GEORGIA: CONSIDERING ENERGY COOPERATION WITH

C O N F I D E N T I A L TBILISI 000070 SIPDIS E.O. 12958: DECL: 01/15/2020 TAGS: PGOV PREL ECON ENRG IR GG SUBJECT: GEORGIA: CONSIDERING ENERGY COOPERATION WITH IRAN, FM HEADS TO TEHRAN REF: A. A) 09 TBILISI 1211 ¶B. B) 09 SECSTATE 70201 ¶C. C) 09 TBILISI 1738 ¶D. D) 09 SECSTATE 132579 ¶E. E) TBILISI 0032 Classified By: Charge d'Affaires a.i. Kent Logsdon for reasons 1.4 (b) and (d). ¶1. (U) This is an action request. Please see paragraph 5. ¶2. (C) Summary: Foreign Minister Vashadze told the Charge that during an upcoming trip to Iran he intends to discuss Iran's non-recognition of the separatist territories and economic ties. He has promised a full readout upon his return. In order to maintain a neighborly relationship with Iran, he feels he must visit, especially as he has already turned down two invitations and the Iranian FM has visited Georgia twice since the Russian invasion in 2008. On energy, Vashadze responded to our demarche (reftels) that the Iranian Export Development Bank is not financing hydropower development. In separate discussions, Minister of Energy Khetaguri asked for U.S. opinions on exporting electricity to Afghanistan and Iraq through Iran. END SUMMARY. FM TO TEHRAN, FEARS IRANIAN RECOGNITION OF TERRITORIES ¶2. (SBU) In advance of his January 18-19 visit to Iran, Foreign Minister Vashadze told the Charge that he was under great pressure to visit Tehran. The FM said that the Iranian Foreign Minister had twice visited Georgia and that he had already put off two past invitations. He stressed that he wanted complete transparency with the United States on this visit, and offered an in-depth readout upon his return. His discussions with Tehran will focus on non-recognition for the separatist territories and economic ties. He added that Georgia is still facing repercussions of the Ardebili extradition to the United States in its relations with Iran -- the relationship has been strained since Georgia cooperated with the United States to extradite the convicted Iranian arms dealer. Simultaneously, he believes that the Russian-Iranian relationship has weakened significantly, due to Russian missteps, presenting an opportunity for the Georgians. IRANIAN HYDROPOWER DEVELOPMENT IN GEORGIA ¶3. (SBU) In a follow up to our demarche (reftels) on Iranian investment in the Georgian energy sector, Vashadze said the Tehran Times incorrectly reported that the Iranian Export and Development Bank was involved in financing hydropower development in Georgia. He said the deal is between a private Georgian company (with significant Iranian ties) and an Iranian commercial bank. The Charge thanked Vashadze for this information, but stressed that, regardless, the USG is not enthusiastic about energy deals involving Iranian entities. POSSIBILITY OF ELECTRICITY EXPORT TO AFGHANISTAN/IRAQ? ¶4. (C) On January 12, on the edges of a preparatory meeting for an energy conference, Minister of Energy Khetaguri mentioned to econoff an interest in exploring the possibility of exporting excess electrical power to Afghanistan and Iraq through Iran. He said that while this would require a transit payment to Iran, it would help get power to energy starved markets further afield. During the visit of Special Envoy for Eurasian Energy Morningstar (septel),Khetaguri discussed this idea further, noting that Georgian power could be purchased in Afghanistan and Iraq instead of the Iranian power that is currently being supplied to these markets. Khetaguri said that he welcomed U.S. thoughts on this idea, and added that high voltage lines connecting Georgia, Qand added that high voltage lines connecting Georgia, Azerbaijan and Iran already existed that would allow for such export. He stressed that none of the electricity would benefit Iran. Morningstar cautioned Washington has strong feelings about activity in Iran, and that there could be political ramifications to such a project. Khetaguri stressed that Georgia would not do anything without U.S. agreement and that he would welcome an official position on the idea. ¶5. (C) ACTION REQUEST: Embassy Tbilisi requests Department guidance in responding to the Minister of Energy's request for an official U.S. position on the idea of exporting Georgian electricity to markets in Afghanistan and Iraq through Iran. COMMENT ) BETWEEN A ROCK AND A HARD PLACE ¶6. (C) After a period of strained relations with the Iranians, due in large part to Georgian assistance to the U.S. on law enforcement matters, the Georgians now see the possibility of limited engagement. Georgia's fear of Iranian recognition of South Ossetia and Abkhazia are driving these discussions, as are recent Iranian statements on building economic ties with and investing in Abkhazia. In addition, electricity is rapidly becoming Georgia's biggest export, and the government is searching out new markets to diversity away from its current exports to only Russia and Turkey. Knowing this, at least in the case of hydropower, the Iranians approached the Georgians. The FM's pledge to give us a readout of his trip and the Energy Minister's clear desire to have U.S. input into ideas for energy engagement in Iran, indicate that Georgia wants to stay on the right side of this issue. However, as the Iranians push harder, recognizing Georgia's extreme concern about territorial integrity, the government will likely find itself in a more and more difficult position to balance between competing interests. LOGSDON