Cablegate: Uzbekistan: Dod Delegation Engages Business

VZCZCXRO5667
PP RUEHLN RUEHVK RUEHYG
DE RUEHNT #1287/01 3121032
ZNR UUUUU ZZH
P 071032Z NOV 08
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC PRIORITY 0559
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 1140
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 4702
RUEHBUL/AMEMBASSY KABUL PRIORITY 2989
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 1648
RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RHMFIUU/CDR USEUCOM VAIHINGEN GE PRIORITY
RHMFIUU/CDR USTRANSCOM SCOTT AFB IL PRIORITY 0019
RHMFIUU/DLA FT BELVOIR VA PRIORITY
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
RUCADHQ/HQ USCENTCOM FWD PRIORITY
RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY
RHMFIUU/HQ AMC SCOTT AFB IL PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUEKJCS/JOINT STAFF WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 03 TASHKENT 001287

SIPDIS

DEPARTMENT FOR SCA/CEN
TRANSCOM FOR KATHY JOHNSON-CASARES

E.O. 12958: N/A
TAGS: ECON MARR PGOV AF UZ
SUBJECT: UZBEKISTAN: DOD DELEGATION ENGAGES BUSINESS
COMMUNITY ON AFGHANISTAN TRANSIT

REF: TASHKENT 1260

SENSITIVE BUT UNCLASSIFIED

1. (SBU) SUMMARY. The delegation from the U.S.
Transportation Command (TRANSCOM) and Central Command
(CENTCOM) that visited Uzbekistan October 21-23 had numerous
meetings with local and Western businesses to discuss
possible purchase of goods and services in support of
Coalition forces operating in Afghanistan. Business were
generally enthusiastic about the prospect of supplying the
U.S. military, but unclear about the modalities. The
Northern Ground Line of Communication (NGLOC) represents an
important opportunity to establish relationships with the
businesses community in Uzbekistan. Looking ahead to next
steps, it will be important provide the Uzbek side, both
government and private companies, with more specific
information about the products and services we are looking to
procure, as well as the modalities of their transport. NGLOC
has generated a lot of interest here, but it has also raised
a lot of questions that we will need to be prepared to
answer. END SUMMARY.

2. (SBU) The TRANSCOM/CENTCOM team's October 21-23 visit
focused on assessing the possibilities for commercial transit
of goods to Afghanistan through Uzbekistan by air, road,
rail, or a combination of these. The Government of
Uzbekistan appeared very interested in the commercial
opportunities presented by NGLOC (reftel), as did local
businesses. During the delegation's stay in Uzbekistan, they
met with numerous Uzbek state entities, private companies and
members of the American Chamber of Commerce (AMCHAM).

UZBEKISTAN AIRWAYS AND UZBEKISTAN RAILROAD
------------------------------------------

3. (SBU) DATT, Air Attache, and Econoff met with
representatives of Uzbekistan Airways (Havo Yollari in Uzbek
- HY), Uzbekistan Railways (Uzbekistan Temir Yollari in Uzbek
- UTI), and Korean Airlines (KAL) before the delegation's
arrival. Each of these companies was clearly interested in
the commercial possibilities of NGLOC, but wanted
re-assurance that NGLOC, if implemented, would be a
profit-making commercial venture. KAL, for its part, has
invested heavily in the international cargo hub being built
at Navoi in southwestern Uzbekistan and is eager to see a
return on its investment. UTI would benefit from potential
profit that would help it pay off large loans it used to
build the Guzar-Kom'gorgon and other lines in the
southeastern part of Uzbekistan. (NOTE: The UTI
representatives noted that although rail traffic had
increased 30 percent last year, this brings it back only to
the level it was at in 1991, the year of the breakup of the
Soviet Union. END NOTE)

VISITS TO BUSINESSES IN TASHKENT
--------------------------------

4. (SBU) The NGLOC delegation visited facilities operated in
and around Tashkent by Rosella Trading, Coca-Cola, and
Uz-Texaco. At Rosella Trading, the Uzbek distributor for
Proctor and Gamble (P&G), the delegation learned there is no
local production of P&G products. All are imported by truck
from Russia, Europe, and Turkey, with anywhere from 4-25
trucks arriving per week. Rosella then supplies the products
directly to stores, markets, and bazaars. Thirty percent of
Rosella's business is in Tashkent, another 30 percent is in
the Ferghana Valley, and the remainder is distributed through
the rest of Uzbekistan. Rosella officials reported they are
encountering increasing difficulty this year in converting
profits from Uzbek soums to U.S. dollars. It now takes up to

TASHKENT 00001287 002 OF 003

270 days for Rosella to convert its profits to dollars,
whereas last year it took only 100 days. (COMMENT: We have
heard similar complaints from other Western businesses
operating in Uzbekistan. END COMMENT) Consequently, Rosella
has been able to recoup the cost of its imports only through
last December and is now limiting its stock. Indeed,
Rosella's warehouses appeared to be only half full.

5. (SBU) At Coca-Cola the NGLOC delegation was treated to a
long tour of the clean, modern production facilities.
Coca-Cola's first production facility was opened in Tashkent
in 1994, followed by a second Tashkent plant in 1996 and a
facility in Namangan in 1998. Coke's Mega-Plant opened in
Tashkent in 1998. For the past several years Coca-Cola
production in Uzbekistan has doubled every year. Coke
imports its sugar from Europe, its concentrate from France,
and its plastic from Korea. Altogether, Coca-Cola employs
over 200 people in Uzbekistan ranging from low-level service
employees to high-level managers, chemists, and biologists
responsible for guaranteeing the purity of the bottled
product. In addition to local sales, Coca Cola's Uzbek
operation used to export its product to Afghanistan. These
exports ended once Afghanistan acquired its own Coca-Cola
bottling plant. (COMMENT: It proved surprisingly difficult
to arrange the NGLOC delegation's visit to Coca Cola. We
suspect that the local manager did not want to receive the
delegation until he received approval from his regional
office in Istanbul and also, perhaps, the GOU. END COMMENT)

6. (SBU) The U.S. joint venture Uz-Texaco briefed the team on
its operations and experiences working in Uzbekistan.
Uz-Texaco produces lubricants in Uzbekistan and exports a
large part of its production. Currently, the company
supplies some 20 percent of the Uzbek market for automobile
lubricants and 90 percent of the market for agricultural
lubricants. A significant part of its output comes from
low-grade petroleum refined in Bukhara which is suitable
primarily for Soviet-made equipment. Like other companies,
Uz-Texaco faces difficulties in currency conversion and other
vagaries of the business climate in Uzbekistan.

AMCHAM BLAZES THE WAY
---------------------

7. (SBU) The American Chamber of Commerce (AMCHAM) in
Tashkent played an important role during the NGLOC visit. In
addition to helping arrange several of the visits to local
businesses, it provided a suggested list of business
representatives to invite to an evening reception at the
Ambassador's residence on October 22. This reception was
well attended, with many local businessmen coming with
proposals for products and services they could provide in
support of NGLOC operations. On October 23 AMCHAM hosted a
sit-down meeting that brought the NGLOC delegation together
with commercial representatives who were able to leave
information about their companies.

COMMENT
-------

8. (SBU) AMCHAM members and the heads of smaller businesses
in Uzbekistan were clearly excited about the potential
business that NGLOC would bring. Indeed, AMCHAM treated the
NGLOC delegation's visit as a major business event. There is
strong interest among the business community in Uzbekistan to
work with the U.S. military on a commercial basis. As the
next delegation prepares its visit, people here will be
anxious to hear more details about the types of products and
services that could be the object of local procurement. The
airlines and the railroad will look for answers on the role
they would play in delivering goods to Afghanistan,

TASHKENT 00001287 003 OF 003

particularly via Navoi. Although Uzbekistan is a developing
country, there is a small part of the business community,
including several companies the delegation visited, that
operates fully at Western standards and could be reliable
suppliers for NGLOC. Expectations have been raised here,
making it essential that the next delegation arrive ready to
provide details on what, if anything, could be procured
locally and clarity regarding the various options for transit.
NORLAND

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