TAJIKISTAN: DAS KROL'S INTRODUCTORY MEETINGS

C O N F I D E N T I A L SECTION 01 OF 02 DUSHANBE 000825 SIPDIS DEPT FOR SCA CORRECTED COPY - FORMAT GARBLED TEXT E.O. 12958: DECL: 06/18/2018 TAGS: EAID ETRD EINV PREL PGOV PHUM TI SUBJECT: TAJIKISTAN: DAS KROL'S INTRODUCTORY MEETINGS DUSHANBE 00000825 001.2 OF 002 Classified By: Ambassador Tracey Ann Jacobson; reasons 1.4(b) and (d) ¶1. (C) Summary: Prior to the Trade and Investment Framework Agreement meetings in Dushanbe, DAS Krol, accompanied by Ambassador, had introductory meetings June 16 with Foreign Minister Zarifi, and with Presidential Advisors on Foreign Policy and Economics Rahmattuloyev and Davlatov. Krol discussed with his interlocutors: - The business environment, including the IMF misreporting scandal; - The overall economic situation including the results of last winter's twin energy and food security crises; - Tajikistan's renewed push for international funding for a hydropower station at Dosti-jhum, on the Tajik-Afghan border; - The pullout of the National Democratic Institute; - The new OSCE mandate, and the Tajik desire to see some sort of regional OSCE institution based in Dushanbe; and - Relations with Iran, both economically and in the context of the Shanghai Cooperation Organization. ¶2. (C) While little new ground was covered, all three of Krol's interlocutors had clearly been studying their recent meetings with us, and repeated back some of our own talking points. Whether their understanding of the government's image problems will result in real reforms remains to be seen. End Summary. IMF Misreporting and Business Environment -------------- ¶3. (C) Zarifi and Davlatov both noted that the government was committed to getting its relationships with the international financial institutions back on track, through an audit of the Central Bank, a Staff Monitoring Program, and eventual audits of the state-owned enterprises TALCO and Barki Tojik. Using identical language, both insisted that Central Bank guarantees for private cotton investors had been going on for years, but the IMF representative in Tajikistan had waited "until the right moment" (i.e., during the winter crisis) to make the misreporting public. (Note: at a dinner that evening, IMF representative Luc Moers said the Central Bank had denied on repeated occasions that it was giving private guarantees.) Krol noted that the delay in finding the misreporting was because the fraud was well hidden and that the misreporting had tarnished Tajikistan's image. ¶4. (C) Krol raised other problems with the business environment, including corruption, reports of record-setting TALCO litigation against Russian oligarch Oleg Deripaska in London, and difficulty with flights and visas for business people and tourists to come to Dushanbe. Davlatov insisted that the cost of TALCO's litigation is nowhere near the 120 million plus reported in the media, and in any case, "it's TALCO's money, not the government's." (Krol pointed out that as a government-owned company, TALCO money is government money). Davlatov admitted the need for greater transparency in TALCO's operations: "Even as the Chief Economic Advisor, I don't always know what they are doing. The audit should make everything clear." Davlatov, unprompted, brought up the conviction of Orima Chairman Oripov, saying - "That grocery store - people keep raising it, but I have no influence - it's a law enforcement issue. Let's not politicize things - we shouldn't say that the IMF case, or the supermarket case, have anything to do with the business environment." Zarifi asked for more international assistance to "solve" the corruption problem. ¶5. (C) On access to the country, Rahmattuloyev said that Q5. (C) On access to the country, Rahmattuloyev said that Tajikistan had taken a positive step forward with airport visas. When Ambassador noted that the airport visa regime had been cancelled last November, Rahmattuloyev, a bit out of the loop, insisted it was still active for visitors. (Note: we have to coordinate in advance for airport visas for official visitors; it's not an option for ordinary tourists or business people). Davlatov said the government had finally approved a third weekly flight for Turkish Air, but the carrier had turned it down - an assertion rejected by the Turkish Ambassador later that evening. Overall Economic Situation and Plans for Hydropower -------------- -------------- ¶6. (C) Zarifi blamed the weather and Uzbekistan for Tajikistan's economic woes. The harsh winter and dry spring DUSHANBE 00000825 002.2 OF 002 have negatively impacted both agriculture and hydropower reservoir levels. Difficulties with Uzbekistan mean that Tajikistan is spending hundreds of millions of dollars on road construction and other transportation projects, in order to avoid transit through Uzbekistan. "Our economy is not so bad, but the problem is that we are spending money where we really shouldn't have to." (Note: Ambassador resisted the urge to hold up the presidential palace, estimated at 130 million dollars, and the TALCO legislation, as example of unnecessary government expenditures. We have raised these issues on multiple occasions. End note) ¶7. (C) All three interlocutors expressed the government's keen interest in further developing hydropower. Building the Rogun dam and hydropower station is a priority, but the Tajik government is worried that potential consortium partners and even international financial institutions will be swayed by Tashkent's protests. Zarifi and Rahmattuloyev both expressed a renewed interest in a new hydropower plant at Dosti-jhum, on the Afghan-Tajik border. Zarifi said he raised greater Tajik-Afghan cooperation with Kai Eide on the margins of the Paris conference; Eide had agreed to visit. Zarifi plans to use the visit to push for Dosti-jhum. Ambassador reiterated to Rahmattuloyev that although our experts thought Dosti-jhum could be a worthwhile project, it would have to be funded by the private sector, not the U.S. government. Rahmattuloyev replied that over 30 billion dollars had been pledged for Afghan stabilization at the Paris conference, and the four billion dollar Dhosti-jhum project could be funded from this amount. National Democratic Institute and OSCE -------------- ¶8. (C) Krol brought up the pullout of the National Democratic Institute, noting that Tajikistan's failure to register the organization was both disappointing and a blow to Tajikistan's image in Washington. Zarifi said the decision was not finalized, and possible registration for NDI was still being discussed. Rahmattuloyev insisted it was NDI's decision to pull out, not the government of Tajikistan's. Ambassador responded that after three failed attempts to register and statements from Ministry of Justice officials that they never would register NDI, there was no way the organization could stay. Further, the State Committee for National Security had roughed up NDI's Amcit director and also stopped and questioned his Amcit fiance. Rahmattuloyev said he didn't know about the harassment and apologized if it had indeed occurred (Ambassador had raised it with Zarifi in May with no response.) ¶9. (C) Krol congratulated Zarifi and Rahmattuloyev on the new OSCE mandate. Rhamattuloyev reiterated the government's request to have some structure of the OSCE physically moved to Dushanbe, in order to anchor the "Asian bloc" more firmly in the organization. Iran -------------- ¶10. (C) Krol questioned his interlocutors about relations with Iran - both economically and in the context of the Shanghai Cooperation Organization. Both Rahmattuloyev and Zarifi described the relationship as "purely economic." Iran is building a hydropower station at Sangtuda, a tunnel under the Anzob pass, and discussing other infrastructure investments. On the question of potential Shanghai Cooperation Organization membership for Iran, Zarifi said: "This will not be a real issue this year or next. It's only at the level of discussions. Our position is that we Qonly at the level of discussions. Our position is that we don't want to cut anyone out, but at the same time, we understand your position. We always tell the Iranians they need to comply with the demands of the international community. Tajikistan's role in this regard will only be positive." ¶11. (C) Comment: The meetings did not produce much news. Our interlocutors have clearly heard and absorbed our talking points, but still take little responsibility for the problems Tajikistan faces, and too little action to resolve these problems. It is clear that the IMF misreporting scandal and combined winter crises have served as a wake-up call to Tajikistan's political/economic elite, but it will take frequent, coordinated, and sustained engagement to move towards real reforms. JACOBSON