UZBEKS ON REGIONAL TRADE, AFGHAN ELECTRICITY

C O N F I D E N T I A L TASHKENT 000219

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/19/2018
TAGS: PREL EAID ENRG ETRD PGOV PHUM AF UZ
SUBJECT: UZBEKS ON REGIONAL TRADE, AFGHAN ELECTRICITY

REF: A. A) STATE 1132 (NOTAL)

B. B) TASHKENT 146 (NOTAL)

C. C) PARIS 272 (NOTAL)

Classified By: P/E Chief Ted Burkhalter; reasons 1.4 (b, d).


1. (C) Summary: SCA Special Advisor for Economic Integration
Bob Deutsch met in Tashkent January 29 with senior Uzbek
officials, to discuss provision of electricity to Afghanistan
and prospects for this year's Trade and Investment Framework
Agreement meetings. The Uzbeks underscored the importance to
them of resolving water usage issues, in particular the
problem of hydropower generation facilities in Tajikistan.
They affirmed their intent to complete transmission line
upgrades and allow the sale of electricity to Afghanistan.
However, they questioned the viability of Afghan demand. The
Uzbeks expressed a clear preference for holding this year's
TIFA meetings in Ashgabat, vice Dushanbe. Deutsch's visit
was well-timed. Following by less than a week the visit of
Commander, USCENTCOM, Admiral Fallon, it has allowed the U.S.
and Uzbek governments to reengage at senior levels across a
spectrum of security and economic issues. The stage is now
set to push for progress on political issues, including human
rights. End summary.

TIFA venue and issues
--------------


2. (C) Minister for Foreign Economic Relations Elyor
Majidovich Ganiev underlined the Uzbek preference for holding
this year's TIFA meetings in Ashgabat (also see ref A). The
Uzbeks have launched a concerted political offensive against
Dushanbe, following the Janauary opening of the new
Sangtuda-1 hydroelectric power station (ref B).


3. (C) Ganiev was broadly supportive of the Trade and
Investment Framework process and emphasized his desire to
focus heavily on increasing U.S.-Central Asian and U.S.-Uzbek
trade. He expressed pleasure at recent investments in the
region by General Motors (in Uzbekistan) and General Electric
(in Kazakhstan). Interestingly, for the first time, he
acknowledged difficulties in the Uzbek trade regime and said
that the Government is committed to addressing these. He
pointed to substantial Uzbek investment in road, rail,
aviation, telecommunications and electrical generation
(comment: all true),as evidence of Uzbekistan's desire to
increase its attractiveness as a trade and investment
destination.

Eletricity for northern Afghanistan
--------------


4. (C) Deputy Prime Minister for Fuel and Energy Ergash
Rakhmatullayevich Shaismatov and Minister Ganiev both
confirmed Uzbekistan's commitment to complete a new 45
kilometer electrical transmission line in southern Uzbekistan
by year's end. The line, running to the Afghan border, will
be built by the Uzbeks and financed by the Afghans at a cost
of 12.5 million USD. It will be capable of delivering up to
300 MW of electricity to northern Afghanistan. The pricing
information tracked with information provided earlier in the
day by Afghan Ambassador Mohammad Farooq Baraki.


5. (C) Shaismatov said his engineers were working with the
Afghans to calculate design parameters. He said that once
this was done, the 45 kilometer line could be built inside of
nine months. He questioned the ability of the Afghans to
deliver even 150 MW electricity to market and hoped that they
could complete a new 434 kilometer transmission line
connecting Mazar to Kabul on schedule, by October. He also
noted that Uzbekistan can currently deliver up to 70 MW to
Mazar-e Sharif but that the Afghans are only purchasing 25
MW.


6. (C) Shaismatov confirmed that the price for future sales
of electricity would fluctuate, according to costs. Uzbek
electricity is primarily natural gas generated and is more
expensive than competing Tajik or Kyrgyz power, he said, but
he added that Uzbekistan was not out to bilk the Afghans.
Shaismatov's pricing information tracked with that provided
earlier in the day by Afghan Ambassador Mohammad Farooq
Baraki. Shaismatov said the Uzbeks would be willing to
consider a currency basket pricing formula.

Telecommunications
--------------


7. (C) Deputy Prime Minister for Information and
Telecommunications Abdulla Nigmatovich Aripov provided
Deutsch with an update on Uzbekistan's evolving
telecommunications infrastructure. Uzbekistan has laid over
11,000 kilometers of fiber optic network, including a stretch
of the Trans-Asia-Europe (TAE) fiber optic cable laid in

1997. The TAE cable connects Uzbekistan to Frankfurt on one
end and to Shanghai on the other. He said that Uzbekistan is
in discussions with its neighbors on enhancing existing
connectivity and building redundancy. Uzbekistan, he said,
would be very interested in any proposal to link India to
China, Russia and Europe via Central Asia. He thought Afghan
security remained an impediment to such projects but would
consider a U.S. proposal. He also noted that Uzbekistan and
Afghanistan have an interconnectivity agreement. Uzbekistan,
he said, is willing to provide any service for which its
neighbors can pay. In response to a question from Deutsch,
Aripov also noted that, while various Uzbek utilities and
rairoads own their own networks, they are unwilling to
guarantee universal access and hence are not allowed to enter
the commercial market here.

Hydropower and regional water tensions
--------------


8. (C) Shaismatov and Ganiev both underscored Uzbek
objections to the January opening in Tajikistan of the
Sangtuda-1 hydroelectric generating station (ref B). Their
bottom line: the Tajiks have to address internal
inefficiencies and reach a political understanding with
Uzbekistan before any discussion of new plant construction
takes place. Ganiev also made clear that with
next-generation facilities and upgrades, Uzbekistan would be
in a position to provide additional power to its neighbors.
He asked that the U.S. assist in speeding up delivery of
backlogged General Electric turbines.

Comment
--------------


9. (C) On the heels of Admiral Fallon's January 24 visit to
Tashkent to discuss regional security, Special Advisor
Deutsch's meetings provided an important opportunity for the
U.S. to engage senior Uzbek officials on economic issues and
round out the dialogue on Afghanistan (covering the economic
as well as the security dimensions). The caliber of these
discussions was substantive and reflected real give and take,
in contrast to set-piece presentations that often
characterize the Uzbek side. We are not yet at the verge of
a breakthrough in U.S.-Uzbek relations, but the tone is
getting better. This should help as we come to grips with
the really tough issues on our political agenda, namely
democratic reform and human rights.
NORLAND