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