VZCZCXRO0835
OO RUEHDBU
DE RUEHKB #0369/01 0661338
ZNY SSSSS ZZH
O 071338Z MAR 06
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9816
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 1524
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/CDR USEUCOM VAIHINGEN GE PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY
RUEHNO/USMISSION USNATO PRIORITY 0404

S E C R E T SECTION 01 OF 03 BAKU 000369 
 
SIPDIS 
 
SIPDIS 
 
FOR EUR A/S FRIED FROM AMBASSADOR HARNISH 
 
E.O. 12958: DECL: 03/08/2021 
TAGS: PREL PGOV ENRG MARR KDEM PHUM IR RU AM AJ
SUBJECT: SCENESETTER FOR A/S FRIED'S MARCH 13-14 TRIP TO 
AZERBAIJAN 
 
REF: BAKU 347 
 
Classified By: Ambassador Reno L. Harnish III per 1.4 (b,d). 
 
¶1.  (S) Summary:  We warmly welcome your March 13-14 visit 
and view it as much-needed opportunity to engage the highest 
levels of the GOAJ.  Azerbaijan could play a critical role in 
advancing U.S. interests in energy security and a useful one 
in the resolution of the nuclear threat posed by Iran.  It 
also could greatly advance the U.S. security posture in the 
region, by upgrading Nasosnoya Air Base to NATO standards and 
accommodating our average of 15 gas-and-go stops per month 
there, rather than at Heydar Aliyev Airport.  Enhanced GOAJ 
efforts on Caspian Sea WMD interdiction efforts -- 
particularly through bringing Azerbaijan's Navy into existing 
programs -- are critical as well.  Further GOAJ progress on 
democracy, reform and human rights remain key to our 
long-term interests in Azerbaijan.  We also are at a critical 
stage in identifying property for a New Embassy Compound 
(NEC) and your raising the issue briefly with the President 
would be extremely useful.  The unresolved Nagorno-Karabakh 
conflict looms large over all of these issues, but cannot 
overshadow our other pressing bilateral issues.  End summary. 
 
 
ALIYEV'S MINDSET 
---------------- 
 
¶2.  (C) In the wake of Western criticism of Azerbaijan's 
November parliamentary elections, President Aliyev worries 
that he may be rejected as a strategic partner by the West. 
Beleaguered by non-stop, high-level pressures and attentions 
from Russia and Iran, Aliyev seeks similar attention from the 
West, and particularly a sign that the U.S. is ready to 
engage further to help protect Azerbaijan's independence and 
security vis-a-vis its powerful neighbors.  Convincing Aliyev 
of the importance that we attach to the bilateral 
relationship will be key to securing U.S. objectives.  Your 
visit will be viewed by Aliyev as welcome evidence of our 
interest in Azerbaijan. 
 
ENERGY SECURITY 
--------------- 
 
¶3.  (C) Azerbaijan could play a critical role in breaking the 
Russian grip on Europe's natural gas markets.  With up to 8 
billion cubic meters per year coming on-line through Phase I 
of the Shah Deniz field, Azerbaijan by 2008 will become a 
major exporter to Turkey.  Recent discoveries indicate that 
Shah Deniz could hold up to one trillion cubic meters, 
meaning that further development of the field will not only 
break Russia's energy grip on Georgia and Azerbaijan, but 
also will significantly diversify Europe's supplies. 
Azerbaijan will need help in developing the additional 
infrastructure needed to deliver Shah Deniz gas to European 
markets (current SCP capacity is not sufficient and new large 
pipeline projects would be necessary beyond Turkey). 
Azerbaijan will also seek our help in working with interested 
companies. 
 
¶4.  (C) Azerbaijan also could play a greater role as a 
transit country for Caspian energy resources.  Azerbaijan 
already has two deals underway to bring Kazakhstan's oil into 
BTC by ship.  Separately, Azerbaijan has been negotiating an 
intergovernmental agreement (IGA) with Kazakhstan for three 
years.  Our help may be necessary to close the deal.  With an 
IGA, the U.S. could be assured that Kazakh oil transits 
through the East-West energy corridor, rather than Russian or 
Iranian routes.  Azerbaijan also seeks our help in convincing 
Turkmenistan of the merits of a new, trans-Caspian gas 
pipeline, and will look to the U.S. to help secure financing 
for such a project.  President Aliyev raised both of these 
energy issues with me on March 2 (ref) and will look to you 
for an expanded vision of U.S. energy policy. 
 
IRAN 
---- 
 
¶5.  (C) The diplomatic standoff over Iran's nuclear energy 
programs worries most Azerbaijanis including President 
Aliyev.  Azerbaijan is both beholden to and threatened by 
Iran, dependent on Iran for access to the isolated Nakhchivan 
exclave and challenged continuously by Iran over the disputed 
 
BAKU 00000369  002 OF 003 
 
 
Caspian Sea boundaries.  For this reason, Azerbaijan walks a 
very fine line on Iran, never publicly condemning its nuclear 
programs while at the same time privately telling us that of 
course it wants to see the programs ended via diplomatic 
means.  Azerbaijan fears that it would be caught in the 
middle of a confrontation over Iran, inadvertently suffering 
from sanctions (as sanctions would leave Nakhchivan without 
energy supplies and ties to mainland Azerbaijan), potentially 
overrun by ethnic Azeri refugees and pressured by the West to 
allow military operations against Iran from Azerbaijani 
territory.  Aliyev told me that he welcomes a high-level 
dialogue with the U.S. on Iran.  He will look to your visit 
as an opportunity for a frank exchange of views and 
intentions, particularly the possible role for Azerbaijan in 
the Secretary's new Iran democracy initiative. 
 
BILATERAL SECURITY ISSUES 
------------------------- 
 
¶6.  (S) We need to advance the already strong bilateral 
security relationship.  Azerbaijan is a critical partner in 
the war against terrorism, providing unlimited overflight 
clearances and regular gas and go services for coalition 
planes bound for Afghanistan and Iraq.  Military flight 
volumes are increasing with over 30 landings since the 
beginning of the year.  We ultimately will need to switch 
from our current operations at Baku's Heydar Aliyev 
International Airport to a more secure and discreet location 
at the Nasosnoya Air Base outside Baku.  While Azerbaijan has 
agreed to upgrade the base to make it NATO compatible as part 
of its IPAP agreement, high-level discussion of this issue 
will be key to actually making this happen.  U.S. policy 
toward Iran likely will factor into Aliyev's thoughts on this 
issue. 
 
¶7.  (C) In order to move forward in our next stage of Caspian 
security programs, the GOAJ must bring its navy into WMD 
interdiction programs supported by the U.S. CTR program.  I 
raised this issue with President Aliyev on March 2 and he 
appeared to understand the issue.  However, reinforcement of 
this message, as well as further elaboration of our vision 
for Caspian security programs, would be useful.  President 
Aliyev continues to receive pressure from Russia on CASFOR -- 
most recently from President Putin during his February 21-22 
visit to Baku -- and a reaffirmation by you of our commitment 
to help Azerbaijan secure its own borders would be very much 
appreciated by Aliyev. 
 
DEMOCRACY AND REFORM 
-------------------- 
 
¶8.  (C) Continued Azerbaijani progress on democracy and 
reform is central to our long-term interest in stability in 
this region.  Azerbaijan will have parliamentary rerun 
election on May 13, for the ten seats that the Central 
Election Commission and Constitutional Court overturned. 
President Aliyev has pledged that the elections will be run 
in a free and transparent fashion and we believe that he 
intends to keep that pledge.  The elections so far have been 
of little interest to the general public, largely because of 
election fatigue and the lack of attention from several 
opposition parties.  However, with an average of 10 
candidates per seat, interesting races could develop if 
independent candidates decide to make a serious run and the 
GOAJ allows campaigns to develop unimpeded.  Looking beyond 
the rerun elections, the real challenge for democracy in 
Azerbaijan is to build independent institutions.  In spite of 
the flawed November elections, the new parliament is showing 
some encouraging signs of developing a backbone and 
independent agenda.  Several members of parliament -- 
including from the ruling party -- have shown an interest in 
developing an oversight capacity and becoming more responsive 
to their constituents through the development of U.S.-funded 
constituency offices.  A discussion with reform-minded 
parliamentarians outlining U.S. democracy goals would boost 
their efforts. 
 
¶9.  (C) Renewed efforts on Azerbaijan's stalled economic 
reform program also are needed. New Minister of Economic 
Development Heydar Babayev is a close friend of and advisor 
to the President, and a key interlocutor on reform issues. 
Your meting will reinforce the message we have been 
delvering to key economic interlocutors for more than 
 
BAKU 00000369  003 OF 003 
 
 
year.  In addition to the need for a clearly articulated 
budget process and macroeconomic policy targeted at 
preventing the onset of Dutch disease, the GOAJ also needs to 
make significant progress on anti-corruption and rule of law 
issues.  With energy revenue projected to explode to USD 42 
billion by 2010, the potential for economic instability is 
great and, if left unchecked, could provoke political 
instability.  Key first steps in promoting a better business 
climate and greater investment in the non-energy sectors 
would be implementation of the recommendations included in 
the AmCham White Paper, which was delivered to President 
Aliyev in November 2005. 
 
HUMAN RIGHTS 
------------ 
 
¶10.  (C) GOAJ handling of the arrest of former ministers Ali 
Insanov and Farhad Aliyev, Aliyev's brother former AzPetrol 
Chairman Rafiq Aliyev, and 10 others accused of plotting a 
coup, demonstrates the serious problems in rule of law.  The 
group has been in custody for nearly five months now, with 
little GOAJ movement toward producing charges against the 
group other than a televised early November "confession" by 
former Finance Minister Fikrat Yusifov that was a gross 
violation of the group's human rights.  The GOAJ has moved 
ravenously against the holdings of former Minister Farhad 
Aliyev and his brother, jailed AzPetrol head Rafiq Aliyev, 
opening what appears to be politically motivated tax cases 
against their companies and dismantling their holdings in 
extremely shady court rulings.  GOAJ handling of this case 
has had a distinct chilling effect on Azerbaijan's business 
climate, with several groups of U.S. investors telling us 
that they have backed away from potential deals in light of 
the lack of protections offered to companies outside the 
energy PSA framework. 
 
¶11.  (C) President Aliyev is the only one who can resolve 
this case and appears to be acting out of a genuine fear that 
the group was in fact plotting his overthrow.  The case is 
further complicated by the fact that Aliyev believes the U.S. 
played some role in orchestrating this "coup."  A frank 
dialogue on this case, including its potentially devastating 
effects on Azerbaijan's attempts to attract investment in the 
non-energy sector, is needed.  We believe such a dialogue 
would be most effective if it focused on the need for a fair 
and transparent trial based on evidence, rather than on the 
plight of individual defendants. 
 
¶12.  (C) The trial of Ruslan Bashirli and other Yeni Fikir 
youth movement activists likely will begin around the time of 
your visit.  Bashirli was the first of three opposition youth 
leaders connected to the Popular Front Party who were 
arrested for allegedly plotting a coup, based on a widely 
publicized videotape of a meeting in Tbilisi in which 
Bashirli appeared to discuss the overthrow of the GOAJ.  The 
GOAJ recently added "illegal entrepreneurship" charges to the 
case against Bashirli, arguing that Yeni Fikir was not 
legally registered with the Ministry of Justice.  The GOAJ's 
aggressive pursuit of this case suggests the arrests were 
meant to send a threatening message to opposition youth 
organizations in the run-up to the November parliamentary 
elections.  A public and private message urging the GOAJ to 
conduct a fair and transparent trial and protect the due 
process rights of the defendants, would help support months 
of embassy advocacy on this case. 
 
NAGORNO-KARABAKH 
---------------- 
 
¶13.  (C) Looming over all of these issues, of course, is the 
unresolved issue of Nagorno-Karabakh.  Resolution of the 
conflict is critical to the region's stability and full 
integration into the Euro-Atlantic system.  We welcome Steve 
Mann's engagement on this issue just prior to your visit and 
are hopeful that he will be able to identify a way out of the 
post-Rambouillet impasse.  We hope that you will be able to 
focus your energies on making progress on our other bilateral 
issues. 
HARNISH