SCA ADVISOR DEUTSCH SEEKS SUPPORT FROM EC AND EIB

C O N F I D E N T I A L BRUSSELS 000165 SIPDIS SIPDIS STATE FOR SCA/FO, SCA/A, SCA/PB, SCA/CEN, EUR/ERA USAID FOR WARD E.O. 12958: DECL: 02/01/2018 TAGS: PREL PGOV EU EAID OSCE AF TI TX UZ XG ZK PK SUBJECT: SCA ADVISOR DEUTSCH SEEKS SUPPORT FROM EC AND EIB ON CASAREM Classified By: USEU POLMINCOUNS LARRY WOHLERS, FOR REASONS 1.4 (b) and (d) ¶1. (C) Senior Economic Advisor for South and Central Asian Affairs Robert Deutsch met with European Commission, European Investment Bank, and KfW Bank officials January 23 - 24 in Brussels to discuss the Central to South Asia Regional Electricity Market (CASAREM). European Commission (EC) Head of Unit for Central Asia Victor Maldonado explained that the Commission itself could not provide funding for CASAREM due to restrictions the European Parliament placed on how it could spend its five-year 750 million Euro assistance package for Central Asia. He said that the restrictions required the assistance to be directly related to poverty reduction, and thus Commission projects mainly targeted health, education, and governance (capacity building). However, Maldonado was optimistic that the European Investment Bank (EIB) could participate in CASAREM, assuming the EIB received from the European Council a mandate to do work in Central Asia, as Maldonado hoped it would under the EU Slovenian presidency. Maldonado explained that the EC would meet with EU member states, EIB, and EBRD officials on March 4 in Brussels and said the EC would push the EIB and EBRD to make loans and guarantees to projects like CASAREM. He added that the EC could potentially help finance the interest on a project like CASAREM. ¶2. (C) Mr. Deutsch met separately with European Investment Bank Senior Adviser for Operational Lending Policies Guido Prudhomme at the EIB liaison office in Brussels. Mr. Prudhomme explained that approximately ten percent of EIB money (equivalent to five billion euros per year) is spent outside the EU and that the EIB works on the basis of mandates from the EU so that they can cover political risk. He said that the 27 EU Finance Ministers would have to approve a mandate for the EIB to operate in Central Asia. Prudhomme added that if the EIB received approval from Finance Ministers to operate in Central Asia, energy -- but mostly oil and gas -- would be their priority but that they would want to coordinate anything they did on Central Asia with the EBRD. He noted that there may be a problem in guaranteeing commercial investment, especially if it were short term. Mr. Deutsch replied that it may be possible to structure the investment differently if there were interest in doing so. ¶3. (C) European Commission Head of Unit for South Asia Helen Campbell told Mr. Deutsch the EC would be interested in using an upcoming regional coordination conference, such as the Regional Economic Conference on Cooperation with Afghanistan, to promote a coordinated U.S. - EU project on regional border management and trade facilitation. Mr. Deutsch responded that the USG would be interested in hearing the ideas of the EC about this, including on the Pakistan - India and Afghan - Pakistan borders. ¶4. (U) This message has been cleared by SCA Senior Economic Advisor Robert Deutsch. MURRAY