TAJIKISTAN SCENESETTER FOR A/S BLAKE'S JULY VISIT

S E C R E T SECTION 01 OF 07 DUSHANBE 000785 NOFORN SIPDIS STATE DEPARTMENT FOR SCA/CEN E.O. 12958: DECL: 6/25/2019 TAGS: EAID ECON EINV PREL PGOV PHUM TI SUBJECT: TAJIKISTAN SCENESETTER FOR A/S BLAKE'S JULY VISIT CLASSIFIED BY: TRACEY A. JACOBSON, AMBASSADOR, EXE, DOS. REASON: 1.4 (a),(b),(d) ¶1. (SBU) Embassy Dushanbe welcomes the upcoming visit of A/S Blake. Following is an overview of the key issues in Tajikistan and some talking points for your meetings with senior government officials. Overview ¶2. (C) Tajikistan has the potential to be a stabilizing influence and a contributor to economic development in Afghanistan and Central Asia, because of its huge hydropower potential, untapped mineral resources, relative (to Afghanistan) stability, and religiously moderate population. To play this role, one which is vital to our interests in Afghanistan and the region, Tajikistan must overcome the many political and economic problems which have stymied its post-independence development: bad relations with neighboring Uzbekistan, internal regional rivalries, cronyism, endemic corruption, a dysfunctional economy dominated by Soviet-era structures, dependence on remittances and illegal drug trafficking income, chronic food insecurity, and economic flight of much of the population to Russia. The malign influence of Afghan instability cannot be underestimated; traffic in its drugs undermines rule of law in Tajikistan, Tajiks naturally fear the spread of extremist ideas from Afghanistan, and militants in Afghanistan can threaten Tajik security across the long, poorly-secured border. ¶3. (C) When they look south Tajiks sense the precariousness of their situation. Chronic problems with Uzbekistan, caused by personal animosity between the presidents of each country and Uzbek opposition to Tajik plans to build dams on rivers Uzbekistan depends on for agriculture, compound their worries. Fear of Russian interference looms large in the Tajik consciousness. To ensure their future, they seek alternative partners, including the United States, China, and Iran. China is a major infrastructure donor, with $800 million in low interest loans to Tajikistan to build large road and power line projects to connect the north and south of the country, while Iran funds tunnel and hydropower projects. Economic Situation ¶4. (C) The poorest former Soviet republic, Tajikistan faces serious challenges. It is the second most mountainous country in the world, with earthquakes, floods, droughts, locust infestations, and extreme weather. Parts of the country are frequently cut off by snow, landslides, and avalanches. External links must pass through obstructive Uzbekistan, unstable Afghanistan, or over the rough and remote passes to western China or Kyrgyzstan. ¶5. (C) Tajikistan's only real industries are aluminum and hydroelectricity. The Tajik Aluminum Company (Talco) accounts for most of Tajikistan's exports and should be a major source of income. However, its revenues go through a secretive offshore company controlled by the President, and the Tajik state sees little income from the plant. Talco consumes up to half the country's electricity production, contributing to major shortages and suffering for other consumers in the winter and spring when water levels are low, disrupting other economic activities, and deterring investment. ¶6. (C) Electricity is sold at prices well below cost, draining state coffers and encouraging waste. Electrical infrastructure is crumbling. Tajikistan's leadership sinks some of its limited resources into the massive Rogun hydropower station, begun in the Soviet era but delayed by the civil war, ownership disputes with Russia, and opposition by downstream Uzbekistan. The Tajik government has been forced to reduce project financing in recent DUSHANBE 00000785 002 OF 007 months due to the global recession. Smaller hydropower stations built with foreign financing have their own problems. The completion date for the partly operational Sangtuda-1 power station continues to recede as Russian and Tajik joint operators squabble over payments, while the Sangtuda-2 station financed by Iran is several years from completion. ¶7. (C) Agriculture is a major domestic economic sector. Cotton production dominates, running on command-economy principles for the benefit of a few politically connected investors; they sell inputs to farmers, whom authorities then force to grow cotton to sell back to investors at below-market rates. Cotton's profitability has declined because of lack of investment and low world cotton prices. In recent years, farmers have gone over $500 million into debt. Meanwhile, little food is grown and most food is imported. ¶8. (C) Arguably the greatest obstacle to improving the economy is resistance to reform at all levels of Tajikistan's government. From the President down to the policeman on the street, government is characterized by cronyism and corruption. As one foreign ambassador summed up, President Rahmon prefers to control 90% of a ten-dollar pie rather than 30% of a hundred-dollar pie. He and his family have their hands in the country's major businesses, including the largest bank. Falling Out with Donors ¶9. (C) The government's support to the unprofitable cotton sector led to a crisis in relations with donors. In December 2007, Tajikistan's National Bank admitted that it had hidden hundreds of millions of dollars in loans and guarantees to cotton investors, violating the terms of its IMF program. The IMF demanded early repayment of some debt, an audit of the National Bank, and other reforms before renewing assistance. The audit, which Tajik state and private entities obstructed, revealed that in the past five years the National Bank had loaned or guaranteed over $1 billion to cotton interests, over half of which was never repaid. The head of the National Bank, Murodali Alimardon, had business ties to the cotton investors his bank was supporting. To placate donors, Rahmon removed him from the Bank - promoting him to Deputy Prime Minister. Despite the audit results, in May the IMF board extended a further $116 million loan to Tajikistan; the United States was the only IMF member to vote against the renewed assistance, which infuriated the Tajik government. ¶10. (C) The IMF has disbursed the first $40 million in assistance. Before it releases the next tranche of $30 million in October, a team will review the country's macroeconomic performance, progress in reforming the National Bank and fiscal oversight in general. Several reforms have been announced: a stronger supervisory board at the Bank with outside members, new legislation barring the Bank from making fiscal policy, conflict-of-interest regulations, and a commitment to disengage from cotton-sector financing. However, enactment is a far cry from implementation. Though the IMF is willing to continue working with Tajikistan, the government needs to show real progress by September. ¶11. (C) Tajikistan must diversify away from cotton, and the government must stop telling farmers what to grow. The recent comprehensive cotton debt forgiveness plan that includes renewed efforts to allow farmers the freedom to choose what crops to grow is a positive step. However, local officials ignored previous "freedom to farm" decrees and the President's decree banning forcing university students to pick cotton. Students who refuse have been expelled from university. Though this year a few officials were reprimanded for using forced student labor, it remains to be seen whether the government has the will to DUSHANBE 00000785 003 OF 007 make significant changes. Economic lifeline ¶12. (C) The most important economic lifeline for most Tajiks is the remittances from some million compatriots working abroad, mainly in Russia. The money they sent home was equivalent to over 50 percent of GDP last year, and literally keeps rural communities alive. Though mostly adult men go abroad, recently we have seen younger labor migrants and significant numbers of women. Parts of the Tajik countryside have lost their entire productive population. Remittances grew dramatically in the past six years, along with the Russian economy, but due to the economic crisis they have fallen 40% this year. This compounds the effects of the winter of 2007-2008, the coldest in decades, which destroyed food supplies, and forced many to sell animals or tools to make ends meet. Remittances fund imports of food and goods from abroad, so the decline in remittances has reduced government revenues, which depend largely on import duties. Government agencies have orders to cut their budgets by 20%. Donors have insisted that social sector spending be maintained. Talking point: What concrete steps have you taken on the conditionality for the IMF loan from the Poverty Reduction and Growth Facility (PRGF) in advance of the mission in September and the board vote in October? What can you say about steps in response to National Bank/TALCO audits? Politics and Human Rights ¶13. (C) Despite declaring he is a democrat, Rahmon has reduced the ability of opposition political parties to operate, and made little progress on reforming election laws in the runup to the 2010 parliamentary elections. The government subjects civil society organizations to onerous registration requirements and inspections, and has increased efforts to curb the activities of non-traditional religious groups, Islamic or otherwise. Our advice that this will only serve to radicalize religious minorities falls on deaf ears. The President appointed a human rights Ombudsman recently, but the office is not independent of him, nor does it have resources. The Ombudsman has already asked donors to finance his operations. ¶14. (S) Having gained power in the civil war, Rahmon distrusts political pluralism and economic liberalism, and focuses on increasing his control and undermining potential rivals. The civil war ended with a power sharing arrangement between Rahmon's government and the leaders of various parts of the United Tajik Opposition; Rahmon gradually reneged on that deal, forcing oppositionists out of government, into prison, or out of the country. In the last 18 months he has faced challenges to his authority from regional strongmen in the Rasht Valley, Kulyob, and Badakhshan, putting them down with a mixture of force and largesse. Regional strongmen have some autonomy, and control official and unofficial armed groups. Since May security forces have been watching, but not engaging, former Tajik opposition leaders supported by foreign fighters in the Tavildara and Darvaz districts. ¶15. (C) Parliamentary elections in February 2010 are unlikely to lead to greater political openness. Parliamentary opposition is weak - 15 of the 62 members of the lower house of parliament are not ruling party, and some of these are independent in name only. Parliament acts as a rubber stamp, barely discussing important legislation such as the national budget. The one real opposition party, the Islamic Revival Party, has not actively opposed the new law on religion, is internally divided, and could lose its two seats in the next election. The government DUSHANBE 00000785 004 OF 007 forced the National Democratic Institute out of the country in 2008, preventing it from engaging in political party training. Talking Point: The OSCE and IFES have sponsored roundtables on electoral reform and made a series of recommendations, what steps do you plan to take in advance of next year's parliamentary elections? Security Cooperation ¶16. (C) Because of Tajikistan's fear that instability in Afghanistan could spread north, counterterrorism, border security and counternarcotics are areas where the Tajiks are most enthusiastic about cooperation. Tajikistan joined the Global Peacekeeping Operations Initiative, and with our help is committed to fielding a peacekeeping company by 2010. We help train Border Guards and National Guard forces, and provide our International Military Education and Training, Foreign Military Financing, and military-to-military programs. ¶17. (C) Tajikistan quickly agreed to our request to allow transit of non-lethal supplies to our forces in Afghanistan, and is eager to see actual shipments begin. The Tajiks see this as a way to show their support on Afghanistan. In return the Tajiks routinely request more assistance for infrastructure in Tajikistan, such as dams, roads and railroads. ¶18. (C) Narcotics cooperation has mixed results. The United States largely funds the Drug Control Agency, whose successful seizure rate has made it a model for other countries in the region. However, the Tajiks have been reluctant to go beyond simple seizures to pursue criminal networks and higher-level targets, possibly because of the political connections of higher level drug traffickers. ¶19. (S/NF) Counterterrorism cooperation is vital, and is taking on a new urgency in 2009 with the increased Taliban presence in Northern Afghanistan and recent incursions by foreign fighters into Tajikistan. However, the Anti-Terrorism Assistance (ATA) program's budget was reduced in the past two years, limiting us to classroom training. ATA programs increase the Tajiks' operational capabilities and give us vital liaison and information opportunities. CENTCOM's Counter-Narcotics and Terrorism training has been reduced from four annual engagements to two, at a time when Tajikistan has more frequent counterterrorism operations. ¶20. (C) Cross border cooperation has been slow to gain Tajik acceptance. The Tajik government has a distinct aversion to cooperation with Afghanistan, viewing all Afghans as drug smugglers and security risks. This view has slowed the full use of the U.S.-funded bridge at Nizhny Pyanj, and impedes programs such as a joint border security training center. A program to train Afghan National Army officers at the Tajik Defense Academy did not go as planned as the training offered did not match the level of the Afghan officers, and the Tajiks then ended the program early. Talking Point: We want to expand counter-narcotics cooperation, and see real opportunities for Tajikistan to help train/improve Afghan border security forces. You discussed this nearly two years ago with A/S Boucher. How can we move this forward? Regional Integration DUSHANBE 00000785 005 OF 007 ¶21. (C) The donor community is pushing for regional energy market integration, with the construction of power lines that will allow Tajikistan and Kyrgyzstan to sell their surplus summer electricity output to power-starved Afghanistan. A 220 kw line from Tajikistan to Afghanistan is under construction now with Asian Development Bank financing, and will be finished in late 2010. The larger CASA-1000 power line project to connect Kyrgyzstan through Tajikistan and Afghanistan to Pakistan has not gotten off the ground. According to the ADB, due to the global financial crisis its focus has shifted to near term on poverty reduction projects. TIP Troubles ¶22. (C) Tajikistan made some progress in fighting Trafficking in Persons (TIP) in the past year, punishing some local officials for forcing students to pick cotton, and increasing the number of trafficking convictions. They made no progress on protection of victims or investigating allegations of abuse of victims by officials. Tajikistan barely escaped a downgrade to Tier 3, and we are now discussing with the government an action plan to produce serious improvement in Tajikistan's anti-TIP efforts. Talking Point: It was thanks to the efforts of Ambassador and Embassy that Tajikistan was not downgraded to Tier 3 on TIP this year. To avoid downgrading next year we need a serious improvement in arrests, prosecutions and convictions. The time for working groups and conferences is past. Who in the government has the power to attack this issue? Assistance Growing ¶23. (C) Until FY 2008 Tajikistan had a multi-year food aid program that showed significant results against food insecurity in some of Tajikistan's most at-risk regions. We provided food to the poorest and taught agricultural techniques and food preservation methods to have a long term impact on the communities. ¶24. (C) U.S. assistance to Tajikistan stands to grow significantly to $52 million in FY 2010, from $30 million in FY ¶2009. The main growth is in economic areas - agriculture, trade, and private sector initiatives to compensate for the loss of the much-needed food security programming in FY 2008. Our programs help give farmers strong land use rights, improve the business environment, and facilitate trade. Programs establishing water users associations are very successful at building sustainable local irrigation schemes and raising incomes as much as 200 percent. Health and Education ¶25. (C) The education and public health systems have declined since the collapse of the Soviet Union. Health and education deficiencies are so acute they imperil our progress in other areas. Our programs work to improve health policies, systems and services, focusing on safe motherhood, newborns and management of childhood illnesses, HIV/AIDS, and tuberculosis control. Our education programs focus on teacher training, education finance, national curriculum, student performance assessment, and school governance. DUSHANBE 00000785 006 OF 007 Public Diplomacy ¶26. (C) Public diplomacy efforts in Tajikistan face major challenges - falling literacy, little knowledge of English, and Russian "black propaganda" that portrays the United States as a destabilizing influence bent on importing radical Islamic and Christian ideas, undermining traditional relationships, even manipulating the drug trade for political gain. Russia sponsors the best university in the country, so the brightest students look to Russia as a model. Our exchange and visitor programs are vital to expand the horizons of future Tajik leaders beyond a Russo-centric mindset. Our programs have great impact for their size, but are far too small to match our interests in this region. Four imams who visited the United States in May were amazed by the religious freedom there. On the down side, these same imams refused to visit the embassy to watch President Obama's June 4 speech to the global Muslim community. Visits by American Islamic clerics to Tajikistan could help build the bridges of understanding to open the minds of Tajik Muslims to our message. ¶27. (C) Without doubling or tripling the State Department budget for English language teaching in Tajikistan, the embassy will soon face a crisis in finding students to fill our already small quota of high school and university exchange programs, leaving Tajik youth even more isolated. Access Microscholarships provide great benefit to underprivileged, talented students but the demand far exceeds the supply of six programs of 45 students each. We have two English Language Fellows doing professional English teacher training, but three more co-located in cities with American Corners could enhance the skills of more teachers. ¶28. (C) A Peace Corps program that provided English language training would help keep Tajiks from falling further behind. President Rahmon once asked to have Peace Corps in Tajikistan, just as all other Central Asian states have, but for budgetary reasons Washington could not respond. With a new administration which favors expanding Peace Corps, this would be a good time to push for a mission here. Peace Corps volunteers could address pressing development needs at the local level, and would expose many more Tajiks to American values. Talking Point - We have a new administration and hope to have a new Peace Corps director soon. We can bring 50 native speakers of English to serve as resources for your schools in all parts of the country, but we need a new appeal from you to successfully lobby for a program in Tajikistan. Embassy Resources ¶29. (C) Embassy resources have not kept up with our expanding interests here. In the past five years embassy staff increased 500%, embassy space increased 250%, but our ICASS budget grew only 24%. DEA, USAID, and ODC need to add positions to properly monitor their expanding programs, but Ambassador imposed a moratorium on further American positions because of a lack of management staff and resources to support them. This year we have gained an HRO, and received approval for a second GSO, but are still seeking approval for an additional IMS and a significant increase to our ICASS base. In the meantime, tens of millions of dollars of programming is at risk because of inadequate American oversight, caused directly by inadequate management resources. ¶30. (C) We have serious recruitment and retention problems with our locally engaged staff. We are not only competing with DUSHANBE 00000785 007 OF 007 businesses and companies in Tajikistan, but with opportunities abroad as increasing numbers of highly educated Tajiks leave because of high inflation and decreasing opportunities here. In 2008 local staff received a 12.5 % pay increase in an off-cycle review; we hope for a follow on increase in 2009 on-cycle review. Continued pay increases for FSN staff will be vital to allow us to compete with other organizations in Dushanbe. The embassy also needs resources to fix inadequate facilities; we have no on-site warehouse, workshops, or motorpool; these facilities are located in a condemned property several miles away, creating oversight problems and additional expenses. JACOBSON