VZCZCXRO2512
OO RUEHAG RUEHROV
DE RUEHKB #0920/01 2701313
ZNY CCCCC ZZH
O 261313Z SEP 08
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0071
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES  PRIORITY
RUEHAK/AMEMBASSY ANKARA PRIORITY 3024
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEHNO/USMISSION USNATO PRIORITY 0809
RHEHNSC/NSC WASHDC PRIORITY
RUEHVEN/USMISSION USOSCE PRIORITY 1106
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHMFISS/CDR USEUCOM VAIHINGEN GE PRIORITY

C O N F I D E N T I A L SECTION 01 OF 04 BAKU 000920 
 
SIPDIS 
 
FOR THE DEPUTY SECRETARY 
 
E.O. 12958: DECL: 09/25/2018 
TAGS: OTRA NEGROPONTE JOHN AJ
SUBJECT: SCENESETTER FOR THE DEPUTY SECRETARY'S VISIT TO 
AZERBAIJAN 
 
Classified By: Ambassador Anne Derse for reasons 1.4 (b) and (d). 
 
¶1.  (C) SUMMARY:  Your visit comes as the Russia-Georgia 
conflict continues to unfold, with critical and sensitive 
ramifications for Azerbaijan.  Baku quietly supported Georgia 
from the start, providing immediate assistance to Tbilisi in 
the form of food and other commodities, financial aid to 
banks, energy, and engineering services to the railroads. 
President Aliyev, however, has been sharply critical of 
Georgian President Saakashvili, calling his actions vis-a-vis 
Russia "irresponsible" and damaging to Azerbaijan's regional 
economic assets, as well as to its sovereignty and 
independence.  In particular, he worries about implications 
for resolution of the Nagorno-Karabakh conflict and the 
impact of the crisis on Azerbaijan's oil and gas production 
and export plans.  END SUMMARY. 
 
CONTEXT 
------- 
 
¶2.  (C) Azerbaijan, in the aftermath of the August conflict 
in Georgia, is a vulnerable country in an unstable region, 
wedged between Russia and Iran, aiming to protect its 
independence, sovereignty and territorial integrity, with 
exports of nearly one million barrels of oil per day hanging 
in the balance.  President Ilham Aliyev, following the course 
set by his father, continues the country's strategic 
re-orientation toward the West.  Recent events in the 
Georgia, however, have made this choice more difficult to 
sustain.  Russia and Iran, in particular, have engaged 
Azerbaijan at high levels this month, suggesting at times 
increased security and energy links to sway Baku in their 
directions. 
 
¶3.  (C) Azerbaijan, besides producing incremental, non-OPEC 
oil, cooperates with the United States on regional security 
-- including in Iraq and Afghanistan, and anti-terrorism 
support -- and is achieving economic reforms, as outlined in 
the World Bank's recent "Doing Business" report.  Still, Baku 
still faces challenges on corruption, democracy and human 
rights.  Since President Aliyev visited the United States in 
April 2006, we have worked to strengthen the relationship. 
Following Russia's foray into Georgia, those efforts have 
intensified.  As Vice President Cheney said during his timely 
visit to Baku earlier this month, the U.S. has "a deep and 
abiding interest" in the well being and security of 
Azerbaijan, and a commitment to further strengthen our 
relations for the long term. 
 
Security Cooperation 
-------------------- 
 
¶4.  (C) Azerbaijan is a steadfast partner in U.S. 
counterterrorist efforts.  In Iraq, 150 Azerbaijani infantry 
troops have stood alongside U.S. Marines guarding the Haditha 
Dam.  At the NATO Summit in Bucharest in April, and again 
this month in Brussels at the NAC 26 1 talks, Azerbaijan 
pledged to double its peacekeeping forces in Afghanistan from 
45 to 90 troops, provide new training programs, and increase 
civilian support.  Azerbaijan provides unlimited and 
important over-flight and landing rights for Coalition 
aircraft bound for Iraq and Afghanistan, as well as strong 
information sharing and law enforcement cooperation in 
fighting terror. 
 
¶5.  (C) Security cooperation is one of the strongest aspects 
of our bilateral relationship, and is even more important in 
the aftermath of Russia's military action in Georgia.  In 
your meetings with President Aliyev and senior Azerbaijani 
officials, it would be helpful to thank them for their 
support and the press the need to move forward.  Azerbaijan's 
leadership remains focused on the Nagorno-Karabakh conflict. 
Azerbaijan's leadership has indicated at all levels that Baku 
wants to purchase U.S. military equipment and arms. 
President Aliyev and others will likely argue that Section 
907 of the Freedom Support Act, as well as Armenia-Azerbaijan 
"parity" on security assistance, restrict our cooperation and 
do not reflect Azerbaijan's contributions as a security 
partner, nor its legitimate defense needs.  Since 2001, the 
U.S. Congress has granted President Bush the authority to 
wave Section 907 on national security grounds, and the 
 
BAKU 00000920  002 OF 004 
 
 
President has done so on an annual basis. 
¶6.  (C) President Aliyev and others have discussed the need 
for a security guarantee from the United States.  We 
encourage you to sound out President Aliyev on specifics. 
President Aliyev has stated that, in the newly dangerous 
regional climate, Azerbaijan must minimize risks and wishes 
to engage with the United States on new security 
consultations.  He has told USG interlocutors that 
"Azerbaijan is willing to go as far as the U.S. is willing to 
go" on security cooperation.  Azerbaijan wants peaceful, 
sustainable relations with all neighbors.  In the aftermath 
of the Russia-Georgia conflict, however, this balanced 
approach has become more difficult to maintain. 
 
¶7.  (C) An agreement to consult on issues of national 
security would be an approach to reassure Azerbaijan's 
interests.  Another would be to have strategic U.S. assets in 
Azerbaijan.  We could expand "gas-n-go" services for 
coalition aircraft by developing infrastructure for a forward 
operating location at Nasosnaya Airfield.  We could also 
explore the possibility of stationing an X-Band missile 
defense radar in Azerbaijan.  Azerbaijan was, in principle, 
willing to consider joint U.S.-Russian use of the Gabala 
Radar Station, and we have had exploratory exchanges on a 
possible train and equip program.  Yet another path we could 
explore is encouraging Azerbaijan to enter into an 
intensified dialogue with NATO in preparation for a future 
membership action plan. 
 
Nagorno-Karabakh 
---------------- 
 
¶8.  (C) The Nagorno-Karabakh (NK) conflict is Azerbaijan's 
top domestic and foreign policy priority, and the sole issue 
that unites Azerbaijani citizens across the political 
spectrum.  All conversations in Azerbaijan eventually turn to 
NK and the adjacent occupied territories.  From Baku's 
perspective, any solution to the conflict must preserve 
Azerbaijan's territorial integrity, i.e., NK cannot become an 
independent state. 
 
¶9.  (C) Despite international support for the OSCE Minsk 
Group (U.S., France and Russia), the GOAJ and its populace 
believe the international community, including the USG, 
should pressure Armenia for a solution consistent with 
Azerbaijan's territorial integrity.  They are increasingly 
frustrated with what they believe is insufficient progress by 
the Minsk Group.  The Azerbaijani Government was extremely 
angry over the Co-Chairs' "no" vote on Azerbaijan's UN 
General Assembly resolution regarding territorial integrity 
and Nagorno-Karabakh and continues to express its concerns in 
public and private fora.  Their concerns, though, have 
subsided following Vice President Cheney's visit and 
affirmation that a negotiated solution on NK "must start from 
the principle of territorial integrity." 
 
¶10.  (C) President Aliyev remains wary of the motives of his 
Armenian counterpart, but concedes that Yerevan may be ready 
to discuss a deal.  Likewise, Aliyev has expressed concern 
about Turkey's efforts to reconcile with Armenia, noting that 
any border re-opening without resolution of NK would lead to 
disastrous results, including relations on energy 
cooperation.  On the heels of the Georgian conflict, there 
may be a new opening from the GOAJ for a senior-level 
dialogue to resolve this frozen conflict.  If successful, the 
door to cooperation and constructive U.S. involvement with 
Azerbaijan will swing open. 
 
Energy Links Azerbaijan to the West 
------------------------------------ 
 
¶11.  (C) Azerbaijan views its energy resources as the key to 
establishing strategic cooperation and obtaining political 
support from Europe and the West.  Azerbaijan is a crucial 
link in the East-West energy corridor that aims to diversify 
Europe's oil and gas 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.  Prior to disruptions to the BTC (Turkey 
explosion, the Russia-Georgia crisis and current offshore 
technical glitches) volumes exceeded 800,000 barrels per day. 
 
BAKU 00000920  003 OF 004 
 
 
 Plans should eventually be realized to link expanding oil 
production in Kazakhstan with the BTC pipeline, initially by 
tanker.  Azerbaijan's ability to produce and transport 
natural gas to Europe via Georgia and Turkey increasingly is 
the focus of bilateral energy discussions.  The significance 
of these issues, particularly the need for security and 
stability in the Caspian-Caucasus-Black Sea corridor, has 
heightened following Russia's invasion of Georgia. 
 
¶12.  (C) In your meetings with President Aliyev, it would be 
useful to underscore that, despite the crisis in Georgia, the 
USG reaffirms its commitment to work with the GOAJ and other 
responsible partners in the region to develop the next 
generation of Caspian energy resources, beyond the 
Baku-Tbilisi-Ceyhan oil pipeline.  The USG will encourage 
Georgia, Turkey and Europe to join efforts to work together 
constructively on projects such as the Turkey-Greece-Italy 
and NABUCCO natural gas pipelines, and will emphasize the 
need for more discussion and action on infrastructure 
security.  The USG applauds the efforts of Azerbaijan, 
Turkmenistan and Kazakhstan to develop constructive, 
productive relations. 
 
Democratic Reform 
----------------- 
 
¶13.  (C) Getting the GOAJ to undertake substantive political 
and economic reform is an ongoing challenge that mirrors 
difficulties in most other post-Soviet states.  The USG 
engages with the GOAJ all levels, arguing that our three core 
interests -- security, energy and economic and political 
reform -- are mutually reinforcing and interdependent.  Many 
in the government still have business interests and do not 
perceive economic reform as serving their immediate, 
personal, short-term interests.  Reformers here scored a 
major victory in pushing through steps that won Azerbaijan 
the number one spot on the World Bank's list of global 
reformers in this year's Doing Business report.  The 
country's October 15 presidential election presents an 
important opportunity for Azerbaijan to demonstrate its 
commitment to democratic reform.  President Aliyev is set to 
coast to an easy electoral victory.  The traditional 
opposition, whose support is small and declining, is 
boycotting the elections claiming that the pre-election 
climate does not permit a fair poll.  The other candidates 
participating in the election have little name recognition or 
chance of garnering significant support.  We hope that after 
the election, President Aliyev will understand a new push for 
reform. 
 
Unprecedented Economic Growth 
----------------------------- 
 
¶14.  (C) With GDP growth of 25 percent in 2007, Azerbaijan 
has one of the fastest growing economies in the world, driven 
nearly entirely by the energy sector.  The government's 
economic planning and the country's judicial, regulatory and 
banking sectors are still developing and face a challenge in 
managing this enormous influx of revenue.  The IMF reports, 
however, that the GOAJ plans in 2009 to rein in the dramatic 
interests in spending, common in recent years, to moderate 
inflation.  Corruption is pervasive, as highlighted in the 
latest Transparency International Corruption Perceptions 
Index.  Azerbaijan rated 158 out of 189 countries surveyed. 
Significant institutional reform and capacity-building are 
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. 
 
Religious Issues 
----------------- 
 
¶15.  (C) Azerbaijan is a secular Shiite Muslim country with a 
significant Sunni minority.  Current estimates show that 
Azerbaijan is roughly 65 percent Shia and 35 percent Sunni. 
Following a broader post-Soviet trend, there are a growing 
number of practicing Muslims, most of whom follow mainstream 
teachings and make no distinction between Sunnis and Shia. 
It is still a small perception of the population -- 1-3 
percent -- in the view of informed observers.  There are, 
however, isolated pockets of extremists fuelled by increasing 
 
BAKU 00000920  004 OF 004 
 
 
interaction with Arab, Turkish and Iranian missionaries. 
Rivalry among Muslim sects and religious groupings is on the 
rise.  Acts of terrorism are rare in Azerbaijan but have 
occurred.  For example, the GOAJ is currently investigating 
an August 17 bombing of a Sunni mosque in Baku that killed 
three people and injured several others.   Azerbaijani 
citizens are free to travel abroad, and some Azerbaijanis 
have accepted scholarships and other vehicles to study in 
Iran, Saudi Arabia and elsewhere.  The strongly secular 
Government of Azerbaijan often clamps down on outward 
religious activity, especially in those areas where it is 
thought to be radical, and has outlawed proselytizing by 
foreigners. 
DERSE