VZCZCXRO6200
PP RUEHLN RUEHVK RUEHYG
DE RUEHKB #0791/01 2350403
ZNR UUUUU ZZH
P 220403Z AUG 08
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC PRIORITY 5869
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RULSDMK/DEPT OF TRANSPORTATION WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 BAKU 000791 
 
SENSITIVE 
SIPDIS 
 
EEB FOR STAFF ASSISTANTS 
 
E.O. 12958: N/A 
TAGS: EAGR EFIN EIND ETRD ETTC AJ
SUBJECT: AMBASSADOR DISCUSSES EPC, CO-FINANCING, BUSINESS 
DISPUTES, TRADE OPPORTUNITIES WITH MINISTER OF FINANCE 
 
¶1. (SBU) The Ambassador met August 8 with Minister of Finance 
Samir Sharifov to discuss a wide range of economic issues, 
including prospective dates this fall for the next meeting of 
the U.S.-Azerbaijan Economic Partnership Commission (EPC) and 
co-financing of assistance projects.  Ambassador also took 
the opportunity to congratulate Minister Sharifov on Moody's 
recent decision to upgrade its outlook on Azerbaijan's Baa1 
government debt issuer ratings from stable to positive. 
 
Economic Partnership Commission: November a Possibility 
--------------------------------------------- ---------- 
 
¶2. (SBU) Following input from EEB, the Ambassador suggested 
to Sharifov that the U.S.-Azerbaijan EPC might next meet in 
Washington for one day during the period of November 10-21. 
Sharifov agreed in principle, noting that, after the October 
15 Azerbaijani presidential election, he would have to be 
officially re-appointed to his position, "assuming that 
President Aliyev is re-elected."  The Ambassador asked 
Sharifov to continue work on the EPC joint communique and 
agenda.  The Azerbaijani side noted the Ministry would soon 
have proposals for an updated version of the agenda, which 
would include discussion of Jackson-Vanik, Generalized System 
of Preferences (GSP) and a global economic briefing by U.S. 
experts.  Azerbaijan will also work on the joint communique, 
Sharifov said. 
 
Co-Financing: Close, but Not Yet 
-------------------------------- 
 
¶3. (SBU) On a related note, the Ambassador asked Minister 
Sharifov to expedite U.S.-Azerbaijan efforts to conclude 
agreements on co-financing of assistant projects.  The 
Ambassador noted that USAID reports that one project with the 
National Bank of Azerbaijan has now been agreed on and is 
awaiting signature.  Three projects with the Ministry of 
Economic Development (MOED) and two projects in the field of 
democracy and governance are still being negotiated, with the 
GOAJ asking to clarify and expand its role in co-managing 
projects that it would co-finance.  USAID indicated that such 
an arrangement might be possible, but would need to be 
carefully crafted in order to be consistent with overarching 
USAID administrative guidelines on project implementation. 
Sharifov, in turn, said that "some difficulties" with 
co-financing remain; finances for the most part are not the 
problem, he explained, but implementation may need to be 
revisited.  Sharifov requested additional meetings with USAID 
to resolve the outstanding issues. USAID will follow up with 
the Ministry of Finance and MOED. 
 
Trade and Investment 
-------------------- 
 
¶4. (SBU) The Ambassador delivered to Minister Sharifov a 
letter from U.S. agricultural firm Cargill that answered 
questions the Minister had earlier raised regarding 
outstanding debts.  Cargill incurred debts of USD 7.7 million 
in 1996, when the GOAJ, through the state-owned "AgroIncom" 
firm, defaulted on a portion of a cotton contract.  The GOAJ 
subsequently requested clarification that a) the debt legally 
is classified as government debt, b) the debt officially was 
incurred by the government, and c) the GOAJ is responsible 
for this debt.  Sharifov accepted the letter and noted that 
his ministry had not rejected the claim, and would further 
investigate.  Sharifov also noted that Cargill had recently 
expressed interest in re-entering Azerbaijan's market, 
perhaps through regional grain trade.  (Note: Cargill has 
sold rights to this debt to a Hong Kong-based firm, but 
retains a percentage interest in any monies recovered.) 
 
¶5. (SBU) The Ambassador also raised Bechtel's bid to 
construct a modern east-west highway, connecting Azerbaijan 
and Georgia.  Sharifov expressed interest in the project, 
noting that "money could be made available" to support it. 
He added, however, that many infrastructure projects are now 
vying for attention, such as the north-south highway project, 
sewage treatment, subway expansion and telecommunications 
upgrades. 
 
Anti-Money Laundering 
--------------------- 
 
¶6. (SBU) Sharifov acknowledged receiving the Embassy's letter 
on Azerbaijan's pending Anti-Money Laundering legislation. 
Ambassador noted that she had spoken to a conference on this 
 
BAKU 00000791  002 OF 002 
 
 
topic a few weeks earlier, and had pointed out that some 
provisions of the new draft law are not in compliance with 
the Financial Action Task Force (FATF). Sharifov said that 
the draft law is in parliament, having passed a first 
reading, and could still be amended.  The Minister promised 
to "talk to lawyers" to resolve the non-FATF compliant 
provisions.  The Ambassador said that the Embassy's Resident 
Legal Advisor would be in contact with the Ministry.  Embassy 
RLA subsequently passed Department of Justice comments to the 
Ministry's International Affairs Department. 
LU