WILL TALKS BREAK THE BISHKEK HYATT IMPASSE?

C O N F I D E N T I A L SECTION 01 OF 02 BISHKEK 000875

SIPDIS

DEPT FOR SCA/CEN, EEB/IFD/OIA (GOETHERT/BUTLER)
DEPT PASS TO OPIC
COMMERCE FOR ITA (STARKS)

E.O. 12958: DECL: 08/26/2018
TAGS: EINV KIDE OPIC PGOV KG
SUBJECT: WILL TALKS BREAK THE BISHKEK HYATT IMPASSE?

REF: A. BISHKEK 760

B. BISHKEK 766

C. BISHKEK 836

Classified By: Charge d'Affaires Lee Litzenberger, Reason 1.4 (b) and (
d).


1. (C) Summary: Following the late July destruction by
Bishkek municipal employees of the security fence guarding
the Hyatt Regency's front perimeter, Bishkek Mayor Tuleyev
has focused his attention on squeezing higher land rent from
the Hyatt before agreeing to a resolution of the fence
dispute. Kyrgyz government officials have attempted to paint
the issue as an "economic" issue with President Bakiyev
claiming to only be aware of the issue through news reports,
and have sought to diminish damage to the investment climate.
No progress has been made in discussions over the past
month, but an August 29 meeting scheduled between the Hyatt
regional manager and Tuleyev may signal a turning point
towards resolution or other unspecified steps. End summary.

Mayor Plays His Hand
--------------


2. (C) As discussed reftels, Bishkek municipal authorities,
acting at the behest of Bishkek Mayor Nariman Tuleyev,
dismantled the security fence guarding the front perimeter of
the Bishkek Hyatt Regency July 24-25. In the following days,
city administration officials organized flower-laying
processions at the ballerina statue on the Hyatt grounds.
According to the mayor's office, liberating the ballerina
statue responded to public demands, even though the Hyatt had
never restricted pedestrian access to the statue. These
actions coincided with Tuleyev's public call for the Hyatt to
pay substantially more rent for the two hectares of land
occupied by the Hyatt property.

Government Officials Avoid Public Role
--------------


3. (C) The Embassy protested Tuleyev's actions, which
included severing municipal water supplies to the Hyatt, to
Kyrgyz government officials, who privately expressed
displeasure with Tuleyev's actions, but sought to minimize
their impact. President Bakiyev's Foreign Policy Advisor
Islan Ryskulov told the Charge July 25 that the mayor's
actions did not reflect "administration policy" towards
foreign investment, and viewed the issue as an "economic
dispute" that he hoped would not become a "political" issue.
The Foreign Ministry relayed to the Embassy the mayor's
explanation that the actions were needed to ensure free
access to the ballerina statue.


4. (C) In a July 29 meeting arranged by President Bakiyev's
Chief of Staff Medet Sadyrkulov, the Hyatt General Manager
presented an offer to pay for the cost of moving the
ballerina statue to another location and restoring the fence.
The mayor countered by saying all the problems could be
resolved if the Hyatt agreed to pay more for the land lease.
(Note: As part of the deal to attract Hyatt's initial
investment, Hyatt was granted long-term leases to land at a
concessional rate, approximately $2600 per year. The mayor
at various times has proposed raising the rent to between
$200,000 and $600,000 annually. End note.) The Charge
pointed out that that the fence and land lease issues were
unrelated, and the destruction of the fence was damaging to
the investment climate, to the security of guests staying at
the Hyatt, and to the largest U.S. investment in the country.



5. (C) In an August 5 meeting with a visiting congressional
delegation headed by Senator Harry Reid of Nevada (reftel C),
President Bakiyev claimed to have only heard about the Hyatt
issue through news accounts, but also expressed hope that a
resolution could be reached soon.

Mayor Changes His Mind (Again)
--------------


6. (C) The mayor subsequently claimed that he put forward
the Hyatt proposal to move the ballerina statue, but the
Ministry of Culture rejected the request. According to the
Hyatt general manager, the mayor then proposed the return of
the one plot of land with the ballerina to the city and a
"reasonable" rent increase for the remaining land -- a
proposal which the Hyatt forwarded back for consideration by

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headquarters. However, the next morning Tuleyev showed up at
the hotel unannounced, declared the previous evening's
proposal invalid and stated that virtually all the land
should revert to the city and much higher rent be paid for
the remaining land. (Comment: While the mayor is relying on
the Ministry of Culture's opposition to moving the ballerina
statue, Ministry objections to the mayor's plans to build a
road through a city park have not stopped preparatory work
for the road. End comment.)

Hyatt Seeks Higher Audience
--------------


7. (SBU) The Hyatt's regional manager is flying to Bishkek
for an August 29 evening meeting with Mayor Tuleyev. While
the local Hyatt general manager hoped that Tuleyev's shifting
position was a negotiating tactic, he reasoned that if this
were not the case the Hyatt might have to pursue alternate
avenues for resolution. The Charge is scheduled to meet the
regional manager prior to the mayor's meeting, and the
general manager promised to brief the Embassy on the results
of the meeting with the mayor. Embassy will report further
developments septel.
LITZENBERGER