VZCZCXRO8874
RR RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHCH #0262/01 0671607
ZNY CCCCC ZZH
R 071607Z MAR 08
FM AMEMBASSY CHISINAU
TO RUEHC/SECSTATE WASHDC 6401
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 03 CHISINAU 000262 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/07/2018 
TAGS: PREL PGOV PBTS PINR EAID ETRN MD
SUBJECT:  Shevchuk Wants MCC Roadwork Project; while Litskai Too Ill 
to Meet 
 
 
Classified By: Ambassador Michael D. Kirby for reasons 1.4(b) and (d) 
 
¶1. (C) SUMMARY:  Transnistrian Speaker Shevchuk expressed strong 
interest in the proposed MCC road reconstruction projects, which 
would make an important contribution to the Transnistrian 
transportation corridor linking Chisinau and the west with Ukraine. 
Sheriff Company Director Ilya Kazmaly complained about Voronin's 
mistakes in dealing with Transnistria, and said that the functioning 
of business interests required resumption of railroad transport. 
"Foreign Minister" Litskai's office declined a meeting with the 
Ambassador stating that Litskai was ill.  Kazmaly explained Litskai 
had been incapacitated for the previous four days from the effects of 
too much alcohol.  End Summary. 
 
¶2. (C) The Ambassador's March 6 trip to Tiraspol was set against the 
backdrop of "President" Smirnov's rage at the EU decision to lift the 
visa ban on Shevchuk and several others.  In response, Smirnov had 
angrily declared that the European and American Ambassadors were not 
welcome in Transnistria.  The Ambassador's crossing was made possible 
by Shevchuk's personal intervention with Smirnov. 
 
MCC Roadwork Would Improve Transportation Corridor 
--------------------------------------------- ----- 
 
¶3. (C) After apologizing for the Ambassador's travel problems, 
Shevchuk suggested he would launch a legislative initiative to 
establish a functioning travel regime for diplomats.  A cooperative 
and reasonable Shevchuk expressed strong interest in the Millennium 
Challenge Corporation program.  The Ambassador explained that the 
GOM's proposal includes USD 80 million for work on two roads that 
pass through Transnistria -- the M-14, which passes through Tiraspol 
to link Chisinau to Odessa, and the M-21, which links Chisinau to the 
Kyiv-Odessa highway through Dubosari.  Shevchuk was eager to see the 
MCC program move forward and confirmed that improvements in these two 
dilapidated roads would help develop the very important 
transportation corridor. 
 
¶4. (C) Shevchuk said he had already informed "President" Smirnov that 
the Supreme Soviet would support going forward with MCC.  Shevchuk 
commented that improved transportation would bring jobs for more 
citizens of Transnistria.  He said he would introduce legislative 
initiatives that would facilitate border crossings for those 
transiting Transnistria on these roads.  The Ambassador suggested 
that as a next step the Transnistrian side should appoint key 
individuals to learn about MCC and to coordinate for Transnistria. 
Shevchuk said he would include personnel from both the legislative 
and executive branches in such a group.  It was agreed that Embassy 
staff would brief this team on the MCC during the week of March 10, 
to be followed by further consultations with them when an MCC team 
from Washington next visits Moldova in April. 
 
Business Development More Important than Humanitarian 
Aid 
--------------------------------------------- -------- 
 
¶5. (C) The pro-business Shevchuk listened with interest as the 
Ambassador described a business assistance project.  During the last 
week of February, the USAID CEED group met with the Lux Company in 
Dubosari, as well as previously meeting with the Tiraspol-based 
TiroTex, to examine possibilities for help with marketing and 
increasing sales to the West.  Shevchuk expressed his interest in 
technical assistance and business development.  The Ambassador 
mentioned an American group that has already raised over USD 300 
million in the U.S., which they have invested in Ukraine and Moldova, 
and promised to encourage them to consider expanding to cover the 
whole of Moldova.  Shevchuk said that mutually-beneficial, profitable 
investment was the key to development. 
 
USG Now Engaged on a Variety of Assistance Programs 
--------------------------------------------- ------ 
 
¶6. (C) The Ambassador reviewed other USG projects in Transnistria. 
He described USG efforts in the healthcare sector through Operation 
Provide Hope, which will include providing medical equipment for 
Transnistrian hospitals this summer.  The Ambassador asked Shevchuk 
to facilitate any border issues to ensure delivery to Transnistria. 
 
¶7. (C) USAID is carrying out a training program for banks on mortgage 
lending, as a functioning mortgage lending system would allow the 
population to purchase homes they otherwise could not afford. 
Additionally the USG will implement a USD 40,000 project for Avian 
Flu education and prevention. 
 
¶8. (C) To update previous discussions on USG provision of seeds to 
help alleviate the consequences of last summer's drought, the 
Ambassador told Shevchuk that the USG was just completing procurement 
of sunflower and corn seeds in response to Shevchuk's request.  Our 
contacts with the Private Farmer's Association and the Agricultural 
Committee in the parliament were still insisting that we provide the 
seeds to farmers with as much as 630 hectares.  The Ambassador added 
that in the U.S. we didn't consider 630-ha farms small.  Shevchuk 
agreed that 630-ha farms were not small by Transnistrian standards 
 
CHISINAU 00000262  002 OF 003 
 
 
either.  Shevchuk promised to provide us with an 
appropriately-targeted list of small farmers (holdings under 25 
hectares) within the next few days. 
 
Sheriff Chief Kazmaly blames Voronin, Seeks Railroad 
Links 
--------------------------------------------- ------- 
 
¶9. (C) In a separate meeting Ilya Kazmaly, director of Sheriff, 
expressed a pragmatic business-oriented approach towards the current 
situation.  (Note:  Sheriff is Transnistria's second-largest company 
in terms of trade volume and Transnistria's largest tax payer. 
Sheriff owns a chain of petrol stations, a chain of supermarkets, a 
TV channel, a cable TV network, the Kvint spirits factory, a mobile 
phone network, a Mitsubishi and Mercedes-Benz dealership, a soccer 
club with its newly-built Sheriff Stadium, which cost an estimated 
$200 million, and other interests. End Note) 
 
¶10. (C) Kazmaly said his businesses require resumption of railroad 
transportation.  Some of Sheriff's enterprises cannot operate 
profitably without rail transport, while others, like TiroTex, lose 
much of their profit to increased shipping expenses.  TiroTex used to 
receive its cotton from Uzbekistan directly by rail.  The need to 
truck the raw cotton on part of its journey greatly added to costs. 
Kazmaly complained at length about the mistakes Voronin has made in 
dealing with Transnistria.  Suggesting  that the sides were well on 
their way to conflict resolution before Voronin came to power, 
Kazmaly blamed Voronin for a variety of ills and said the business 
community lacks faith in Voronin's willingness to honor any deal 
reached in a Transnistrian settlement. 
 
¶11. (C) Kazmaly told the story of his own personal disappointment in 
trying to do business with Chisinau.  Having set up a cellphone 
network in Transnistria, Kazmaly negotiated for a contract to make it 
legal under Moldovan laws and rules.  An agreement was reached which 
required him to put USD one million cash down.  Two weeks after he 
paid the sum, President Voronin reneged on the contract.  Kazmaly's 
efforts to sue for reimbursement failed.  Now he is disillusioned and 
said he would not want to do business with Chisinau.  When asked if 
he would rather trade with Europe or Russia, his answer was very 
pragmatic: it would depend on where the market for each particular 
good was more profitable. 
 
Kazmaly Plans to Continue Expanding Sheriff 
------------------------------------------- 
 
¶12. (C) Kazmaly has plans in 2008 to build his own 
electric-generating plant for Sheriff's companies on the grounds of 
the TiroTex factory.  Given the high cost of energy, and its 
vulnerability to Russian threats to interrupt supply, an independent 
power-generating capacity would help ensure TiroTex's continued 
functioning.  Kazmaly also has an idea for cement mining that would 
link both sides of the Dniester River.  There is an old cement mine 
in Rezina (just across the river from Ribnitza), with outdated 
technology whose pollution is causing illness among the local 
population.  Kazmaly hopes to build a new factory using modern 
technology.  Russia is offering credit at 12 percent, but Kazmaly is 
seeking money at a reduced interest rate from the EBRD.  Kazmaly 
expressed the desire to see American business represented in 
Transnistria. 
 
Litskai on a Drunken Binge? 
--------------------------- 
 
¶13. (C) Though the Ambassador had requested a meeting with "Foreign 
Minister" Litskai, for several days his staff had been unable to 
confirm that the meeting would take place, claiming that he was ill. 
Finally on the morning of the meeting, his office informed us that 
Litskai would not be able to meet the Ambassador.  Kazmaly said that 
for the past four days Litskai had been on a drunken binge, 
exhibiting a level of alcoholism beyond any previous state.  That was 
the real reason why he was not available to meet. (Note:  Post is 
unable to confirm Kazmaly's statement, but notes that Litskai has a 
history both of over-drinking and of ill health. End Note) 
 
Comment: 
------- 
 
¶14. (C) Shevchuk's interest in working with us on MCC is a positive 
sign.  Construction of this transportation corridor would facilitate 
business development for both the left and right banks.  Both 
Shevchuk and Kazmaly share a pragmatism rooted in a business-oriented 
approach that has little patience for Smirnov's blustering anger at 
foreign diplomats and counter-productive retaliation.  At the same 
time, neither Shevchuk nor Kazmaly trusts Voronin to deliver on a 
deal.  The timing was not ideal for publicly lifting the visa ban on 
Shevchuk, and it appears the EU may have inadvertently created more 
problems for him rather than helping him.  Nonetheless, Shevchuk is 
learning to use his legislative power to work around Smirnov's 
ideological desire to erect stumbling blocks to relations with the 
outside.  Economic development on both sides suffers from the 
continued frozen conflict, and ultimately the pragmatic 
 
CHISINAU 00000262  003 OF 003 
 
 
business-oriented approach may provide the momentum needed for 
reunification.  Tackling the railroad issue could help jumpstart the 
rest of the process.  End Comment. 
 
KIRBY