UZBEKISTAN: ECONOMY MINISTER SEEKS U.S.

C O N F I D E N T I A L TASHKENT 000453 SIPDIS SIPDIS DEPT FOR SCA/CEN E.O. 12958: DECL: 04/16/2018 TAGS: ECON PREL ECIN EINV ENGR EAGR PGOV UZ SUBJECT: UZBEKISTAN: ECONOMY MINISTER SEEKS U.S. INVESTMENT, BUT DOWNPLAYS LABOR PROBLEMS IN THE COTTON SECTOR Classified By: GSO Josh Rubin for reasons 1.4 (b, d). ¶1. (C) Summary: On March 28, in a long and sometimes contentious meeting, Minister of Foreign Economic Relations Elyor Ganiev laid out his case for Uzbekistan's strong economic performance and promising investment prospects. He told A/DAS Pamela Spratlen that Uzbekistan is currently experiencing a period of strong economic growth. Ganiev also praised Trade and Investment Framework Agreement (TIFA) and the Uzbek/American Chamber of Commerce as useful tools for facilitating the relationship. He grew defensive on the subjects of regional electricity and child labor in the cotton sector. End summary. Meeting with Minister of Foreign Economic Relations Ganiev -------------- -------------- ¶2. (C) Minister Ganiev opened with an extended brief on Uzbekistan's current economic prospects based on healthy growth of nearly 9 percent annually. The United States, he noted, is playing a significant role in this economic expansion and he highlighted as successes Uzbekistan's commercial partnerships with General Motors and Boeing. (Note: Neither company maintains any direct foreign investment in Uzbekistan. End note). A/DAS Spratlen responded that she also is encouraged by the success stories of large companies, but noted that fewer American businesses currently operate in Uzbekistan than was the case when she last visited about a year and a half ago. The U.S. wants a healthy economic relationship as part of a broader bilateral relationship. Cases such as the forced bankruptcy of Newmont Mining and takeover of cell phone operator Coscom damaged the country's image. These cases had been resolved, but the examples created a chilling effect on bringing U.S. business in the country. Further, corruption and lack of rule of law present difficulties for companies in operating profitably. Uzbekistan, she said, must create a transparent framework in which businesses can operate if it hopes to attract additional American commerce and achieve its true potential. ¶3. (C) Spratlen mentioned, as an example, that Chevron-Texaco is still awaiting a GOU response regarding supply problems. Ganiev responded that he was unaware of this situation and would look into it. (Note: At a breakfast meeting with U.S. firms earlier in the day, Chevron expressed frustrations with its own efforts to address operational problems in its small refinery and asked that the issue be raised with Ganiev. End note.) ¶4. (C) A/DAS Spratlen then asked what steps Uzbekistan is taking to prevent a situation similar to what occurred in Kyrgyzstan and Tajikistan this winter when severe temperatures crippled capital cities. Ganiev responded sharply that Uzbekistan suffered the same cold and frost as other countries in the region but had a responsible energy policy in place that prevented the catastrophe that befell its neighbors. Kyrgyzstan and Tajikistan, Ganiev suggested, are completely misusing their natural resources. Notably, he said, they are not living up to the agreement by which they supply water to Uzbekistan in the summer for irrigation purposes, while Uzbekistan provides fuel to those countries in the winter months to generate hydroelectricity. Ganiev complained that Kyrgyzstan is several years delinquent in its payments for Uzbek gas and bristled when he talked about a proposed initiative by which Uzbekistan's upstream neighbors would levy taxes on the water entering Uzbekistan. ¶5. (C) Ganiev grew still more passionate when discussing the use of children in the cotton industry. He vehemently refuted the idea that children under the age of 15 are used as labor in the cotton industry and suggested that these allegations from international non-government organizations and the international press are initiated by competitors who fear Uzbekistan's superior, organic, and pesticide-free cotton. Uzbek legislation, he continued, strictly prohibits the use of child labor, as do the international agreements to which Uzbekistan is a signatory. Uzbekistan, he claimed, takes these accusations very seriously and has an ombudsman and general prosecutor who investigate all allegations in this sphere. Ganiev, however, contradicted himself several times during this discourse by saying that there is nothing wrong with a situation where a farmer's child helps him in the field. Ganiev also said that he, himself, had participated in this ritual between the ages of seven and 20. Comment: -------------- ¶6. (C) Ganiev is an ambivalent reformer, a former foreign minister who wants more foreign investment in Uzbekistan. His reaction to international criticism about child labor in the cotton sector shows his sensitivity to Uzbekistan's standing and portrayal in the international press. His broadsides about the performance of other Central Asian states over winter preparations reflects the larger irritations in Uzbekistan's bilateral relations with neighbors, especially Tajikistan. Ganiev has defended the country's economic performance, but he has not been willing to take reform steps to address concerns repeatedly expressed by U.S. and other interlocutors. Nonetheless, he sometimes gives lip service to reform and has supported Uzbek participation in the TIFA. ¶7. (U) A/DAS Spratlen has cleared this message. NORLAND