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FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC PRIORITY 0485
INFO RUEHAK/AMEMBASSY ANKARA 3170
RUCNCIS/CIS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEAUSA/DEPT OF EDUCATION WASHDC
RHEHNSC/NSC WASHDC
RHEHAAA/WHITE HOUSE WASHDC

UNCLAS SECTION 01 OF 07 BAKU 001158 
 
SIPDIS 
 
DEPT FOR EUR/CARC 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD ENRG EPET ADPM AJ
SUBJECT: USAID ADMINISTRATOR AND DIRECTOR OF 
FOREIGN ASSISTANCE HENRIETTA H. FORE VISIT TO 
AZERBAIJAN 
 
REF: BAKU 01147 
 
¶1.  SUMMARY:  The visit of USAID Administrator and 
Director of Foreign Assistance Henrietta H. Fore to 
Azerbaijan capitalized on the existing USG strong 
host-country counterpart relationships.  During her 
three-day visit, Administrator Fore held meetings 
with AzerbaijanQs President (see reftel), key 
ministers, and the Speaker of Parliament. 
Administrator Fore championed public-private 
partnership opportunities to both government and 
key business leaders within Azerbaijan.  In each of 
her meetings she also leveraged President AliyevQs 
message to do more in the areas of water and 
sanitation, anti-corruption, IT, the ecology and 
environment, and agriculture.  In the course of 
discussions, Administrator Fore indicated a 
willingness to authorize a significant expansion of 
USAID staff and programming to expand large-scale 
developmental efforts.  End Summary. 
 
AMBITIOUS NEXT STEPS ON ECONOMIC REFORM ENVISIONED 
--------------------------------------------- ----- 
 
¶2.  On November 25, USAID Administrator Fore met 
with Shahin Mustafayev, Minister of Economic 
Development.  Administrator Fore mentioned USAID 
was very pleased with the leadership that MOED had 
shown in accelerating progress on economic reform 
in general and the WTO accession process in 
particular, and that USAID looked forward to 
continuing its close collaborative working 
relationship with the MOED.  The Administrator 
mentioned USAIDQs interest in forging 
public/private partnerships in agriculture and 
other critical sectors key to the development of 
AzerbaijanQs non-oil sector.  The Administrator 
noted the importance of moving forward to support 
the adoption of draft regulatory reform, which 
would introduce greater transparency and efficiency 
into the public investment planning and selection 
process. 
 
¶3.  Minister Mustafarov emphasized the fact that 
USAID has been a very strong collaborator with MOED 
on major reforms, especially in WTO accession and 
QDoing BusinessQ.  The Minister emphasized the 
governmentQs intent to continue to promote progress 
in key structural and fiscal reform areas, 
referencing an array of ministry support programs 
for local and non-oil sector economic development. 
The Minister asked for intensified support in this 
area and Administrator Fore agreed that USAID would 
examine modalities for improving the effectiveness 
of MOED-led private sector support strategies and 
programs. USAID Mission Economist Paul Davis 
mentioned the importance of further draft 
legislation refinement in the competition law and 
investment law.  Ambassador Derse noted the MOEDQs 
leadership in promoting path-breaking economic 
policy and institutional reforms in Azerbaijan.  In 
closing, Administrator Fore emphasized USAIDQs 
strong commitment to continued collaboration in 
support of vital economic growth and reform 
prograAdministator 
 
DEVELOPING AN EQUITABLE ENDOWMENT STRATEGY 
------------------------------------------ 
 
¶4.  On November 25, USAID Administrator Fore met 
with State Oil Fund of Azerbaijan (SOFAZ) Executive 
Director, Shahmar Movsumov.  Movsumov gave the 
Administrator a detailed summary of SOFAZ 
directives.   He highlighted several ongoing and 
future projects that the fund directly finances and 
supports, including the Baku-Tbilisi-Ceyhan (BTC) 
pipeline, the Baku-Tbilisi-Kars railroad, and the 
temporary settlements for internally displaced 
persons (IDPs) rendered homeless by the Nagorno- 
Karabagh (NK) conflict.  (NOTE:  Movsumov noted 
that all IDPQs had been resettled, that the last 
 
BAKU 00001158  002 OF 007 
 
 
tent camp was demolished in 2008, and emphasized 
that the GOAJ considers the new settlements to be 
strictly temporary as the issues of NK are expected 
to be resolved.  End Note.) 
 
¶5.  The Administrator expressed gratitude for the 
willingness of Movsumov to establish and maintain 
an effective partnership with USAID on development 
priorities.  She requested that he consider 
deepening and broadening the current level and 
areas of cooperation to include public-private 
partnerships for education programs.  She also 
asked for MovsumovQs suggestions on areas in which 
the USG could help advance President AliyevQs goals 
in support of the areas of agriculture, water and 
sanitation, information technology, ecology and 
environment, and anti-corruption. 
 
¶6.  Administrator Fore mentioned that it could 
prove extremely beneficial to link the GOAJQs 
scholarship fund to an internship program with 
American businesses.  This could also help 
scholarship program beneficiaries receive hands-on 
training that could be effectively applied when 
they return to Azerbaijan.  The Administrator also 
offered USAID support to implement the concept. 
Administrator Fore mentioned USAIDQs public 
investment planning site visit to Chile and the 
Financing for Development meeting in Doha as events 
that could benefit Azerbaijan.  Movsumov expressed 
interest in participating in both and mentioned his 
own plans to host a high-level conference in 2009 
to celebrate the 10th anniversary of SOFAZ.  He 
also expressed interest in the internship concept 
referenced by Administrator Fore. 
 
GLOBAL DEVELOPMENT ALLIANCE 
------------------------------- 
 
¶7.  Administrator Fore spoke at a luncheon 
sponsored by AmCham and the Eurasia Partnership 
Foundation (EPF).  In attendance were AmCham 
members (American, foreign, and local) representing 
accounting and audit, banking, communications, 
energy, financial services, food, and insurance 
businesses operating in Azerbaijan.  After 
recognizing the various public-private partnership 
(PPP) efforts in Azerbaijan, Administator Fore 
overviewed the U.S. Foreign Assistance portfolio 
and the dramatic evolution of assistance support 
(today 80 percent private; 20 percent public). 
Administrator Fore provided large-scale PPP 
examples, including the Unilever/Colgate hand 
washing, Cisco/Intel IT infrastructure, and Coca 
Cola sanitation and water initiatives. 
Administrator Fore noted that as assistance 
recipient countries mature, the USG looks for them 
to evolve into Qequal [assistance] partners.Q  She 
concluded her formal remarks with an invitation to 
kick off several multi-million dollar partnerships 
in Azerbaijan. 
 
¶8.  Eurasia Partnership Foundation (EPF) Associate 
Director Michael Haines highlighted various 
corporate social responsibilities initiatives that 
EPF promotes.  He reaffirmed that Azerbaijan is 
ripe for Global Development Alliances (GDA). 
Administrator Fore noted that PPP moves beyond 
corporate social responsibility to a recognition 
that Qit is in the interest of business to do 
PPPs.  Various AmCham staff and members reaffirmed 
the support the U.S. Embassy and USAID has provided 
them and the GOAJ in numerous areas of strategic 
importance to the private and public sector.  They 
also noted some of the challenges, including slow 
democratic progress, corruption, resistance to 
change, and the need for further legislative 
development and reform.  There was a general 
consensus that regardless of the challenge, each 
requires behavior changes within the government, 
businesses community, and the individual that is 
 
BAKU 00001158  003 OF 007 
 
 
best accomplished by targeting AzerbaijanQs youth. 
USAID Country Coordinator Scott Taylor reinforced 
the opportunity for all attendees to substantially 
raise the bar in PPP, in line with Azerbaijan 
President AliyevQs priorities to improve water and 
sanitation, anti-corruption, agriculture, IT, and 
ecology and the environment. 
 
STATE OIL COMPANY OF AZERBAIJAN PARTNERSHIP 
------------------------------------------- 
 
¶9.  On November 25, USAID Administrator Fore met 
with State Oil Company of Azerbaijan Republic 
(SOCAR) President Rovnag Abdullayev.  Abdullayev 
said he had just returned from Ashgabat, where he 
participated in the annual Turkmenistan 
International Oil and Gas Exhibition (TIOGE) and 
had announced AzerbaijanQs willingness to help 
Europe achieve its energy security goals and 
to serve as a transit country for eastern Caspian 
hydrocarbons.  Abdullayev said to the extent 
that countries such as Kazakhstan and Turkmenistan 
decided to export their hydrocarbons west, 
Azerbaijan stood ready to provide its 
infrastructure for transit. 
 
¶10.  Administrator Fore complimented SOCAR 
President Abdullayev on the progress SOCAR and the 
GOAJ continues to make in the energy sector.  After 
soliciting an energy tour dQhorizon from 
Abdullayev, Administator Fore said that USAID stood 
ready to work with SOCAR in its initiatives to help 
clean up the environment. 
 
ECOLOGY AND NATURAL RESOURCES 
----------------------------- 
 
¶11.  Administrator Fore met with Minister of 
Ecology and Natural Resources Huseyngulu Bagirov on 
November 25.  Minister Bagirov described some of 
the environmental challenges Azerbaijan is facing, 
including oil contamination, urban migration, water 
pollution, and solid waste management.  Minister 
Bagirov stated that 1.5 billion tons of oil had 
been taken out of Azerbaijan during Soviet times, 
generally through Qthe most primitive 
technologies,Q and as a result, 30,000 hectares of 
land were now heavily contaminated.  He said that 
there were plans to build an incinerator near Baku 
that would not only reduce the amount of solid 
waste in the country, but would also generate 
electricity for Azerbaijan.  He lamented that 
Azerbaijan was unable to do much about water 
pollution because, he said, QSeventy-five percent 
of contaminated water comes from Georgia and 
Armenia.Q  The Minister indicated that the waters 
coming from Georgia are heavily contaminated with 
municipal waste, and the waters from Armenia 
contain heavy metals. 
 
¶12.  When asked to identify one area in which the 
GOAJ most needed USG assistance, Minister Bagirov 
pointed to staff.  He said that the QMinistry is 
not a resource of skill for anyone,Q and that Qthe 
building of the Ministry is more impressive than 
the Ministry itself.Q  Mr. Bagirov explained the 
need for Ministry staff who are Qimpassioned, 
understand these [environmental] problems, and have 
[the appropriate] skills.Q  In response, USAID 
Mission Economist Paul Davis offered to launch 
technical support efforts to improve cost/benefit 
analysis capacity with regard to environment 
mitigation projects and to examine the potential 
application of economic instruments to promote 
cost-effective and comprehensive compliance with 
critical pollution abatement policies/goals. 
 
CO-FINANCING MOU TO ADVANCE FINANCIAL SECTOR 
REFORMS 
----------------------------------------- 
 
 
BAKU 00001158  004 OF 007 
 
 
¶13.  On November 25, USAID Administrator Fore met 
National Bank of Azerbaijan (NBA) Chairman Elman 
Rustamov.  The NBA Chairman welcomed Administrator 
Fore and stressed the importance of USAIDQs 
financial sector stability program for achieving 
financial sustainability and banking sector growth 
in Azerbaijan.  The Administrator inquired about 
the most pressing challenges of the Azerbaijan 
banking sector in the light of the current economic 
growth situation in the country and the 
international financial crisis.  The Chairman noted 
that the Azerbaijan banking sector is still in a 
nascent period of development and is still 
rebuilding public confidence following the collapse 
of the financial system that accompanied the 
breakup of the USSR.  He mentioned that the NBA is 
taking all necessary steps to mitigate the negative 
consequences of the recent international financial 
crisis.  The Chairman appreciated the fact the 
USAIDQs Technical Assistance Support program helped 
the NBA forecast the crisis a year ago and prepare 
an anti-crisis plan.  The Chairman noted how 
critical USAIDQs work had been to Azerbaijan under 
its two-year program on anti-money laundering, 
risk-based banking supervision, HR, and IT 
management, as well as the recent NBA cash 
management work. 
 
¶14.  Administrator Fore reiterated USAIDQs 
commitment to continue the work in these areas. 
The Chairman requested support for the 
establishment of Caucuses leadership programs in 
Azerbaijan under a world leading international 
accreditation program.  He noted the Central BankQs 
interest in attracting a leading US business school 
to establish a presence in Azerbaijan which could 
send students from the region.  Ambassador Derse 
supported the idea and promised to follow up. 
 
CHARTING A COURSE FOR INFORMATION HIGHWAY 
INNOVATIONS 
---------------------------------------- 
 
¶15.  Administrator Fore met with Minister of 
Communications and Information Technologies Ali 
Abbasov on November 25.  Administrator Fore noted 
USAIDQs strong interest in working with the 
Ministry on key sectoral policy and regulatory 
reform issues; and in public/private partnerships 
that would expand sustainable access to information 
technology services, building upon USAIDQs strong 
experience and track record in this area.  Minister 
Abbasov noted that while Azerbaijan has 
impressively expanded telecommunication service 
availability, particularly in cell phone coverage, 
internet service coverage remains low and related 
access to computer services remains limited.  He 
noted the Ministry has great interest in 
implementing a comprehensive innovation promotion 
strategy in the IT sphere and in galvanizing a 
regional strategy and program to expand east-west 
telecommunications infrastructure capacity through 
fiber optic network expansion. 
 
¶16.  The Minister referenced plans to facilitate 
expanded availability of satellite-based telecom 
services, privatize the countryQs landline 
services, and establish an independent 
telecommunications sector regulator.  The Minister 
would welcome USAID technical support to promote 
policy and regulatory reforms to cost effectively 
expand access to telecom services and facilitate 
the establishment of a WTO-consistent sectoral 
regulatory regime.  The Minister expressed his 
interest in technical support to promote IT 
diffusion and expansion of its regional 
telecom network capacity. 
 
¶17.  Administrator Fore responded that USAID stands 
ready to work together in each of these areas. 
USAID Mission Economist Paul Davis noted that this 
 
BAKU 00001158  005 OF 007 
 
 
work could build upon a recently developed 
strategic requirements analysis to establish a WTO- 
consistent regulatory system.  Davis indicated that 
USAID was prepared to have a discussion on how to 
move forward on key policy, regulatory reform and 
infrastructure capacity expansion strategy issues. 
Minister Abbasov and Administrator Fore agreed to 
hold a follow-up discussion the week of December 1, 
to formulate concrete technical support activities 
in these areas. 
 
LEGISLATIVE BRANCH EAGER TO EXPAND ITS AUTHORITY 
--------------------------------------------- --- 
 
¶18.  The Chief of Staff of the Parliamentary 
Speaker provided the Administrator with a quick 
tour of the main meeting hall and a demonstration 
of ParliamentQs interactive website.  Speaker Ogtay 
Asadov thanked USAID for the American peopleQs 
support.  He stated that he valued USAIDQs 
Parliamentary Project efforts, specifically 
referencing two areas he found important and well 
received:  1) training and support for newly hired 
Members of Parliament Assistants (MPAs), and 2) 
roundtable discussions with external experts, 
Members of Parliament (MPs), and parliamentary 
staff.  The Speaker expressed hope that USAID would 
continue with a planned second phase of the project 
and was confident that Parliament would complete 
all the tasks established under the Memorandum of 
Understanding (MOU) with USAID at the projectQs 
start.  He requested the second phase be launched 
with USAID working with the Parliament and the EU 
to find ways to link required under a new EU- 
planned twinning project. 
 
¶19.  Administrator Fore thanked the Speaker and 
noted how impressed she was at how the Parliament 
website provides for greater transparency in 
posting the legislative calendar, agenda and draft 
legislation under consideration.  The Administrator 
noted the USG's intent to continue with a second 
phase, based upon the results and progress achieved 
under the first phase.  The Administrator noted 
some of the points discussed in her meeting with 
President Aliyev, including the desire of both 
governments to increase cooperation in economic 
reform and political and social development. 
 
¶20.  Ambassador Derse noted how impressed she was 
with the SpeakerQs outreach to other parliamentary 
assemblies and hoped she could work with him to 
develop outreach to the U.S. Congress, share ideas 
and best practices, and strengthen U.S.-Azerbaijan 
relations.  Ambassador Derse expressed pleasure 
with how the partnership has grown and looked 
forward to follow up on the SpeakerQs ideas for 
further cooperation and outreach to the U.S. 
Congress.  The meeting concluded with both sides 
expressing their desire to continue the open 
dialogue and support for continuing assistance to 
the parliament. 
 
THE TRUE MEASURE OF DEVELOPMENT SUCCESS 
--------------------------------------- 
 
¶21.  Administrator Fore met with USAIDQs Baku staff 
on November 26.  She complimented the staff for the 
Qextraordinary jobQ done, particularly in light of 
the small staff.  She indicated she had sent on 
November 25 her written support to have USAID/Baku 
recognized as a full, stand-alone mission.  She 
hoped final approval would be reached before the 
end of the calendar year.  Administrator Fore also 
commented on future FSN pay adjustments and the 
need for USAID/Baku to participate in the wage 
survey. 
 
¶22.  Administator Fore explained the intended 
progression of assistance development countries 
from one of QdependenceQ to one of Qfull partner. 
 
BAKU 00001158  006 OF 007 
 
 
Together with the GOAJ and the private sector, 
USAID/Baku has the ability to leverage its 
expertise and funding with that of already 
established and new public and private sector 
partners to expand the reach and impact of 
development assistance efforts throughout 
Azerbaijan, she said.  She noted a bright future 
for the USAID/Baku staff. 
 
¶23.  Administrator Fore commented on the financial 
crisis and its impact on assistance development. 
She stated she would announce the United StateQs 
intent to hold fast to its assistance commitments 
at the Finance for Development meeting in Doha. 
Administrator Fore opened the floor to questions. 
Following her thanks and appreciation to the staff, 
the meeting concluded with a group photo. 
 
FINANCE MINISTRY SEEKS USG CONTINUITY 
------------------------------------- 
 
¶24.  Administrator Fore met with Minister of 
Finance Samir Sharifov on November 26.  Minister 
Sharifov noted that the number and frequency of 
high-level USG visitors to Azerbaijan showed the 
closeness of the relationship.  He noted that he 
had found the prior weekQs Economic Partnership 
Commission meeting in Washington to have been 
extremely productive.  He added that he wished he 
could sign the co-financing Memorandum of 
Understanding (MOU) that USAID prepared, because he 
wanted the visit Qto result in something very 
tangible,Q but that for Qa few purely technical 
reasons" he could not do so.  He added, however, 
that USAID and the Ministry had "agreed to almost 
everything,Q and was optimistic the MOU would be 
signed soon.  Administrator Fore signed the MOU and 
the Minister and the Ambassador agreed they would 
do a formal signing as soon as the Minister had the 
final approval to sign.  He said the GOAJ has 
included the $21 million it pledged in the 
agreement in the just approved budget, and it will 
be paid. 
 
¶25.  Administrator Fore said that AzerbaijanQs 
support had been Qextraordinarily important.Q  In 
order to keep the relationship strong in the midst 
of a transitioning Presidential administration in 
the United States, the Administrator proposed that 
Minister Sharifov and other high-level GOAJ 
officials visit Washington in January to meet with 
her, Deputy Secretary of State Negroponte, and 
Deputy Secretary of Defense England, as well as 
various members of Congress.  The Administrator 
suggested that the visit could focus on economic, 
security, diplomacy, and civil society issues. 
Sharifov emphasized that Section 907 of the Freedom 
Support Act is of great concern to Azerbaijan, and 
that the GOAJ wants to ensure that the next U.S. 
administration continues to waive 907 each year, 
just as the Bush administration did, and moves 
quickly to repeal it.  He emphasized the security 
cooperation between the U.S. and Azerbaijan, saying 
that Azerbaijan was Qthe last country to depart 
Iraq, and increased its presence in Afghanistan, 
but warned that Q907 does not correspond to the 
level of [bilateral] relations.Q  He said that the 
GOAJ has to convince Congress, and said in this 
regard: QWe will try mount a lobbying effort in the 
U.S.Q  He also noted that the Ministry would 
support necessary reforms designed to improve the 
transparency and cost-effectiveness of public 
investment planning procedures, and looked forward 
to working together on guiding these reforms 
towards approval in the near-term. 
 
¶26.  COMMENT:  The Embassy greatly appreciated this 
first-ever visit by a USAID Administrator to 
Azerbaijan, which comes on the heels of numerous 
high-level Washington visits aimed at reaffirming 
our support for Azerbaijan in the wake of the 
 
BAKU 00001158  007 OF 007 
 
 
Russia-Georgia conflict.  Citing the strategic 
importance of development assistance to our 
diplomatic and defense efforts, the Administrator 
emphasized the need to adopt a long-term 
perspective in order to sustainably advance 
economic and democratic reform in Azerbaijan.  This 
will also raise the level of our developmet 
engagement to parallel intensive USG engagemen on 
national security and energy.  In recognition of 
AzerbaijanQs vast energy wealth, Administrator Fore 
also stressed the importance of partnering with the 
business community whose financial contributions, 
together with the substantial assistance co- 
financing expected from the Government of 
Azerbaijan.  These partnerships will permit more 
robust public-private partnerships to meet the 
significant development challenges facing the 
country, and offered an enhanced USAID Mission 
presence to meet those challenges. 
 
¶27.  Cleared by USAID AdministratorQs Office. 
 
DERSE