TAKING A STAND AGAINST THE ROGHUN EXTORTION

C O N F I D E N T I A L SECTION 01 OF 02 DUSHANBE 000055

SIPDIS

TREASURY PLEASE PASS LAWRENCE NORTON

E.O. 12958: DECL: 1/13/2020
TAGS: EFIN PHUM ENRG EAID IMF TI
SUBJECT: TAKING A STAND AGAINST THE ROGHUN EXTORTION

REF: DUSHANBE 052

CLASSIFIED BY: Kenneth Gross, Ambassador, Exec, DOS.
REASON: 1.4 (b),(d)
CONFIDENTIAL

PROG 01/13/2010

AMB: KGROSS

POLECON: DKRONENFELD

POLECON: MPURL DCM: NQUAST, USAID: JLEHRER

POLECON



AMEMBASSY DUSHANBE

SECSTATE WASHDC

INFO CIS COLLECTIVE

AMEMBASSY KABUL

AMEMBASSY BEIJING

CIA

DIA







E.O. 12958: DECLASSIFY ON 01/14/2020

Classified by Ambassador Ken Gross, reasons 1.4 (b) and (d)




1. (C) SUMMARY: International Monetary Fund (IMF) Resident
Representative Luc Moers (protect) said the government's
campaign to extort money from the population for the
construction of the Roghun hydroelectric dam appeared to violate
the terms of the IMF's current assistance to Tajikistan. He
said, however, that his view may be at odds with that of IMF
headquarters in Washington, who appear to be adopting a more
conciliatory tone with the government. A high-level IMF team
will be here in early February to assess the government's
progress. This represents an important opportunity for the
United States and other IMF board members to express their
serious concerns about the government's behavior and to urge the
IMF to hold the government accountable to its agreements. Post
will work carefully with our diplomatic colleagues to present a
forceful and unitary message to the IMF and to the government of
Tajikistan. END SUMMARY



IMF RESREP SAYS ROGHUN CAMPAIGN MAY VIOLATE LOAN AGREEMENT




2. (C) Econoff met with IMF Resident Representative Luc Moers on
January 13 to discuss the government's recent campaign to extort
and intimidate the Tajik population into buying shares in the
Roghun hydropower project (reftel). Emphasizing that he was
speaking personally and not in his capacity as Resident
Representative, Moers said the "fundraising" campaign was not
only morally reprehensible but appeared to violate the
government's agreement with the IMF under the Poverty Reduction
and Growth Facility (PRGF) signed last year. Under the PRGF,
the IMF has agreed to provide the government of Tajikistan $116
million in preferential loans over three years. The first
tranche of $40 million was disbursed last year; another tranche
of $30 million will be considered in the coming months.




3. (C) Moers said the Roghun drive, in which Tajik citizens from
all walks of life are being forced to buy shares in Roghun,
appeared to break several provisions of the PRGF. First, the
IMF and other donors have required the government to maintain
minimum social sector funding levels -- including education,
health, and pensions -- as a condition of assistance. Since the

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government is forcing teachers, doctors, and pensioners to buy
shares in Roghun, often well in excess of their monthly
salaries, actual social sector spending is certainly well below
agreed targets.




4. (C) Second, the government of Tajikistan committed to
limiting Roghun funding to $140 million in 2010. (Moers said
the IMF only reluctantly agreed to this level, which it believed
was too high given Tajikistan's pressing needs in other
sectors.) The Roghun funding drive has reportedly raised well
over $100 million in its first few days alone. If this amount
is added to the budget, it far exceeds the agreed amount.
Third, additional expenditures on Roghun would violate the
government's overall commitment to maintaining a particular
budget spending envelope. Fourth, the government has agreed to
try to maintain certain macroeconomic conditions. The forcible
extraction of massive amounts of cash from the already
impoverished population might have severe consequences on this
condition, including on inflation, exchange rates, and balance
of payments.



IMF HEADQUARTERS HAS SOFTER VIEW




5. (C) Moers said he had carefully briefed his superiors at IMF
headquarters in Washington about the severity of the Roghun
issue, but they appear have a relatively conciliatory attitude
toward the government's actions. For one thing, IMF
headquarters is not questioning the morality of the Roghun
campaign, even though Moers said it clearly constitutes a
regressive, ad hoc tax falling disproportionately on the poor.
IMF Washington is focusing on a few narrow macroeconomic
concerns. Even on these issues, Moers said, they are showing an
early inclination to work with the government. In particular,
they say if the government could demonstrate the money it is
collecting for Roghun would be kept in savings until next year,
they would not have violated their spending envelope
restrictions. Provided they have met other macroeconomic
benchmarks for 2009, the PRGF funding could continue.




6. (C) COMMENT: The upcoming visit of the IMF team represents
an important opportunity to pressure the government to alter its
destructive Roghun strategy. In addition to the socio-economic
and macro-economic issues raised by the Roghun campaign, it is
also a step backwards in budget transparency. The government is
collecting non-tax revenue in a separate off-budget account with
virtually no accountability. The government cares about the
PRGF, and even little hiccups -- such the U.S. "no" vote on the
package last year -- get its attention. To stiffen the IMF's
spine, however, the international community, and particularly
IMF board members, will have to be vocal, insistent, and unified
in voicing their concerns here, in their capitals, and in
Washington. We believe we are pushing on an open door: in
informal discussions our European counterparts have been as
aghast as we are at the Roghun campaign. The question is
whether their capitals will pay heed. END COMMENT
GROSS