VZCZCXYZ0000
OO RUEHWEB

DE RUEHKB #0536/01 0970922
ZNR UUUUU ZZH
O 070922Z APR 06
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0083
INFO RUEHSI/AMEMBASSY TBILISI 1277
RUEHYE/AMEMBASSY YEREVAN 1073

UNCLAS BAKU 000536 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PHUM KDEN ECON EAID MARR AJ
SUBJECT: SCENESETTER FOR CODEL KOLBE'S APRIL 12-14 VISIT TO 
AZERBAIJAN 
 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION. 
 
¶1. (U) Chairman Kolbe, I warmly welcome you and Congressman 
Garrett to Baku next week.  This visit will be a superb 
opportunity to deliver a strong message of support for political 
and economic reform, and to enhance further our strong security 
cooperation with Azerbaijan.  Your visit comes at a particularly 
crucial time in our efforts to increase our strategic cooperation 
with the Government and to push for continued democratic 
progress, building on last November's parliamentary elections and 
one month before parliamentary rerun elections..  I want to 
provide you background on the situation in Azerbaijan and 
highlight the important strategic equities the United States has 
in this country and region. 
 
THE STRATEGIC CONTEXT 
--------------------- 
 
¶2. (SBU) The United States has several core strategic equities in 
Azerbaijan, including counter-terrorism, energy security, 
regional stability, and democratic and economic development. 
Azerbaijan is in a key geographic position to assist our efforts 
on the Global War on Terrorism, and has consistently been willing 
to provide the necessary support and cooperation to advance our 
efforts.  This commitment includes deployment of troops to both 
Afghanistan and Iraq, as well as the provision of blanket over- 
flight rights for U.S. military aircraft. 
 
ENERGY AND REVENUE MANAGEMENT 
----------------------------- 
 
¶3. (U) Our partnership extends to the energy sector as well, and 
last May, Energy Secretary Bodman represented the United States 
at the First Oil ceremonies of the Baku-Tbilisi-Ceyhan (BTC) 
pipeline.  These ceremonies marked the culmination of ten years 
of focused U.S. efforts to promote the East-West Energy Corridor, 
creating a major export pipeline that does not pass through 
Russian or Iranian territory.  Eventually, one million barrels of 
oil a day will flow from Azerbaijan to the Mediterranean, and 
from there to world markets.  Next phases could see increased 
carriage of Kazakhstan volumes and movement of natural gas to 
Western Europe, a development that could be critical to ensuring 
Europe's energy security. 
 
¶4. (U) Azerbaijan's massive influx of energy revenue poses 
massive challenges to the economy.  A pioneering member of the 
Extractive Industries Trasnparency Initiative (EITI), Azerbaijan 
has established an internationally audited State Oil Fund that 
will safeguard Azerbaijan's energy revenues and invest in its 
development.  Expenditures to-date have focused on construction 
of schools and IDP housing; future plans include a water system 
for Baku and a new investment fund to spur growth in the non-oil 
sectors.  The real challenge will come in managing the growth of 
Azerbaijan's econonomy, ensuring that inflation remains at 
acceptable rate and preventing the onset of Dutch disease. 
Corruption, which is pervasive in Azerbaijan, further complicates 
matters.  With Freedom Support Act funds, the USG is providing 
technical assistance to help Azerbaijan manage this transition, 
with technical advisors in the Ministries of Tax and Finance, 
anticorruption programs, rule of law programs and a program to 
help strengthen the GOAJ's consolidated budgeting process 
 
¶5. (SBU) A just, lasting, and peaceful resolution of Azerbaijan's 
unresolved conflict with Armenia over Nagorno-Karabakh remains 
the government of Azerbaijan's stated top priority.  Ambassador 
Steven Mann and the other OSCE Minsk Group Co-Chairs continue 
their active support of settlement negotiations, and we have seen 
some recent progress in this area.  While the February 
Rambouillet meeting between President Kocharian and President 
Aliyev did not yield the results we had hoped for, it is critical 
to urge both sides to continue talks within the structure of the 
Prague Process.  We believe this year presents a golden 
opportunity to make necessary steps to resolve this long 
conflict; you may wish to ask the Foreign Minister what 
constructive approaches he feels would be beneficial to the 
process.  In other areas, we are providing millions of dollars in 
assistance to promote economic reform and development, to enhance 
Azerbaijan's ability to interdict WMD through the Cooperative 
Threat Reduction Proliferation Prevention Initiative, and to 
improve security cooperation and increase interoperability with 
NATO.  Our interests are widespread and varied and our policy 
toward Azerbaijan should and does reflect this diversity of 
interests. 
 
DEMOCRATIZATION CONTINUES WITH NEW PARLIAMENT, NEW ELECTIONS 
--------------------------------------------- --------------- 
 
¶6. (SBU) On May 13 Azerbaijan will hold rerun parliamentary 
elections in ten constituencies that were canceled due to fraud 
 
after last November's elections.  The November elections failed 
to meet international standards, as have previous elections, 
although the conduct was an improvement over previous elections. 
The Government accepted key recommendations of the international 
community to accept exit polling, finger inking to prevent 
multiple voting, and to do away with a requirement that forced 
domestic observer organizations to register as individuals, 
instead of as an organization.  The ten May reruns will be a key 
test of the Government's stated commitment to clean elections and 
we believe this is still possible.  While candidates have yet to 
begin the campaign in earnest, reports from the ten districts 
indicate government interference in the process is low.  You 
should urge the Foreign Minister to stay the course and ensure 
that the May reruns erase the scourge of November's fraudulent 
vote count. 
 
¶7. (SBU) Meanwhile, the MPs elected in November are already hard 
at work in their new positions and we are seeing positive signs 
from the new Parliament.  The current body is Azerbaijan's third 
Parliament and appears to be shedding some of the "rubber stamp" 
tendencies for which its predecessors were notorious.  You will 
meet eight MPs key to this process from the opposition, the 
ruling party, and independents.  We believe these MPs represent 
the future of Parliament's ability to exercise its jurisdiction 
as a separate governing institution and a check on executive 
power.  I encourage you to engage these MPs in discussions on 
legislative reform, increased numbers of professional staff, and 
ways to exert an independent voice in the Government. 
 
¶8. (SBU) A concerning human rights development, however, has been 
the detention and subsequent trial of key individuals separately 
accused of coup plotting in the leadup to the November 
parliamentary election.  Last summer three youth activists were 
detained and are currently on trial for plotting the violent 
overthrow of the government; in a disturbing step, the court 
proceedings were closed due to national security concerns. 
Separately, two former sitting ministers and a handful of high 
level government officials were detained in a separate coup 
charge.  These individuals remain in detention with no trial date 
in sight.  I recommend that you urge the Foreign Minister to 
respect rule of law and each defendant's due process rights in 
your meeting with him. 
 
¶9. (SBU) We strongly believe that through encouraging steady 
democratic change, the United States will best be able to protect 
and expand its very real equities in Azerbaijan.  We are actively 
promoting democratic reform and a civil society, and providing 
technical assistance to support it.  Last year we introduced two 
new AID programs aimed at strengthening civil society and are 
currently drafting a concept paper for a multi-year parliamentary 
assistance program.  We are also continuing work to 
professionalize political parties and candidates and enhance the 
technical capabilities of the election commissions.  You will 
have the opportunity to hear from the individuals implementing 
these programs on the ground; I encourage you to engage in a 
frank exchange of ideas on the way forward in Azerbaijan. 
 
A STEADILY DEEPENING SECURITY RELATIONSHIP 
------------------------------------------ 
 
¶10. (SBU) Our steadily deepening security relationship makes 
Azerbaijan a key partner to the United States.  Our mutual 
security interests with Azerbaijan include close cooperation in 
Iraq and in fighting the Global War on Terror.  151 Azerbaijani 
Shiite Muslim infantry troops stand alongside U.S. Marines to 
guard the Haditha Dam in Iraq, and Azerbaijan has also 
contributed troops in Afghanistan and peacekeepers in Kosovo. 
Azerbaijan provides blanket over-flight rights for U.S. aircraft, 
as well as strong information sharing and law enforcement 
cooperation in fighting terror.  An aviation fuel supply problem 
at Kyrgyzstan's Manas Airbase last year significantly increased 
the air traffic flow through Azerbaijan, and the closing of K2 in 
Uzbekistan may further increase this traffic. 
 
¶11. (SBU) In looking to the future, Azerbaijan recently completed 
an Individual Partnership Action Plan (IPAP) with NATO that has 
promoted more extensive cooperation in a number of areas.  For 
example, the US has provided equipment to Azerbaijan's 
peacekeeping battalion.  The US is also working extensively with 
the Ministry of Defense to develop a "NATO compatible" military 
airfield that could be used by US aircraft as a "gas and go" 
location for operations in Central Asia.  The US is assisting the 
Azerbaijani Navy to upgrade the capabilities of five ships and a 
naval commando unit to assist in interdicting trans-national 
threats on the Caspian Sea.  The last area is defense reform, in 
which the US is providing assistance in the areas of English 
language training, NCO professional development, and US-NATO 
staff training. These efforts are funded by a variety of US 
security assistance programs including Foreign Military Financing 
 
(FMF), Coalition Support Funds (CSF), Individual Military 
Education and Training (IMET), and the Counter-Terrorist 
Fellowship Program (CTFP). 
 
¶12. (SBU) The Proliferation Prevention Initiative encompasses the 
Coast Guard, and the recently-added participation of the Navy to 
complete the mission requirements to surveill the Azerbaijani 
sector of the Caspian Sea, and to detect and interdict WMD. The 
Cabinet of Ministers recently directed the Joint Command and 
Control Center be located at the Coast Guard Base in Baku and for 
the Navy to staff the JC3 jointly with the Coast Guard.  This 
program represents a historic first for Cooperative Threat 
Reduction (CTR) programs.  Rather than disabling and destroying 
WMD, CTR money will be used to detect and prevent proliferation. 
Sheparding this complex and first-ever undertaking is a major 
priority for this mission. 
 
POST-SETTLEMENT RECONSTRUCTION NEEDS 
------------------------------------ 
 
¶13. (SBU) A resolution of the Nagorno-Karabakh conflict in 2006 
would present the GOAJ with the staggering task of organizing the 
repatriation of over half a million Internally Displaced Persons 
(IDPs) to the occupied territories. The donor community UNHCR 
believes that any IDP repatriation plan would require a thorough 
needs assessment of the occupied territories infrastructure, 
largely obliterated over the past decade of conflict. The GOAJ 
does not have the capacity to develop a robust repatriation plan 
and would be unprepared for an IDP return in the event of 
settlement.  Consequently, an international organization under 
the auspices of the OSCE Minsk Group would need to undertake any 
future needs assessment. 
 
¶14. (SBU) On the eve of the Ramboiullet talks, Deputy Prime 
Minister Ali Hassanov (who heads the State Committee on Refugee 
and IDP Issues) held a widely publicized conference with 
international donors, during which he announced the Government's 
intent to start planning for an eventual IDP return to the 
occupied territories. We strongly support the DPM's initiative as 
it is a welcome sign that the GOAJis prepared to work with the 
international community to begin planning for an IDP return in 
the context of a negotiated settlement. At the conference, UNHCR 
also announced that it would take the lead in drafting a 
statement of principles for IDP repatriation in conjunction with 
the GOAJ. Despite the failure of the Ramboiullet talks, we 
believe there is a need to continue moving the IDP planning 
process forward. In the event of a resolution of the conflict, 
the USG would be expected to take a lead role in implementing a 
post conflict IDP repatriation plan as an integral part of the 
settlement. 
 
KEY POINTS TO RAISE 
------------------- 
 
¶15. (SBU) Below are key points that we suggest you raise: 
 
Strategic relationship 
 
-- We appreciate our countries' broad strategic partnership and 
welcome opportunities to deepen it. 
 
-- Thank you for your support in Iraq and Afghanistan. 
 
Democracy 
 
-- We support a democratic process and are encouraged by recent 
reform efforts, in particular the improved November parliamentary 
elections.  Azerbaijan should continue these efforts and ensure 
the May rerun elections are free and fair. 
 
-- We are concerned, however, about certain human rights cases 
that appear to contradict your government's reform agenda.  I 
urge you to ensure that rule of law and due process rights are 
respected with regard to the detention and trial of all 
individuals charged in connection with coup plotting last year. 
 
REVENUE MANAGEMENT AND ANTICORRUPTION 
 
-- Azerbaijan has made great strides toward responsible 
management of its energy resources by signing on to EITI and 
creating a State Oil Fund. 
 
-- Azerbaijan needs to demonstrate similar leadership by 
establishing sound macroeconomic policies and procedures, 
ensuring proper oversight of government spending by empowering 
parliament, and fighting corruption. 
 
Nagorno-Karabakh 
 
-- 2006 represents a watershed year to solve the prolonged 
Nagorno-Karabakh conflict.  I urge you to take the bold steps 
necessary to set in motion post-conflict settlement plans, 
especially as they relate to the large scale IDP repatriation 
plan that would be required in the aftermath of the conflict. 
Similarly, I urge you to prepare your citizens for the steps your 
government will need to take to ensure a lasting peace. 
 
-- As you prepare for an eventual end to this conflict, know that 
the USG stands ready to assist you in implementing an IDP 
repatriation plan as well as in addressing the massive 
reconstruction needs that you will facing. We look forward to 
continued dialogue as this process moves forward. 
 
¶16. (U) Your visit next week provides an outstanding opportunity 
to advance the USG's agenda in Azerbaijan. I look forward to 
welcoming you. 
 
HARNISH