VZCZCXYZ0000
RR RUEHWEB

DE RUEHKB #0149/01 0461502
ZNR UUUUU ZZH
R 151502Z FEB 08
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 4793
INFO RUEHTV/AMEMBASSY TEL AVIV 0054
RUEHFR/AMEMBASSY PARIS 0479
RUEHJM/AMCONSUL JERUSALEM 0016

UNCLAS BAKU 000149 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
PLEASE PASS TO CODEL BROWNBACK 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PHUM ENRG ECON AJ
SUBJECT: SCENESETTER FOR CODEL BROWNBACK'S VISIT TO 
AZERBAIJAN, FEBRUARY 20-21 
 
REF: STATE 15016 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION - 
PLEASE HANDLE ACCORDINGLY. 
 
¶1.  (SBU) Azerbaijan's pro-Western foreign policy 
orientation, geopolitical setting -- sandwiched between Iran 
and Russia -- and ability to provide alternative energy 
supplies to Europe and to use its energy resources to drive 
growth and development in the region, make it an important 
U.S. partner.  It is in our interest to have a reforming, 
stable, pro-western Azerbaijan, in the Eurasian heartland. 
As you know, the bilateral agenda with Azerbaijan is based on 
three interdependent interests:  diversifying European energy 
supplies, promoting political and economic reform, and 
extending our security cooperation.  Our security and energy 
cooperation is strong, but promoting reform 
remains challenging. 
 
Energy Links Azerbaijan to the West 
----------------------------------- 
 
¶2.  (SBU) Azerbaijan is a crucial link in the East-West 
energy corridor that aims to diversify Europe's energy 
supply.  U.S.-Azerbaijan cooperation was critical in 
realizing the Baku-Tbilisi-Ceyhan (BTC) pipeline project, 
which in July 2006 delivered its first oil to Ceyhan, Turkey. 
 Azerbaijan's ability to transit gas to Europe increasingly 
is the focus of our bilateral energy discussions.  With up to 
one trillion cubic meters in new gas reserves and the 
political will to bring them to European markets, 
Azerbaijan's gas could enhance European energy security. 
Azerbaijan and Israel also are discussing potential gas 
deals.  At the same time, Azerbaijan faces pressure from Iran 
and Russia not to be too closely linked to the West.  Neither 
Tehran nor Moscow is interested in seeing Azerbaijan play a 
supplier and transit role for sending Caspian oil and gas to 
Europe.  In your meetings with GOAJ officials, conveying the 
message that the U.S. Congress is grateful for Azerbaijan's 
role in diversifying Europe's energy supplies -- despite 
regional pressures -- will reinforce broader U.S. efforts to 
let the government know that Azerbaijan plays an important 
regional role. 
 
Robust Security Cooperation 
--------------------------- 
 
¶3.  (SBU) Azerbaijan is a steadfast partner in U.S. 
counterterrorist efforts.  In Iraq, 151 Azerbaijani (Shiite 
Muslim) infantry troops stand alongside U.S. Marines guarding 
the Haditha Dam.  Azerbaijan is also contributing troops in 
Afghanistan and peacekeepers in Kosovo.  In October, the 
Azerbaijani Parliament voted to double the number of 
Azerbaijani peacekeepers serving in Afghanistan from 22 to 
¶45.  Azerbaijan provides blanket over-flight rights for U.S. 
aircraft, as well as strong information sharing and law 
enforcement cooperation in fighting terror. 
 
¶4.  (SBU) Azerbaijan is in the process of drafting a second 
Individual Partnership Action Plan (IPAP) with NATO. 
Azerbaijan's first IPAP began in 2005, promoting defense 
sector reforms and Azerbaijan's interoperability with NATO. 
The IPAP is a good umbrella for Azerbaijan-NATO cooperation, 
although the GOAJ often sends mixed public signals on the 
question of whether it wants to join NATO eventually.  The 
U.S. works extensively with the Azerbaijani Navy and Coast 
Guard to increase Azerbaijan's interdiction capabilities 
against proliferation and terrorist threats on the Caspian 
Sea. 
 
¶5.  (SBU) Security cooperation is one of the strongest 
aspects of our bilateral relationship.  In your meetings with 
Azerbaijani officials, it would be helpful to thank them for 
their consistently strong support, despite Iran and Russia's 
distaste for such cooperation.  Azerbaijani officials may 
tell you that the ongoing Nagorno-Karabakh (NK) conflict and 
Section 907 of the Freedom Support Act restrain our 
cooperation.  The OSCE Minsk Group is tasked with helping 
Azerbaijan and Armenia resolve their conflict; Department of 
State EUR Deputy Assistant Secretary Matt Bryza is one of the 
three OSCE Minsk Group Co-Chairs.  According to Section 907 
of the Freedom Support Act of 1992 (P.L 102-511), the U.S. is 
limited in the types of aid it can provide to Azerbaijan 
because of the ongoing NK conflict. Since 2001, however, the 
U.S. Congress has granted the President the authority to wave 
Section 907 on national security grounds, which President 
Bush has done on an annual basis. 
 
 
Rapid Economic Growth 
--------------------- 
 
¶6.  (SBU) With GDP growth of 25 percent in 2007, Azerbaijan 
has the fastest growing economy in the world, driven nearly 
entirely by an unprecedented inflow of energy revenue.  The 
government's economic planning, and the country's judicial, 
regulatory and banking sectors are weak and ill-prepared to 
manage this enormous influx of revenue.  Corruption is 
pervasive throughout Azerbaijan.  Significant institutional 
reform and capacity-building will be required to manage the 
stable growth of Azerbaijan's economy and to prevent 
Azerbaijan from succumbing to the "oil curse" experienced by 
many other energy producers. 
 
¶7.  (SBU) We believe the WTO accession process is the key 
vehicle through which we can promote GOAJ implementation of 
successful economic reform that will keep Azerbaijan's 
development on a stable path.  The Ministry of Economic 
Development has been tasked to lead the WTO accession 
process.  The Government has recently accelerated its WTO 
accession efforts, and hopes to have a WTO Working Party 
meeting in Geneva by early spring with the goal of completing 
the accession process by late 2009.  Creating a stable and 
predictable business environment is especially crucial for 
attracting investment to the non-energy sector. At present, 
however, Azerbaijan remains a challenging market in which to 
do business.  Following international recommendations, the 
Government of Azerbaijan established a new business 
registration mechanism on principles of a one-stop-shop at 
the Ministry of Taxation.  The time to register new 
businesses has dropped from several weeks to three days.  The 
2008 World Bank/IFC "Doing Business" report ranks Azerbaijan 
at 96 (out of 178).  According to Transparency International, 
corruption worsened in 2007 and the country ranked 157 out of 
180 countries (compared to 130 of 163 in 2006).  The 
government this year launched a new strategy for fighting 
corruption which, if implemented, provides a basis for 
progress. 
 
Promoting Reform is Tough Work 
------------------------------ 
 
¶8.  (SBU) Getting the GOAJ to make substantive political and 
economic reform is an ongoing challenge that mirrors 
difficulties in most other post-Soviet states.  The situation 
is complicated by the fact that U.S. reform assistance began 
late in Azerbaijan, relative to other CIS countries, due to 
section 907 for the Freedom Support Act.  The U.S. engages 
with the Azerbaijani Government at all levels, arguing that 
our three core interests are mutually reinforcing and 
interdependent.  Cooperation and progress in the areas of 
security and energy reform are mutually supporting.  We seek 
to convince th GOAJ that reform, though difficult, will 
advanc Azerbaijan's goals of independence, regional 
infuence, and long-term stability. 
 
¶9.  (SBU) We are concerned by a trend of increased government 
pressure against the media and critics of the government. 
The media environment is heavily restrictive, with 
implausible criminal charges against journalists and  attacks 
against journalists that have gone unprosecuted and 
unpunished.  Many argue that the media's ability to criticize 
or question government policies has significantly 
deteriorated in the last year.  On the other hand, President 
Aliyev pardoned 119 prisoners -- several of whom, including 
five high-profile journalists, appeared to have been jailed 
because of their criticism of the government.  It would be 
helpful to acknowledge the importance of the pardon as a 
first step toward allowing a more robust and critical press. 
The GOAJ and media representatives under OSCE auspices are 
also working on a strategy and action plant to defuse the 
tension in the media environment and improve government-media 
relations. 
 
¶10.  (SBU) In addition to the problem of media freedom, the 
government since the 2005 elections has restricted the 
ability for peaceful groups to assemble, particularly in 
central areas of Baku.  It has put pressure on opposition 
political parties by restricting their ability to rent office 
space, hold meetings, raise funds and carry out normal 
political activities.  Civil society representatives also 
complain that they increasingly feel under fire and are 
nervous that a recent Presidential decree for state financial 
support to NGOs is another instrument of government control. 
At the same time, the GOAJ is working with both the OSCE and 
 
COE, and civil society representatives, on revisions to the 
Law on Freedom of Assembly and a joint GOAJ-NGO task force on 
pardons. 
 
¶11.  (SBU) In your meetings with officials, we believe it is 
important to highlight the interrelationship of our three 
interests.  Political and economic reform will support the 
government's aims of ensuring Azerbaijan's independence and 
projecting Azerbaijan as a regional leader.  The October 2008 
presidential election presents a tremendous opportunity for 
Azerbaijan to take an important step forward on democratic 
reform by allowing the opposition, civil society, and the 
media more political space.  As the Embassy regularly notes 
to the government and the general public, the U.S. supports 
the process of a free and fair election and our concerns will 
focus most heavily on the process over the result. 
DERSE