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P 021147Z NOV 09
FM AMEMBASSY BAKU
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UNCLAS SECTION 01 OF 03 BAKU 000864 
 
SENSITIVE 
SIPDIS 
 
COMMERCE FOR D.STARKS 
EEB/CBA FOR T.GILMAN 
DEPT PLEASE PASS TO USTR FOR C. MORROW AND P. BURKHEAD 
 
E.O. 12958: N/A 
TAGS: ECON EINV EIND EAIR KCOR TINT KIPR AJ TU AE
CH, BK 
SUBJECT: AZERBAIJAN: ECONOMIC/ COMMERCIAL ROUNDUP 
 
REF: A. REF A: BAKU 551 
     ¶B. REF B: BAKU 799 
     ¶C. REF C: BAKU 856 
     ¶D. REF D: BAKU 696 
 
BAKU 00000864  001.4 OF 003 
 
 
¶1.  SUMMARY: This cable is the second in a regular series 
that will summarize economic and commercial issues in 
Azerbaijan.  In this issue: The GOAJ is still pushing for the 
Trans-Eurasian Information Superhighway (para 2); the ILO 
says child labor is shifting from cotton to "the worst" 
sectors (para 3); a large trafficking ring of Bosnian Serbs 
constructing prestige GOAJ projects is uncovered (para 4), as 
is possible trafficking of Chinese street vendors (para 5); 
Parliament's "mole" law appears officially dead (para 6); a 
raising of pension ages causes protest within parliament 
(para 7); Azal and Boeing agree to ask ABN-AMRO to clear on a 
737 - 767 order swap (para 8); bank unfreezes Lufthansa's 
700,000 Euros that were being held by a court for potential 
"emotional distress" payment caused by a six-hour delay (para 
9); and Embassy Baku plans to partner with Microsoft on 
anti-piracy efforts (para 10) and learns how corruption in 
the GOAJ affects staff: even a cut of per diems have to be 
passed upstairs (para 11).  End Summary. 
 
¶2.  DEPUTY FOREIGN MINISTER STILL CRAZY FOR INFO HIGHWAY: 
Deputy Foreign Minister Mammadguliyev called the Charge 
d'Affaires on October 30 to remind him of Azerbaijan's 
Trans-Eurasian Information Superhighway initiative at the 
United Nations.  Mammadguliyev said that European support for 
the UN proposal was lacking, and that the GOAJ is depending 
on USG support (Ref A). 
 
¶3.  CHILD LABOR SHIFTING FROM COTTON TO OTHER SECTORS (Ref 
B): Following the release of the Department of Labor's report 
on International Child Labor, Econoff toured cotton-producing 
regions of Azerbaijan and witnessed child labor during the 
harvest.  It's unclear if child labor is a problem or a 
symptom of an awful school system.  One teenager asked 
Econoff, "Why should I go to school?  I will just sit there 
for no reason for two more years, and then I will come back 
to work here.  I should start working now."  The ILO reports 
the cotton industry has suffered a 95 percent decline (from 
32,000 hectares of production in Soviet times to 1,700 
hectares today), and as the sector shrinks, child labor is 
moving to "the worst forms," namelydrug sales, prostitution, 
and child trafficking o Dubai and Turkey. 
 
¶4.  BOSNIAN SERBS TRAFFICKE FOR PRESTIGE GOAJ CONSTRUCTION: 
In related news, Poloff was made aware of a large trafficking 
ring of Bosnian Serbs (Ref C).  About 346 men were brought to 
Azerbaijan by a Serbian company called SerbAz to work on 
construction projects, including the Buta Palace, used by the 
GOAJ for official functions, and the GOAJ-run Mingachevir 
Olympic Center.  There is evidence that SerbAz may be 
connected to the Ministry of Youth and Sports. 
 
¶5.  POSSIBLE HUMAN TRAFFICKING FROM CHINA TO AZERBAIJAN: On a 
trip to cotton-producing regions of Azerbaijan, Econoff met a 
Chinese vendor working at a restaurant in Berda.  Berda is 
one of the poorer regions of Azerbaijan; its cotton industry 
has collapsed along with worldwide cotton prices, and the 
town is filled with IDPs from the Nagorno-Karabakh conflict. 
Like many Chinese found in both large and small cities 
throughout Azerbaijan, this vendor was selling small trinkets 
(toy guns, picture frames, etc.)  Local Peace Corps 
Volunteers reported that she told a Chinese-speaking 
volunteer that she wanted to go back to China as soon as she 
could.  She said she was promised a good job in Europe; when 
she found herself selling trinkets in Berda, she was told not 
to complain because she was given a "good job" in "Europe." 
According to the volunteers, she said that she had been in 
Azerbaijan for two years, and that she had two more years of 
work left to "pay off her debt" before she could return home. 
 She was the only young female (appeared to be in her 20s) in 
 
BAKU 00000864  002.4 OF 003 
 
 
a restaurant whose clientele was 50-100 men and one woman, 
who appeared to be in her 50s.  Because she was the only 
young female out after dark in Berda, the volunteers thought 
it was possible she might also be engaged (or forced to 
engage) in other money-generating activities. 
 
¶6.  PARLIAMENT'S "MOLE" LAW IS REALLY DEAD - NO, SERIOUSLY 
THIS TIME:  Parliament voted on October 21 to accept 
President Aliyev's veto of amendments to the law on 
entrepreneurship.  Parliament had passed amendments on June 
30 that would have required the Deputy Head (Vice President) 
of every foreign company to be 1.) an Azerbaijani citizen, 
and 2.) chosen jointly by the foreign company and the GOAJ 
(Ref D).  The threat of this law threw American companies up 
in arms; they complained it amounted to planting a GOAJ 
"mole" in every foreign company.  If signed by President 
Aliyev, this would have violated the US-AJ bilateral 
investment treaty.  Acceptance of the veto is good news, but 
on the same day Parliament voted to remove term limits on the 
Prosecutor-general, who has been an obstacle to further legal 
reform. 
 
¶7.  PROTEST IN PARLIAMENT OVER AMENDMENTS TO PENSION LAW: The 
retirement age has been raised to 60 (from 57) for women, and 
63 (from 62) for men.  There are different rules for mothers 
of large families, parents of the disabled, the disabled, and 
single fathers, but ages in these categories are also to be 
reviewed.  MP Hadi Rajabli, Chair of the Social Policy 
Commission, said the pension age is higher in CIS and 
European countries, but opposition MPs protested that life 
expectancy and quality of life were also higher abroad. 
 
¶8.  AZAL AND BOEING AGREE TO ASK ABN-AMRO TO CLEAR ON 737/767 
ORDER SWAP:  Boeing Regional Sales Director Serdar Gurz says 
that following months of heated discussion, Boeing and 
Azerbaijan Airlines (Azal) have agreed in principle to 
replace an order for two 737s for 2012 delivery with an order 
for one 767 for 2013 delivery.  The task now is to convince 
Dutch bank ABN-AMRO, which has already made a pre-delivery 
payment on the two jets, to sign off on the new deal.  If 
ABN-AMRO agrees, Boeing and Azal plan to ask ABN-AMRO to sign 
off on a similar deal involving two 737s slated for 2014 
delivery.  Gurz says he will fly to Baku soon to attend a 
meeting between Azal and ABN-AMRO.  Azerbaijan Airlines 
(Azal) put out press releases on Thursday re-trumpeting an 
order that was finalized in 2008 for two 767s and two 787s. 
The press release does not mention the four 737s that were in 
dispute, and it's unclear to Boeing why their customer is now 
re-issuing a press release for a deal that had already been 
publicized over a year ago.  Gurz says Azal executives 
discuss politics (and specifically Turkey-Armenia 
rapprochement) with him at every meeting, and he suspects 
Azal's original threat to cancel the 737 orders outright may 
have been politically driven. 
 
¶9.  MORE GOOD NEWS FOR LUFTHANSA: Country Manager Hakan Tin 
reports that the International Bank of Azerbaijan has 
unfrozen the 700,000 Euros it was holding in the court case 
involving a six-hour delay.  The matter is not yet settled, 
but Lufthansa says things are moving in the right direction. 
Background: a warning light on the nose gear forced a 
Baku-bound Lufthansa jet to divert to Ashgabat, where weather 
conditions were better.  The passengers were taken off and 
put on a Turkmen jet to Baku while a technician was flown in 
from Frankfurt to fix the nose gear.  Seven (presumably 
well-connected) passengers then sued Lufthansa for 100,000 
Euros each in emotional distress. 
 
¶10.  UPCOMING ANTI-PIRACY DRIVE WITH MICROSOFT:  Embassy Baku 
has begun talks with local Microsoft reps about an upcoming 
anti-piracy effort.  Microsoft plans to train GOAJ officials 
on the detection of pirated software and send them into 
Azerbaijani banks to verify the software being used is legit. 
 If the drive is successful, it could be repeated in other 
 
BAKU 00000864  003.4 OF 003 
 
 
sectors.  Microsoft's plan is to focus on business users, 
rather than home users, and to emphasize the security risks 
of banks using pirated software, which can be more easily 
hacked. 
 
¶11.  TRICKLE-UP PER DIEMS AT THE STATE COPYRIGHT AGENCY: 
Embassy Baku invited two GOAJ officials to a USPTO-sponsored 
IPR training in Bishkek.  One participant, from the Ministry 
of Communications and Information Technology (MCIT), eagerly 
accepted.  The other nominee, from the State Copyright 
Agency, spent the bulk of Thursday morning on the phone with 
Econ FSN asking about different flight options.  At COB 
October 29, the nominee informed Embassy Baku he "probably" 
would not accept the USG's offer for a free training course 
(including airfare, hotel, per diem in Bishkek, and taxi 
to/from airport) because it did not include per diem for the 
days in Baku when he would go to the airport.  This appeared 
to be a negotiating tactic; the next morning his boss called 
to inform us the employee would participate after all, but 
the boss needed to know exactly how much per diem the 
employee would be paid.  We suspect this is a case of 
"trickle-up" per diem, and that the supervisor needs an exact 
figure so he knows how much of a kickback to demand. 
LU