AIRBUS PUSHING AZERBAIJAN AND CENTRAL ASIANS TO

C O N F I D E N T I A L SECTION 01 OF 02 BAKU 000186 SIPDIS COMMERCE FOR D.STARKS EEB/CBA FOR T. GILMAN MOSCOW PASS TO FAA BRIAN STAURSETH STATE PASS TO FAA ANKARA FOR FCS - J. FLUKER E.O. 12958: DECL: 03/10/2019 TAGS: EAIR ECON EINV AJ FR NL SUBJECT: AIRBUS PUSHING AZERBAIJAN AND CENTRAL ASIANS TO "ILLEGAL" ACTION? REF: 08 BAKU 729 ¶1. (U) This is an action/ guidance request: see paragraph 8. ¶2. (C) SUMMARY: Boeing Regional Sales Director told Econoff that due to recent aggressive action by Airbus and the Government of France (GOF),Azerbaijan Airlines (AZAL) may soon cancel an order for four 737-900s (part of an August 2008 deal for eight aircraft),which he says would put AZAL in breach of contract. Boeing Sales Director warns that Airbus and the French government are taking aggressive action throughout the region "because of the incomplete transition in Washington," and he cautioned U.S. Embassies in Central Asia to be on alert for similar action by Airbus and the GOF. Boeing is prepared to pursue this case vigorously, and such a dispute would likely involve Dutch bank ABN-AMRO, which had financed the purchase. END SUMMARY. ¶3. (C) BACKGROUND: In August 2008, Boeing and Azerbaijan Airlines announced that AZAL had revised its original order for three 787 "Dreamliners" and two 737-900s and that both parties had agreed to a new order for eight aircraft: two 787s, two 767-300ERs, and four 737-900s. Of the two 767-300ERs, one would be fitted with a VIP interior for use as a Presidential aircraft, and the second would be used for Azal,s planned service to New York. END BACKGROUND. ¶4. (C) Serdar Gurz (protect),the Boeing Sales Director for Europe and Central Asia, called Econoff March 9 to discuss aggressive new actions by Airbus and the French government in the Caucasus and Central Asia. Gurz said that the GOF and Airbus believe that with the transition still incomplete in Washington (and with the position of Commerce Secretary still vacant),the time is right to move forward with provocative action to sell Airbus jets. Gurz noted that throughout his sales area (Caucasus/Central Asia) he is hearing similar reports from his clients and his contacts. ¶5. (C) In Azerbaijan, Gurz was told by AZAL President Jahangir Askerov and First Vice-President Sabir Ilyasov that although AZAL still wants to purchase the Boeing jets, Askerov is being pressured by "some people" to cancel the order for the four 737-900s and replace those jets with slightly smaller Airbus aircraft. Gurz said he was unsure who "some people" referred to, but suspected it might mean the Prime Minister Artur Rasizade. Gurz said that he told AZAL that he refused to allow this cancellation, as Boeing has already begun production of the 737s, and that such a breach of contract would be in violation of international law. Gurz noted that as a goodwill gesture, he offered to allow AZAL to delay delivery of two of the 737s for a year or two. According to Gurz, Askerov responded by asking if it could delay delivery of all four 737s indefinitely, to which Gurz said no. Gurz warned Econoff that U.S. Embassies throughout the Caucasus and Central Asia should be on watch for similar action by Airbus and the GOF, and that Dutch bank ABN-AMRO would become involved because it had signed a financing deal with AZAL, thus obligating it to pay Boeing for these aircraft. ¶6. (C) Gurz told AZAL that Boeing is prepared to pursue this case vigorously if AZAL moved forward with such a cancellation. Among other actions, Gurz said that Boeing would request State Department advocacy, that Boeing would take legal action, and that Boeing would refuse to refund the deposit AZAL paid for its aircraft (the deposit was roughly one-eighth of the purchase price). According to Gurz, ABN-AMRO is now legally responsible to pay Boeing for the jets, and AZAL is legally responsible to pay ABN-AMRO. Gurz requested that no action be taken by the Embassy ) and that all this information be kept within the USG ) until such time as he has spoken with Boeing headquarters and received guidance on how to proceed. ¶7. (C) Gurz added that U.S. Embassies in other Caucasus and Central Asian countries should be on alert for similar aggressive action by Airbus. He believes that similar pushes by the GOF could be occurring under the radar in other BAKU 00000186 002 OF 002 regional capitals. ¶8. (C) Given the large dollar amounts, and the potential for this to become a three-nation dispute (US, Netherlands, Azerbaijan),post requests guidance on how to move forward. Embassy notes that Boeing representatives have suggested that they will take this issue up with the USG in Washington later this week. DERSE