there is no further justification for Armenia to prevent
Azerbaijanis from returning or to delay any further a
settlement. Azerbaijan "counts on the USG's efforts to
persuade Armenia to behave according to the norms and
standards of international law. This is our major request
and our expectation from you."

Energy
--------------

4. (C) Aliyev said that energy and security in the Caspian
are interrelated. Absent security, there can be no movement
of energy. The Caspian is playing a larger role than ever in
global energy production and Europe should pay more attention
to matters in the region. The future political configuration
of the region is being determined today, with "rivalry,
aggressiveness and energy diplomacy" intensifying, Aliyev
said. "We do not have much time," Aliyev added, noting that
he had openly asked European partners to be more decisive on
strategic energy projects.


5. (C) Azerbaijan, Aliyev asserted, is doing all it can do to
facilitate provision of gas to Europe and in fact is
presently "the most active party for future energy
diversification." The other interested parties need to get
in step, display more unity, and "play as a team," Aliyev
said. Azerbaijan appears to be the one country most
interested in promoting Nabucco. Others -- including some
NATO allies and EU members -- are "ruining the energy policy
of the West" with their disunity and inaction. Azerbaijan has
not even been able to discuss energy with the major European
countries -- France, UK, and Germany. And Hungary, Bulgaria,
Austria, all Nabucco members, "are killing Nabucco" with
their engagement with South Stream and separate deals with
Gazprom. Although recent discussions with the Hungarian PM
had been more positive, what Bulgaria and Hungary say to
Azerbaijan and what they do doesn't track, Aliyev said.
Europe had not responded to Azerbaijan's proposal to hold an
Energy Summit or Ministerial, in Baku or in Brussels, with
the Nabucco countries, Georgia and Turkmenistan. Azerbaijan,
he emphasized, cannot fix the problem with Europe.


6. (C) Turkey, Aliyev said, is also a problem. "Geography can
be a disadvantage if it is misused." There has been no
agreement on transit terms nor on a new sales price for Shah
Deniz I gas, as required on April 15. As a result, Turkey is
still paying around $100 (while prices in Europe are
approaching $400) and is giving the impression it wants to
continue to do so as long as possible. Turkey's
"unacceptable" behavior is not strategic, but that "of the
bazaar." Aliyev said he told Turkish President Gul in Kars
that if Turkey insists on buying the major share of Shah
Deniz II production it will make it impossible for Nabucco to
be sanctioned, and Azerbaijan will have to look at other
options if the situation continues.


7. (C) Aliyev said he advised Gul to concentrate on buying
gas from Turkmenistan, not Azerbaijan, utilizing Turkey's
1998 gas purchase agreement with Turkmenistan. "Gul had not
thought about that before." Aliyev said this would be the
best solution for Turkey's gas needs, and Azerbaijan can
build the interconnector to join Azerbaijan's and
Turkmenistan's infrastructure to transport the gas. He said
that "your communication with Turkey -- to help them
understand -- that this is in accord with our common
interests," is key. Aliyev said he had not proposed that
Azerbaijan finance and build Nabucco itself (as we understand
President Saakashvili reported to DAS Brzya). COMMENT: We
assume from Aliyev's comment that Saakashvili confused
Aliyev's interest in building an Azerbaijan-Turkmenistan
interconnector with building Nabucco itself. END COMMENT


8. (C) Turkmenistan is "passive" and will not initiate a deal
but "it has the resources and we can persuade them to
respond," Aliyev said. This will be easier for Azerbaijan to
do than for western countries to do. Turkmenistan needs "an
excuse" for non-Russian gas sales vis a vis Russia and can
defend a sale to Turkey as a bilateral matter.
Berdimuhamedov, Aliyev noted, had offered to sell gas to
Azerbaijan at the border, and sells gas to Iran and Russia at
the border now. He has "no excuse" not to also sell to
Turkey. But Berdimuhamedov does not want to initiate the
deal, Aliyev repeated. "If we had guaranteed contracts with
Nabucco we could purchase gas from Turkmenistan and sell it
on, if Nabucco or Turkey does not want to do it." Gas
purchase and sales agreements are needed now, but "no one in
the group (of countries that should be interested in Nabucco)
is doing anything," to advance them, Aliyev said. The
failure to resolve transit terms with Turkey is a key part of
the problem.


9. (C) BP, Aliyev said with frustration, has reported it will
reduce Shah Deniz I production this year. This "may be for
technical reasons, maybe not," Aliyev said. BP has big
interests in Russia and "perhaps has received a message from
Russia." Russia's main objective in energy is to block
Caspian energy from going west. If BP cuts production, this
will mean less gas for Georgia, which Azerbaijan is currently
providing at less than half the market price to show support
for Georgia, he added.


10. (C) "We do not see a strong commitment to this (Southern
Corridor) project," Aliyev repeated. "Even with US support,
we cannot do this on our own." Azerbaijan does not need to
develop gas for Europe for economic reasons. Azerbaijan's
revenues from gas will never parallel those it receives from
oil. The 30-40 bcm it will soon have has a ready market in
Russia, Georgia and Turkey. Russia has offered to buy all
Azerbaijan's gas for Southstream, with an offer that from a
purely commercial point of view is "acceptable." However,
"the gas factor for us is not commercial."


11. (C) Concluding that the picture is "not very optimistic,"
Aliyev urged again that "we need a plan." This should
include persuading Turkey or Nabucco to negotiate with
Turkmenistan for gas supply, urging Turkey to see the bigger
picture and "not block" Nabucco, securing Turkmenistan's
agreement to sign a deal with Azerbaijan to build an
interconnector, urging BP to act only as a commercial entity,
and convincing the EU to "pay more attention to the Caspian
-- displaying less skepticism and more unity."

Iran
--------------

11. (S) Aliyev noted that bilateral cooperation on Iran is
"much broader than what is seen," as it is on "all issues of
the neighborhood." He said that it would be "very important
to hear from you your expectations of us. We'll wait to hear
from you."

Democratic Reform
--------------

12. (C) Aliyev confirmed that the OSCE would observe
Azerbaijan's October elections and "can send as many
observers as they want." The election campaign has begun and
is proceeding "normally." Some opposition parties have
announced a boycott; "this is just an excuse not to
participate."


13. (C) Highlighting the number of media outlets and
publications in Azerbaijan as evidence that Azerbaijan "does
not have restrictions on the media," Aliyev said information
in the US on this issue "is not right." He said he was
surprised to hear that at the recent Helsinki Commission
hearings in Washington, it was reported that if someone in
Azerbaijan criticized him, that person would be arrested.
"This is provocation and disinformation ... I am criticized
daily, and in ways that go beyond ethical rules." Those who
criticize "are still walking" around Baku. Aliyev said he is
trying to install the Internet in every school, and has no
plans to limit it. A recent monitoring of Radio Liberty
broadcasts, he maintained, showed 90 percent of the coverage
was "critical of me" with limited opportunities for "our
party" to respond. Radio Liberty's activity shows the level
of media freedom. "They can reflect what they see, but we
ask that they be objective," Aliyev said.


14. (C) "Insulting me personally is not fair or friendly,"
Aliyev said. Moreover, "we do not believe that the level of
democracy in Azerbaijan is lower than that of any other
country of the region." The "assumption" that democratic
reform is weaker in Azerbaijan than in Georgia or Armenia
"was always in the air in Washington, and the Secretary of
State made it public recently," Aliyev noted. "It is a
classification of democratic development we do not agree with
and we cannot accept," especially in light of the crackdowns
in Georgia and Armenia, including killings of protesters,
closure of media outlets, arrests of oppositionists, and the
declaration of state of emergency. "We never did anything
like that and we are considered less democratic."


15. (C) Aliyev also paraphrased Secretary Rice's recent
comments in Prague about "oil rich dictatorships with 18th
century systems enjoying only temporary success," which he
said were made in response to a question about Azerbaijan and
Kazakhstan. "These kinds of statements are not helpful; we
do not understand why they are happening. They are not in
line with our relations and they do not reflect Azerbaijan's
realities." Major events in Georgia or Armenia draw little
US criticism, while minor events in Azerbaijan draw major USG
reactions, Aliyev said. Such statements also create a
negative image of Azerbaijan. "CNN called me a dictator, but
not Sargisian or Kocharian, and they killed people." People
in Azerbaijan watch these reports and they raise questions.
When they come from CNN or Radio Liberty people think they
reflect the USG's views. It is one thing for NGO's to
criticize, another thing for the State Department to do so,
Aliyev said.

COMMENT:
--------------

16. (C) Although clearly pleased at the prospect of the
visit, Aliyev was frustrated in his comments on energy, NK,
and Azerbaijan's democratic development, all difficult issues
at present for him. His direct "request and expectation"
that the USG push Armenia for a solution on Nagorno Karabakh
consistent with international norms and standards reflects
the hard line he has taken publicly and privately since the
March UNGA vote that any solution on NK must preserve
Azerbaijan's territorial integrity. On energy/Nabucco, he
remains very unhappy with what he sees as European and BP
foot-dragging and duplicity, and Turkish intransigence.
Clearly at a loss as to what more Azerbaijan can do, he
continues to seek greater support from the USG to secure
cooperation from Turkey, the EU and BP. Finally, Aliyev
continues to seek an explanation for public comments
contrasting Azerbaijan unfavorably with its neighbors on
democratic reform.
DERSE