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S E C R E T SECTION 01 OF 03 BAKU 000054
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E.O. 12958: DECL: 01/27/2030
TAGS: ECON EINV EIND ETRD KCOR PINR PGOV AJ
SUBJECT: AZERBAIJAN: WHO OWNS WHAT? PART 1 - THE FIRST
LADY'S FAMILY (C-RE9-02493; C-RE9-02492)
REF: 08 BAKU 93
Classified By: XXXXXXXXXXXXX, for reasons 1.4 b and d.
1. (S) SUMMARY: This cable is the first in a series that
will highlight the most powerful families in Azerbaijan, both
in terms of economic and political power. In this opening
issue, we profile the family of First Lady Mehriban Aliyeva
(born Mehriban Pashayeva), and her uncle, former Azerbaijani
Ambassador to the United States and current Deputy Foreign
Minister Hafiz Pashayev. Mehriban Aliyeva, besides being the
wife of the President, is a Member of Parliament and head of
the Heydar Aliyev Foundation, a non-transparent organization
that bills itself as a vehicle for charitable works. Other
members of the Pashayev family hold powerful positions in
government and academia, and are associated with powerful
business groups outside the energy sector. The Pashayevs are
known to operate extensively in Baku's rapidly expanding
construction/real estate market, and are well invested in the
financial and telecommunications sectors. End Summary.
2. (C) Observers in Baku often note that today's Azerbaijan
is run in a manner similar to the feudalism found in Europe
during the Middle Ages: a handful of well-connected families
control certain geographic areas, as well as certain sectors
of the economy. By and large, this seems to be the case,
with general agreement among leading families to divide the
spoils and not disturb one another's areas of business or
geographic control. The families also collude, using
government mechanisms, to keep out foreign competitors, and
entities such as the State Border Services, State Customs and
tax authorities create barriers that only the best connected
can clear. As a result, an economy already burgeoning with
oil and gas revenues produces enormous opportunity and wealth
for a small handful of players that form Azerbaijan's elite.
This series of reports will describe the businesses they run,
the regions they control, and the ministries they keep under
their thumbs.
3. (U) Biographical note: Similar to Russian tradition,
many Azeris still utilize the Slavic naming convention where
the last letter(s) of a person's last name indicates gender.
Example: Pashayev (male) / Pashayeva (female).
Mehriban's Heydar Aliyev Fund
-----------------------------
4. (S) First Lady Mehriban Aliyeva (born Mehriban Pashayeva)
is no doubt the most famous member of this clan, playing
multiple roles and holding multiple titles. Aside from being
the President's wife, she is President of the Heydar Aliyev
Fund, which proclaims to be a humanitarian organization
constructing schools, hospitals, and youth centers, among
other projects. These projects provide a constant array of
goodwill photo opportunities and advertisements for the First
Lady, as she cuts ribbons on new schools and cultural
centers. The Fund has its critics, however, who claim that
it often fails to provide continued financing for the
operation of these projects. Much funding seems to be geared
towards efforts to explain Azerbaijan's side of the
Nagorno-Karabakh conflict, for example in the form of books,
brochures and other materials describing what they call a
"genocide by Armenia" in the town of Khojali.
5. (S) Moreover, the organization tends to be
non-transparent. It is unclear where the money for the Heydar
Aliyev Fund's activities comes from, though many assume that
oil revenues fill the coffers. There are multiple anecdotal
reports of employees of government ministries being forced to
make contributions to the Fund. The Fund is located in one
of the largest historical buildings in downtown Baku,
towering even over the SOCAR (State Oil Company)
Headquarters. One opposition politician recently told poloff
that receipts of donations to the Foundation are a type of
"get out of jail free card" for local officials, meaning that
if these officials can show that they donate regularly,
higher level officials will allow them to operate businesses
and other activities locally without interference.
BAKU 00000054 002 OF 003
6. (C) Aliyeva is also a Member of Parliament and Goodwill
Ambassador for UNESCO and ISESCO (the Organization of the
Islamic Conference cultural organization). A recent survey
of journalists accredited to Parliament declared her "the
Most Active MP of 2009 in making legislative initiatives."
Embassy monitors, who have attended nearly every session over
the past year, have never seen her present in Parliament, an
institution that in general is not known for working
independently outside the realm of the Presidential Apparat.
When she received Members of Congress in 2008, she appeared
poorly informed about political issues and could only respond
knowledgeably about issues relating to the Heydar Aliyev Fund
(reftel).
Academics and Other Endeavors
-----------------------------
7. (S) Other notable Pashayevs include the First Lady's
sister Nargiz Pashayeva, who heads the branch of Moscow State
University located in Azerbaijan; the First Lady's father
Arif Pashayev, who leads the National Aviation Academy; and
the First Lady's uncle Hafiz Pashayev (brother of Arif
Pashayev), who is a Deputy Minister of Foreign Affairs and
the Director of the Azerbaijan Diplomatic Academy. Hafiz
Pashayev was also Azerbaijan's first Ambassador to the United
States, serving in Washington DC for over 13 years. The
Deputy Foreign Minister these days spends much time focusing
on his Diplomatic Academy, which is constructing an elaborate
new compound (modeled after NFATC Arlington) in central Baku.
As a whole, the family, which generally speaks Russian
better than Azeri, is considered the single most powerful
family in Azerbaijan.
8. (S) The Pashayev family's center of power is considered
to be Baku, where Mehriban Aliyeva's parents were born, and
the Absheron peninsula, with Aliyeva "representing" in
parliament a constituency that surrounds Heydar Aliyev
International Airport. Aliyeva has also arranged for the
building of the Shuvelan designer shopping center in her
constituency, which stands out among the crumbling houses in
the area. The family is believed to exert control over the
Ministry of Culture and Tourism, the Ministry of Youth and
Sport, the Ministry of Health, and the Ministry of Education,
simply because these ministries fall under the areas
traditionally of interest for a First Lady. In that regard,
the Pashayevs have been active in promoting the construction
of museums and other cultural sites in Baku, and at a time
were associated with an effort to open a branch of the
Guggenheim museum along Baku's waterfront. Mehriban
Aliyeva's collection of contemporary art also provided the
foundation for Baku's new Museum of Modern Art, which opened
quietly last fall. The museum was designed by Altay
Sadikhzade, a local artist/designer married to Nargiz
Pashayeva. No expense was spared in the construction of the
museum, which highlights Soviet-era Azerbaijani artists,
including Altay (whose portraits of Mehriban, Nargiz and Arif
are at the center of the galleries).
A Vast Empire
-------------
9. (S) The Pashayev family controls Pasha Holding, a
conglomerate that includes Pasha Bank, Pasha Insurance, Pasha
Construction, and Pasha Travel. The family owns local TV
station Lider TV as well as cosmetics producer "Nargiz." The
family is believed to control several of the top ten banks in
Azerbaijan, including Bank Standard and Kapital Bank, in
addition to the newest, Pasha Bank. In November 2009, Pasha
Holding opened Baku's first, and so far only, Bentley
dealership.
10. (S) Nar Mobile (which is officially registered as
Azerfon) is also linked to this family, and speculation is
that the company is named "Nar" not only after the Azeri word
for pomegranate but also after the First Lady's sister
Nargiz. According to XXXXXXXXXXXXXXXXXX,
when President Aliyev visited the Azercell booth recently at
the Baku telecom expo, he said, "So this is what the
BAKU 00000054 003 OF 003
competition looks like." Nar Mobile/Azerfon has been growing
rapidly and was recently awarded the only 3G license in
Azerbaijan. Market leader Azercell had its license
application denied for reasons that remain unclear. There
have also been commercial disputes between Azercell and Nar
Mobile/Azerfon. XXXXXXXXXXXX says that while
Azercell always pays its interconnection fee responsibilities
(for passing a call from one network to the other) to Nar
Mobile/Azerfon, the latter does not reciprocate. In protest,
Azercell blocked its subscribers (who form roughly 60 percent
of the lucrative Baku market) from making calls to or
receiving calls from Nar Mobile/Azerfon users (who make up 8
percent of the Baku market). Pashayev-controlled Nar
Mobile/Azerfon went to court and not surprisingly received a
verdict within hours that ordered Azercell to restore
interconnectivity.
11. (S) Construction projects in Baku are generally beset by
a number of government-imposed delays, such as the tax man,
the fire marshal, and safety engineers battling for their own
slices of the corruption pie. This is particularly true of
smaller scale projects that do not have a "krysha" (Russian
criminal slang for an official "roof," or protector), such as
a government minister. Not surprisingly, projects by Pasha
Construction face few, if any, of these setbacks and are
generally among the fastest to be built in Azerbaijan.
Examples include the Shuvelan Shopping Center, the Port Baku
Towers and Residences, The Four Seasons Hotel, the Absheron
J.W. Marriott Hotel and Residences, and the Amburan Marriott
Beach Resort. Three workers were killed on January 11 when
they fell from a building under construction on high-rent
Neftchiler Prospect. Initial media reports said this was a
Pasha Construction site; within hours, retractions appeared
and said it was in fact a "Geygapi Construction" site.
A First Lady, Too, in Fashion
-----------------------------
12. (S) The Pashayev women are known to be fashion-conscious
and daring, far more so than the average woman in majority-
Muslim Azerbaijan. First Lady Mehriban Aliyeva appears to
have had substantial cosmetic surgery, presumably overseas,
and wears dresses that would be considered provocative even
in the Western world (reftel). On television, in photos, and
in person, she appears unable to show a full range of facial
expression. The First Lady and her two daughters hosted
Second Lady Lynne Cheney for dinner in September 2008. Prior
to the Second Lady's arrival, while the three ladies were
waiting for Mrs. Cheney's car, one Secret Service agent asked
"which one of those is the mother?" Emboffs and White House
staff studied the three for several moments, and then Emboff
said, "Well, logically the mother would probably stand in the
middle."
Comment: Pashayevs Worth Talking to
-----------------------------------
13. (C) By any measure, the Pashayevs are a family to be
reckoned with in Azerbaijan. First Lady Mehriban Aliyeva has
traveled to the United States on multiple occasions, with her
husband and separately, and been the celebrated guest at
events hosted by the U.S.-Azerbaijan Chamber of Commerce and
other organizations. XXXXXXXXXXXXXX
has been an important interlocutor for the U.S.
Embassy in Baku and official Americans traveling to
Azerbaijan. He has not always been able to deliver outcomes
that we promote -- such as on difficult issues like the
jailed bloggers -- but has been wlling to hear us out and
relay those messages appopriately. End Comment.
14. (C) The next report on "Who Owns What" will profile the
Heydarov family. Patriarch Kemaladdin Heydarov is the
Minister of Emergency Situations and the former Chairman of
the State Customs Committee. A wealthy monopolist, he has
been called "the most powerful man in Azerbaijan," although
Post believes his family is actually second in power to that
of the President and First Lady.