Shevchuk Wants MCC Roadwork Project; while Litskai Too Ill

C O N F I D E N T I A L SECTION 01 OF 03 CHISINAU 000262 SIPDIS SIPDIS E.O. 12958: DECL: 03/07/2018 TAGS: PREL PGOV PBTS PINR EAID ETRN MD SUBJECT: Shevchuk Wants MCC Roadwork Project; while Litskai Too Ill to Meet Classified By: Ambassador Michael D. Kirby for reasons 1.4(b) and (d) ¶1. (C) SUMMARY: Transnistrian Speaker Shevchuk expressed strong interest in the proposed MCC road reconstruction projects, which would make an important contribution to the Transnistrian transportation corridor linking Chisinau and the west with Ukraine. Sheriff Company Director Ilya Kazmaly complained about Voronin's mistakes in dealing with Transnistria, and said that the functioning of business interests required resumption of railroad transport. "Foreign Minister" Litskai's office declined a meeting with the Ambassador stating that Litskai was ill. Kazmaly explained Litskai had been incapacitated for the previous four days from the effects of too much alcohol. End Summary. ¶2. (C) The Ambassador's March 6 trip to Tiraspol was set against the backdrop of "President" Smirnov's rage at the EU decision to lift the visa ban on Shevchuk and several others. In response, Smirnov had angrily declared that the European and American Ambassadors were not welcome in Transnistria. The Ambassador's crossing was made possible by Shevchuk's personal intervention with Smirnov. MCC Roadwork Would Improve Transportation Corridor -------------- -------------- ¶3. (C) After apologizing for the Ambassador's travel problems, Shevchuk suggested he would launch a legislative initiative to establish a functioning travel regime for diplomats. A cooperative and reasonable Shevchuk expressed strong interest in the Millennium Challenge Corporation program. The Ambassador explained that the GOM's proposal includes USD 80 million for work on two roads that pass through Transnistria -- the M-14, which passes through Tiraspol to link Chisinau to Odessa, and the M-21, which links Chisinau to the Kyiv-Odessa highway through Dubosari. Shevchuk was eager to see the MCC program move forward and confirmed that improvements in these two dilapidated roads would help develop the very important transportation corridor. ¶4. (C) Shevchuk said he had already informed "President" Smirnov that the Supreme Soviet would support going forward with MCC. Shevchuk commented that improved transportation would bring jobs for more citizens of Transnistria. He said he would introduce legislative initiatives that would facilitate border crossings for those transiting Transnistria on these roads. The Ambassador suggested that as a next step the Transnistrian side should appoint key individuals to learn about MCC and to coordinate for Transnistria. Shevchuk said he would include personnel from both the legislative and executive branches in such a group. It was agreed that Embassy staff would brief this team on the MCC during the week of March 10, to be followed by further consultations with them when an MCC team from Washington next visits Moldova in April. Business Development More Important than Humanitarian Aid -------------- -------------- ¶5. (C) The pro-business Shevchuk listened with interest as the Ambassador described a business assistance project. During the last week of February, the USAID CEED group met with the Lux Company in Dubosari, as well as previously meeting with the Tiraspol-based TiroTex, to examine possibilities for help with marketing and increasing sales to the West. Shevchuk expressed his interest in technical assistance and business development. The Ambassador mentioned an American group that has already raised over USD 300 million in the U.S., which they have invested in Ukraine and Moldova, and promised to encourage them to consider expanding to cover the whole of Moldova. Shevchuk said that mutually-beneficial, profitable investment was the key to development. USG Now Engaged on a Variety of Assistance Programs -------------- -------------- ¶6. (C) The Ambassador reviewed other USG projects in Transnistria. He described USG efforts in the healthcare sector through Operation Provide Hope, which will include providing medical equipment for Transnistrian hospitals this summer. The Ambassador asked Shevchuk to facilitate any border issues to ensure delivery to Transnistria. ¶7. (C) USAID is carrying out a training program for banks on mortgage lending, as a functioning mortgage lending system would allow the population to purchase homes they otherwise could not afford. Additionally the USG will implement a USD 40,000 project for Avian Flu education and prevention. ¶8. (C) To update previous discussions on USG provision of seeds to help alleviate the consequences of last summer's drought, the Ambassador told Shevchuk that the USG was just completing procurement of sunflower and corn seeds in response to Shevchuk's request. Our contacts with the Private Farmer's Association and the Agricultural Committee in the parliament were still insisting that we provide the seeds to farmers with as much as 630 hectares. The Ambassador added that in the U.S. we didn't consider 630-ha farms small. Shevchuk agreed that 630-ha farms were not small by Transnistrian standards CHISINAU 00000262 002 OF 003 either. Shevchuk promised to provide us with an appropriately-targeted list of small farmers (holdings under 25 hectares) within the next few days. Sheriff Chief Kazmaly blames Voronin, Seeks Railroad Links -------------- -------------- ¶9. (C) In a separate meeting Ilya Kazmaly, director of Sheriff, expressed a pragmatic business-oriented approach towards the current situation. (Note: Sheriff is Transnistria's second-largest company in terms of trade volume and Transnistria's largest tax payer. Sheriff owns a chain of petrol stations, a chain of supermarkets, a TV channel, a cable TV network, the Kvint spirits factory, a mobile phone network, a Mitsubishi and Mercedes-Benz dealership, a soccer club with its newly-built Sheriff Stadium, which cost an estimated $200 million, and other interests. End Note) ¶10. (C) Kazmaly said his businesses require resumption of railroad transportation. Some of Sheriff's enterprises cannot operate profitably without rail transport, while others, like TiroTex, lose much of their profit to increased shipping expenses. TiroTex used to receive its cotton from Uzbekistan directly by rail. The need to truck the raw cotton on part of its journey greatly added to costs. Kazmaly complained at length about the mistakes Voronin has made in dealing with Transnistria. Suggesting that the sides were well on their way to conflict resolution before Voronin came to power, Kazmaly blamed Voronin for a variety of ills and said the business community lacks faith in Voronin's willingness to honor any deal reached in a Transnistrian settlement. ¶11. (C) Kazmaly told the story of his own personal disappointment in trying to do business with Chisinau. Having set up a cellphone network in Transnistria, Kazmaly negotiated for a contract to make it legal under Moldovan laws and rules. An agreement was reached which required him to put USD one million cash down. Two weeks after he paid the sum, President Voronin reneged on the contract. Kazmaly's efforts to sue for reimbursement failed. Now he is disillusioned and said he would not want to do business with Chisinau. When asked if he would rather trade with Europe or Russia, his answer was very pragmatic: it would depend on where the market for each particular good was more profitable. Kazmaly Plans to Continue Expanding Sheriff -------------- ¶12. (C) Kazmaly has plans in 2008 to build his own electric-generating plant for Sheriff's companies on the grounds of the TiroTex factory. Given the high cost of energy, and its vulnerability to Russian threats to interrupt supply, an independent power-generating capacity would help ensure TiroTex's continued functioning. Kazmaly also has an idea for cement mining that would link both sides of the Dniester River. There is an old cement mine in Rezina (just across the river from Ribnitza),with outdated technology whose pollution is causing illness among the local population. Kazmaly hopes to build a new factory using modern technology. Russia is offering credit at 12 percent, but Kazmaly is seeking money at a reduced interest rate from the EBRD. Kazmaly expressed the desire to see American business represented in Transnistria. Litskai on a Drunken Binge? -------------- ¶13. (C) Though the Ambassador had requested a meeting with "Foreign Minister" Litskai, for several days his staff had been unable to confirm that the meeting would take place, claiming that he was ill. Finally on the morning of the meeting, his office informed us that Litskai would not be able to meet the Ambassador. Kazmaly said that for the past four days Litskai had been on a drunken binge, exhibiting a level of alcoholism beyond any previous state. That was the real reason why he was not available to meet. (Note: Post is unable to confirm Kazmaly's statement, but notes that Litskai has a history both of over-drinking and of ill health. End Note) Comment: -------------- ¶14. (C) Shevchuk's interest in working with us on MCC is a positive sign. Construction of this transportation corridor would facilitate business development for both the left and right banks. Both Shevchuk and Kazmaly share a pragmatism rooted in a business-oriented approach that has little patience for Smirnov's blustering anger at foreign diplomats and counter-productive retaliation. At the same time, neither Shevchuk nor Kazmaly trusts Voronin to deliver on a deal. The timing was not ideal for publicly lifting the visa ban on Shevchuk, and it appears the EU may have inadvertently created more problems for him rather than helping him. Nonetheless, Shevchuk is learning to use his legislative power to work around Smirnov's ideological desire to erect stumbling blocks to relations with the outside. Economic development on both sides suffers from the continued frozen conflict, and ultimately the pragmatic CHISINAU 00000262 003 OF 003 business-oriented approach may provide the momentum needed for reunification. Tackling the railroad issue could help jumpstart the rest of the process. End Comment. KIRBY