AZERBAIJAN: DEPUTY MAJLIS SPEAKER SHOWS IRE WITH

C O N F I D E N T I A L BAKU 000934

SIPDIS

E.O. 12958: DECL: 10/03/2018
TAGS: ENRG PREL RS TN AJ
SUBJECT: AZERBAIJAN: DEPUTY MAJLIS SPEAKER SHOWS IRE WITH
THE EUROPEANS, RECOMMENDS USG PROMOTION OF NEW TURKMENISTAN
PETROCHEMICAL INDUSTRY

REF: A) BAKU 880 B) BAKU 860

Classified By: JOEL R. GARVERICK, REASON 1.5 (B AND D)

Summary
--------------


1. (C) During a discussion with DAS Bryza, Deputy Parliament
Speaker and Head of the Parliament's Energy Committee Valeh
Aleskerov complained about alleged European cultural
arrogance and lack of strategic vision, citing recent
developments in Azerbaijan-European Euro-Integration
negotiations and the proposed Nabucco gas pipeline as prime
examples. Aleskerov claimed that Azerbaijan's bilateral
relationship with Turkmenistan has significantly improved
over the past year, and was guardedly optimistic that, with a
reconceived USG strategic effort, the GOT can be shifted in a
positive commercial direction, and at least partially weaned
off Russia. For example, Turkmenistan should be encouraged
to develop a petrochemichal industry for export to China,
thereby absorbing gas that would otherwise go to Gazprom, and
enhancing Turkmenistan's ecomomic and commercial strength
and independence. He sketched out a notional plan for a
USTDA feasibility study, followed by an approach to the GOT
by an American energy company or consortium, and offered his
personal assistance as a go-between in selling this notion to
the Turkmen. End Summary.

Ire Over European Parliament Negotiations
--------------


2. (C) Visiting EUR DAS Matthew Bryza met in Baku on October
1 with Valeh Aleskerov, Deputy Speaker of Azerbaijan's
Parliament, and former long time Vice President in charge of
international relations for Azerbaijan's state oil company,
SOCAR. Aleskerov noted that he is deeply involved in
Azerbaijan's "Euro-Integration" negotiations with the
European Union, which has a European/Azerbaijan Parliament
component. Aleskerov said that he had just received the
latest draft from the EU of the proposed final statement for
the upcoming October Brussels joint meeting, which he noted
"says nothing about (our rights of) sovereignty, territorial
integrity, and internationals borders," but merely reiterates
boilerplate-type diplomatic language to the effect that "the
parties agree to resolve all conflicts peacefully." (Note:
these comments refer to Azerbaijan's "Nagorno-Karabagh"
conflict with Armenia. End Note.)


3. (C) Aleskerov also complained about language in the draft
statement requiring Azerbaijan to "guarantee the rights of
its national minorities." While suggesting that language on
"ethnic" (vice national) minorities might be acceptable, he
attacked the "national minority" formula as a kind of poison
pill that, if adopted, could encourage conflict between
ethnic groups in this country made up of dozens of
ethnicities, setting the stage for future "ethnic cleansing."
Aleskerov called the European approach hypocritical and
culturally arrogant: "where are the "national minority
rights" of the Corsicans, the Bretons, and the Basques?" he
sputtered. Aleskerov concluded his lengthy expostulation by
stressing that the GOAJ does not desire any USG assistance on
this issue - "we will deal with the Europeans ourselves," he
said. (Note: the term "national minority" in the ex-Soviet
context implies an array of potential educational, legal, and
cultural rights, that can include separate schools,
percentages of government jobs, translation of all government
documents into "national minority" tongues, cultural
subsidies, etc. End Note).

Nabucco - Another Issue with Europe
--------------


4. (C) Aleskerov called the Nabucco pipeline issue "another
big problem in our relations with Europe." He claimed that
that the Europeans are constantly "asking us about Nabucco."
"They say - 'how can you convince us that you have enough
gas?' - we could if they were geologists." Aleskerov claimed
that the Europeans lack strategic vision, and are still
reluctant to displease Russia on energy, and have done
nothing to acknowledge Azerbaijan's commercial interests in a
notional Nabucco deal, or to help resolve Azerbaijan's
continuing gas transit impasse with Turkey. Aleskerov
asserted that if the Europeans have there way, Azerbaijan
will be nickled and dimed to death via the various individual
transit countries gas take off, taxes, and other costs so
that at the end of the day it realizes little or no profit
from the project. "They are just assuming that eventually


the U.S. will force us and Turkey to cooperate (with the
project),despite our concerns," he claimed. "We don't
care," he shrugged - we can sell our gas South or North
(i.e., to Russia or Iran) - within three years the Russians
will screw them (the Europeans),and they will come running."



5. (C) Aleskerov acknowledged that a "take or pay" contract
for Azerbaijani gas at market prices remains a key goal, but
evaded Bryza's efforts to make him provide details or spell
out more specifically on what else the GOAJ wants the
Europeans - or us - to do at this point. Bryza told
Aleskerov that we share his frustrations with the lassitude
and lack of realism of some of the Europeans - nonetheless,
many in Washington recognize that our shared strategic goals
and energy independence are too important to risk over our
frustration. Despite the current weakness and lack of
foresight of some parties, we will continue to remain active
and work constructivelty towards a solution.

Azerbaijan-Turkmenistan Relations Are Improving
-------------- --------------


6. (C) Aleskerov claimed that "official and unofficial"
relations between Azerbaijan and Turkmenistan have improved
over the last year, which he attributed in part to the
passing of the late President of Turkmenistan, Niyazov, as
well as to dogged efforts by GOAJ officials over the last
several years. He depicted the recent
Azerbaijan-Turkmenistan Trans-Caspian Conference (reftels) as
a minor triumph, claiming that the conference itself was
largely a mask for significant behind the scenes bilateral
relationship-building. In this context, Aleskerov expressed
guarded optimism that a window has also opened for
influencing GOT economic and strategic thinking generally,
and reducing its current economic dependence on, and fear of,
Russia.

Time for Strategy, not Tactics, on Turkmenistan Gas...
-------------- --------------


7. (C) Alskerov asserted that over the past few years the
USG and Western energy companies have gradually drifted away
from a strategic towards a more "tactical" vision of
Turkmenistan's energy. As an example, he said that merely
facilitating the expansion of gas production by the GOT "will
do nothing but create more gas for Gazprom to monopolize." A
more effective strategy, he opined, would be to direct the
Turkmen towards utilizing this gas to help create a domestic
petrochemical industry. Asserting that "China is ready to
buy even three times" the maximum probable output of such an
industry, he claimed that its existence could potentially
produce far more jobs, better and more comprehensive economic
infrastructure, technology transfer, and larger commercial
profits for Turkmenistan than mere expansion of its energy
production can do. He added that a large Turkmen
petrochemical industry would "mop up" much of Turkmenistan's
gas, diverting it from the Russian market. This in turn, he
argued, will help propel Gazprom and Russia away from their
current addiction to cheap second-country sources, and
towards increased domestic energy investment, and ultimately,
more normal integration into the world economy.

Through Building a Turkmenistan Petrochemical Industry
-------------- --------------


8. (C) Gathering steam, Aleskerov sketched out a possible
methodology for turning this concept into a reality. As a
first, he suggested, the U.S. Trade Development Agency
(USTDA),or a similar institution, should underwrite a
comprehensive feasibility study studying the commercial and
economic viability of developing a large scale Turkmen
petrochemical industry, cost and benefit criteria, etc.
Then, if the feasibility study is promising (as Aleskerov
assumed it would be),"private U.S. company A" should make
presentations to key Turkmenistan officials to help persuade
them to launch this venture, with support of the U.S.
company, and/or an international consortia that it might
assemble. Aleskerov stressed that that this presentation
should be short and to the point, illustrating the
economic/commercial benefits, and driving home to the Turkmen
that "this is their opportunity, their moment" to obtain far
greater returns and true ecomomic independence.


9. (C) Aleskerov strongly recommended that (apart from
USTDA's notional involvement) the USG stay behind the scenes
in this effort, allowing private companies to take the lead



in public. Among other considerations, he opined that a
discreet USG approach would be helpful in providing cover to
the GOT in resisting probable Russian countervailing
pressure. Meanwhile, Aleskerov argued that we should
concurrently help the Turkmen guide those new gas resources
in "appropriate" directions - their Western gas (e.g., Block
A) should move West to Europe, and their eastern gas should
move East - to China and/or India. Aleskerov added that he
was willing to personally assist any U.S. companies in making
contact and reaching out to appropriate GOT officials for the
purpose of exploring this proposal.


10. (U) DAS Bryza approved this cable.
DERSE