AZERBAIJAN: MOED READY TO RE-ENGAGE ON NEXT ROUND

UNCLAS SECTION 01 OF 02 BAKU 000015 SIPDIS COMMERCE FOR D.STARKS EEB/CBA FOR T.GILMAN DEPT PLEASE PASS TO USTR FOR C. MORROW AND P. BURKHEAD E.O. 12958: N/A TAGS: EINV ETRD BTIO EFIN KCOR KIPR AJ TU GG SUBJECT: AZERBAIJAN: MOED READY TO RE-ENGAGE ON NEXT ROUND OF ECONOMIC PARTNERSHIP COMMISSION BAKU 00000015 001.2 OF 002 ¶1. (U) SUMMARY: The U.S. - Azerbaijan Economic Partnership Commission last met in November 2008; prior to that, meetings took place roughly annually, alternating between Baku and Washington. These meetings were successful in sending a message about U.S. commitment to a more transparent business climate, development of a free market, and the importance of fighting corruption and money laundering. We believe a meeting under the new administration would be equally successful. GOAJ officials are willing to discuss these topics, but the absence of a U.S. Ambassador to Azerbaijan has made it difficult for the Embassy to deliver this message to high-level officials. A meeting of the EPC would give us a renewed opportunity to send this key message. End Summary. ¶2. (U) The Charge d'Affaires met with Deputy Minister of Economic Development Sevinj Hasanova on January 5, 2010. Hasanova expressed satisfaction with USAID assistance programs in the economic sphere and said that she would like to expand her Ministry's engagement with the USG and is looking for ways to do that. She expressed an interest in doing what she can to re-energize Azerbaijan's WTO accession effort, in conjunction with the Ministry of Foreign Affairs, and pledged to re-start her Ministry's participation in the Economic Partnership Commission (EPC). Hasanova, besides highlighting WTO, noted that President Aliyev has designated 2010 as the "Year of Ecology" in Azerbaijan, and asked for USG assistance in environmental initiatives and sustainable development. Embassy agreed that such an initiative would be constructive, and noted that another round of the EPC this winter or spring could be the single best way for President Obama's new international economic team to reach out to high-level actors in the GOAJ. ¶3. (U) Embassy Baku has had few high-level economic contacts with the GOAJ in recent months, with the exception of Treasury A/S Cohen's visit last fall. Moreover, the absence of a U.S. Ambassador to Azerbaijan since July has left policymakers here wondering about the commitment of the USG to Azerbaijan and its economic development. Embassy believes that a renewed EPC, hosted by the Minister of Finance in �A;Baku, would give us an important opportunity to revive those contacts and to stress our commitment to encouraging Azerbaijan's free-market development, improving its business climate, strengthening its fight against money laundering and corruption, and re-energizing its WTO accession efforts. These meetings, which have previously taken place in Baku and Washington, were successful in sending that message during the previous administration; we believe they can be equally successful under the current administration. ¶4. (U) Azerbaijan's economy continues to be dominated by the energy sector, with one million barrels of oil per day exported through the Baku-Tbilisi-Ceyhan pipeline and natural gas production set to surge. Currency reserves here have reached about USD 20 billion, with the State Oil Fund (SOFAZ) holding around USD 13 billion, essentially in a sovereign wealth fund. 2009 economic growth, despite a worldwide financial crisis, held at 9 per cent, with inflation reduced to 2 per cent. Real incomes in Azerbaijan last year expanded by 7 per cent, according to President Aliyev. U.S companies are active in Azerbaijan's energy sector, with the oil majors invested in offshore activity and services companies adding support. Additionally, U.S. companies have signed agreements to construct Azerbaijan's first telecommunications satellite and to build segments of the East-West Highway to Georgia. Azerbaijan also purchases construction services and agricultural equipment from U.S. firms. ¶5. (U) GOAJ participation in the EPC would include the Ministry of Finance, Ministry of Economic Development and the State Oil Fund, and would likely also be attended by the Central Bank, Ministry of Energy, Ministry of Agriculture and Ministry of Communications. We expect the GOAJ would also use the meeting as an opportunity to share the President's regional development plan and non-energy sectors diversification strategy, as well as to raise Jackson-Vanik, FSA Section 907, MCC, and as always, all things Nagorno-Karabakh. ¶6. (U) Our goals for the EPC would include further developing and targeting our economic assistance programs; addressing corruption and the non-transparent nature of the business BAKU 00000015 002.2 OF 002 climate; advancing our work with the Central Bank and Financial Monitoring Unit on anti-money laundering and compliance with the Financial Action Task Force; promoting U.S. trade and development, with an emphasis on explaining Export-Import Bank and Overseas Private Investment Corporation financing schemes; discussing regional oil and gas developments; and advocating renewable/alternative energy programs, including recycling. GARVERICK