BISHKEK MAYOR TARGETS HYATT WITH WATER CUTS AND

C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 000760 SIPDIS DEPT FOR SCA/CEN (GEHRENBECK) DEPT FOR EEB/IFD/OIA (GOETHERT/BUTLER) DEPT PASS TO OPIC (GUELIG) COMMERCE FOR ITA (STARKS) E.O. 12958: DECL: 07/24/2018 TAGS: EINV KIDE OPIC PGOV KG SUBJECT: BISHKEK MAYOR TARGETS HYATT WITH WATER CUTS AND FENCE DESTRUCTION BISHKEK 00000760 001.2 OF 002 Classified By: Charge d'Affaires Lee Litzenberger, Reason 1.4 (b) and ( d). ¶1. (C) Summary: Bishkek municipal employees, working with a police escort, tore down large sections of the security fence surrounding the Hyatt Regency Bishkek on July 24. City officials had earlier cut off water to the hotel in an attempt to pressure the Hyatt over land leases and "public access" to a statue on the grounds of the hotel. Newly installed Bishkek Mayor Nariman Tuleyev reportedly told Hyatt officials that land leases were "undervalued" and the security fence should be moved closer to the hotel building. The Embassy has raised the issue with the Foreign Ministry, and noted the negative impact these actions will have on the already poor investment climate. The OPIC-insured Hyatt has resorted to trucking in water for its use, and is contemplating its next options. End summary. Background of Hyatt Problems -------------- ¶2. (C) Earlier this year, Hyatt General Manager Puneet Tandon informed Embassy of increasing problems associated with the leases covering the land of the Bishkek Hyatt. The Bishkek city administration, then led by Daniyar Usenov, specifically questioned the duration of two of the four leases and complained that Hyatt security fencing restricted access to a statue honoring a renowned Kyrgyz ballerina. (Note: The ballerina statue predates the renovation of an existing hotel which later became the Hyatt property. End note.) Tandon confirmed that the city administration had later dropped active engagement with the Hyatt on the issue. Renewed Harassment from the Mayor -------------- ¶3. (C) On July 16, municipal water officials notified the Hyatt that "technical problems" caused a shut-off of water supplies to the hotel. On July 17, Hyatt management received a copy of a July 14 mayoral resolution, which cited complaints relating to access to the ballerina as justification for canceling the land leases and ordering the Hyatt to remove its security fencing by July 20. (Note: Hyatt security personnel screen entering vehicles at two entrances, but numerous pedestrian entrances allow unimpeded 
access to the Hyatt property, including to the ballerina statue. End note.) ¶4. (C) Hyatt Manager Tandon informed Embassy that one of the Hyatt's local board members subsequently spoke with newly installed Bishkek Mayor Nariman Tuleyev, who reportedly confirmed that he ordered the water supplies cut. In the meantime, the Hyatt has been trucking in water to cover its needs. Municipal water authority officials cited a water "shortage" in a July 23 meeting with Tandon as cause for the indefinite service interruption, but could not explain why neighboring buildings were unaffected and why other water pipelines could not be tapped to restore service to the Hyatt. What Does the Mayor Really Want? -------------- ¶5. (C) In a subsequent meeting between Tuleyev and Tandon, the mayor indicated "technical problems" with the Hyatt's water could continue for one or two months. Tuleyev also informed Tandon that the leases were "undervalued," and noted that the annual payment should increase from $2,000 to $200,000. Tuleyev also pointed to a plan of the Hyatt BISHKEK 00000760 002.2 OF 002 property and suggested that the Hyatt put fencing much closer to the building. He discounted the validity of previous agreements and claimed that the Hyatt was making "demands" of the mayor by requesting a restoration of water supplies and a suspension of fence dismantling plans. Removing the Security Fence -------------- ¶6. (SBU) On July 24, municipal workers, escorted by Kyrgyz security forces, arrived at the Hyatt and began dismantling the metal fence guarding the southern perimeter of the Hyatt with blowtorches. The security officials referred to the mayor's resolution as justification for the action. As of 1800 local July 24, workers had removed about 300-400 feet of the metal fence, with work continuing into the evening. Hyatt Approaches International Community -------------- ¶7. (C) In addition to the Embassy, Hyatt management has contacted the European Bank for Reconstruction and Development, the Kyrgyz State Property Fund, the World Bank and President Bakiyev's younger son, Maxim. (Note: Maxim Bakiyev is an influential businessman with growing interests in various sectors of the Kyrgyz economy. End note.) Charge Litzenberger raised the issue with Deputy Foreign Minister Ibraimov July 22, and advised him of the negative impact the mayor's actions towards the Hyatt would have on the local investment climate. The Embassy is also sending a sharply worded diplomatic note protesting the actions against the Hyatt. World Bank Resident Representative Roger Robinson plans to raise the issue in a previously scheduled July 25 meeting with Prime Minister Chudinov. Tandon held a press conference at the Hyatt July 24 to discuss the issue. Comment -------------- ¶8. (C) Tuleyev's actions raise new questions about local conditions for investors, adding to the already serious concerns about the rule of law and the investment climate. As many Western businesspeople stay at the Hyatt, word of the Hyatt's difficulties will spread quickly among the business community. Former U.S. Senator Johnston is staying at the Hyatt now, and next week the Hyatt will host A/CENTCOM LTG Dempsey, followed by a CODEL of five U.S. Senators, led by Senator Harry Reid. Interestingly, the Kyrgyz government previously contacted Hyatt management seeking to reserve all rooms for the October Commonwealth of Independent States summit. Tuleyev's actions may compromise the security currently provided by the most secure public venue in Bishkek. ¶9. (SBU) Unlike many of its hotels elsewhere, the Hyatt Corporation has an ownership stake, insured by the Overseas Private Investment Corporation, in the Hyatt Regency Bishkek. LITZENBERGER