AZERBAIJAN: DEPUTY SECRETARY DISCUSSES RUSSIA,

C O N F I D E N T I A L SECTION 01 OF 03 BAKU 000945

SIPDIS

FOR EUR/CARC

E.O. 12958: DECL: 09/25/2018
TAGS: AJ AM ENRG GG PGOV PREL RS
SUBJECT: AZERBAIJAN: DEPUTY SECRETARY DISCUSSES RUSSIA,
IRAN, NAGORNO-KARABAKH AND THE ROAD AHEAD

Classified By: Ambassador Anne E. Derse for reasons 1.4 (b) and (d).


1. (C) Summary: Over dinner October 1 with the Deputy
Secretary, key Azerbaijani foreign policy thinkers discussed
the role of Russia and Iran in the Caucasus, the
Nagorno-Karabakh conflict and efforts to intensify the
U.S.-Azerbaijan relationship. Participants highlighted
Azerbaijan's difficult geopolitical setting, which has been
further complicated by Russia's invasion of Georgia. In
light of the current political issues influencing Azerbaijan,
these contacts underscored the need for more tangible
results from the U.S.- Azerbaijan relationship, particularly
in the economic sphere and on Nagorno-Karabakh. End Summary.


2. (C) The Ambassador hosted a dinner October 1 for Deputy
Secretary of State John Negroponte. Deputy Assistant
Secretary Matthew Bryza and D staff joined. Azerbaijan's
Deputy Foreign Minister Hafiz Pashayev, former Presidential
Adviser Vafa Gulazade, current Presidential Foreign Policy
Advisor Novruz Mammadov, and IMF Country Director for
Azerbaijan Koba Gvenetadze were guests.

RUSSIA AND IRAN


3. (C) The dinner's participants quickly engaged in a heated
conversation about Russia's recent aggressive actions in
Georgia. Gulazade and Mammadov in particular expressed
concern that Russia may become more aggressive against
Azerbaijan, similar to the way Moscow confronted Georgia.
Further, they expressed concern that Russia might decide to
utilize economic tactics to gain broader control over
Azerbaijan, especially in terms of energy production and
transport.


4. (C) Gulazade argued that peace in the Caucasus was not in
Russia's best interest. Furthermore, he reminded the group
that Azerbaijan was in a precarious location, sandwiched
between Russia and Iran. He said that both countries were
currently vying for further power in the region. Mammadov
supported Gulazade's claims - noting that both Russia and
Iran wanted to prevent further Azerbaijan integration with
the West. He explained that the GOAJ needed to weigh its
decisions carefully given the unpredictability of its
neighbors. He noted recent pressure by Russian President
Dmitriy Medvedev and the Iranian Foreign Minister Manouchehr
Mottaki citing Medvedev's warning to the GOAJ to stop its
strong support for re-reversal of Ukraine's Odessa - Brody
pipeline.

GEORGIA INSTABILITY CREATES PROBLEMS FOR AZERBAIJAN


5. (C) Despite strong U.S. support following the invasion,
Pashayev said that Georgia lost more than it gained. Given
his belief that the pro-Azerbaijan "U.S. lobby" was weak, he
reasoned that Azerbaijan would not receive the same level of
U.S. aide should they suffer a similar fate. As a result,
Azerbaijan had to tread carefully against Russia.


6. (C) Pashayev highlighted Russia's ability to re-establish
military bases in Georgia's sovereign territory as the worst
outcome of the Georgian conflict. He pointed out that Russia
now had military bases in 2 of the 3 Caucasus countries,
Armenia and Georgia, and that Russia was unlikely to scale
back in the Caucasus over the longer term. Russia, he
maintained, had devised customized strategies for dealing
with each of the Caucasus countries to promote instability
and to re-establish Moscow's control in the region, including
over energy exports and broader integration with the West.
The other participants at the dinner agreed.

NAGORNO-KARABAKH


7. (C) In a discussion regarding Nagorno-Karabakh (NK),
everyone agreed with Mammadov that Russia had fueled the
unstable situation in NK. He thought that Russia would agree
to a partial settlement, as agreed to in the Basic
Principles, which ultimately would be accepted by Yerevan.
Mammadov suggested that Azerbaijan and Armenia should agree
on the return to Baku of the 7 occupied territories, and

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allow the final status of NK to remain ambiguous, (marking a
welcome return to accepting "constructive ambiguity" on NK,s
status, which is at the heart of the Basic Principles).
Mammadov speculated that Moscow was behaving constructively
for two reasons. First, in light of the recent events in
Georgia, Russia wanted to prove to the world that it was a
peace-seeking country. Second, Armenia desperately needs
economic improvements and open borders. In order to
facilitate a deal, Mammadov said that he believed that GOAM
and GOAJ needed direct communication with one another.


8. (C) Gulazade, who was the most outspoken and radical
during the discussion, did not believe that Russia would
accept half a settlement and would want to stop any deal.
Nor did he believe that Armenia would be willing to try and
create a settlement on their own, since their previous
attempt resulted in the Parliamentary assassinations. All
participants believed that these assassinations were a
message from Moscow to further unilateral action by the GOAM.



9. (C) Mammadov believes that Moscow needs conflicts to
justify their presence in the region. Both Gulazade and
Mammadov agreed that if there is a settlement, both GOAM and
GOAJ would look West, and potentially to NATO membership.
Thus, any complete settlement of NK would be a lose/lose
situation for Russia.


10. (C) In response, DAS Bryza asked if the GOAJ would be
interested in the U.S. facilitating better communication,
behind-the-scenes, with the GOAM and GOAJ. He caveated this
offer, by stating that it was imperative that some semblance
of the Minsk Group be kept up, because otherwise Russia's
role might not be constructive. Mammadov agreed with DAS
Bryza's proposal.

U.S.- AZERBAIJAN RELATIONSHIP


11. (C) Towards the end of the discussion, the conversation
switched to how to improve the U.S.- Azerbaijan relationship.
IMF Country Director Gvenetadze (a Georgian national) urged
the U.S. to appreciate the precarious position of Azerbaijan.
He said that if the U.S. were to ask for a military base in
Azerbaijan, it would only put the GOAJ in a difficult
position. He commented that developments in Georgia would
likely indicate the direction of U.S.- Azerbaijan relations.
Should the situation in Georgia improve, Gvenetadze contended
that the GOAJ would be more comfortable with a pro-western
attitude. Should the Russian occupation continue, the GOAJ
may feel more comfortable siding with Russia.


12. (C) Pashayev said that one concrete step would be U.S.
assistance with a Trans-Caspian pipeline. Mammadov added
that any assistance on projects like the Trans-Caspian
pipeline or the Nabucco project would further strengthen the
relationship, but that the GOAJ could not take the lead
because of the message it would send to Russia and Iran. As
a result, Mammadov asked that if the U.S. could take a lead
role in initiating such projects. Furthermore, he
recommended the EU or U.S. create a document which all
participatory countries could sign, describing the role of
each country. In such an agreement, the GOAJ would
gratefully participate.


13. (C) DAS Bryza then raised the intent of the Foreign
Minister of Hungry, Kinga Goncz, to invite Azerbaijan's
President Aliyev to Budapest in January 2009 to discuss the
Nabucco deal. In this meeting, DAS Bryza said that Goncz
intended to demonstrate the support of Heads of State for the
project. Mammadov said that he did not believe that Aliyev
was ready for such a meeting, and suggested that there be a
few more preparatory meetings prior to agreeing to such a
gathering.


14. (C) Pashayev said that he thought the relationship
between GOAJ and the U.S. was strong. He said that the visit
by both Vice President Cheney and Deputy Secretary Negroponte
were extremely well received. In addition, he reiterated
that U.S. support for a Trans-Caspian pipeline would further

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strengthen a good relationship.


15. (C) The Deputy Secretary then asked about Azerbaijan's
economy. Gvenetadze said that economic reforms needed more
support. Growth is dominated by oil and is not sufficiently
diversified. He noted the need to improve the environment
for businesses before the economy would expand, especially
with regard to corruption and transparent business
practices. Besides oil and gas, Gvenetadze said that once
the business environment improved, Azerbaijan's economy could
expand into sectors like agriculture, construction, tourism,
trade and telecommunications.


16. (C) Mammadov suggested that the U.S. focus its foreign
relations in this region on Georgia, Ukraine and Azerbaijan,
because it was a pivotal time in Eurasia. If these countries
could successfully integrate with the West, Mammadov was
convinced that the Central Asian countries would follow suit.



17. (C) At the end of the dinner, Mammadov gave the U.S.
some advice on dealing with Azerbaijan. He reminded U.S.
diplomats that Azerbaijan was "an oriental country with an
oriental, sensitive mindset." He suggested that when the
U.S. wanted to comment on an event in Azerbaijan, that the
U.S. should start its statement with praise for Azerbaijan
for its successes, and conclude the statemen with areas for
improvement. Mammadov said whenstatements are issued in the
opposite format "th sensitive Azerbaijani mindset" takes
offense an the message might not be properly heard.

COMMEN


18. (C) This was an informal, free flowing diaogue, where
our interlocutors were speaking off the cuff. This
discussion highlighted Azerbaijani concern regarding possible
Russian aggression and the perceived threat from their
neighbors. Furthermore, in their view, the Georgian invasion
plays a key role in defining the Eurasian landscape for the
future. Azerbaijan is looking to the U.S. for more tangible
results from the relationship, particularly in the economic
sphere and on NK.


19. (U) DepSec staff has cleared this cable.
DERSE