US embassy cable - 04YEREVAN2061

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 002061 
 
SIPDIS 
 
DEPT FOR EUR/CACEN, EUR/ACE EB/ESC, NEA/ARP 
 
E.O. 12958: DECL: 09/13/2014 
TAGS: ECON, ENRG, EPET, AM, IR 
SUBJECT: OFFICIAL VISIT OF PRESIDENT KHATAMI TO ARMENIA 
 
REF: YEREVAN 02019 
 
Classified By: DCM A.F. GODFREY FOR REASONS 1.4 (b) and (d). 
 
1. (C) During Iranian President's Mohammad Khatami's visit to 
Yerevan, September 8-9, the Armenian and Iranian governments 
signed seven agreements including the agreements concerning 
the partial financing and construction of an Armenian-Iranian 
gas pipeline.  The local press and the Armenian Ministry of 
Foreign Affairs (MFA) officials portrayed the visit as 
symbolically and economically important.  Press reports 
claimed that the visit signaled increased political and 
economic relations between Iran and Armenia. 
 
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GAS PIPELINE AGREEMENT 
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2. (C) On September 8-9 Iranian President Mohammed Khatami 
paid an official state visit to Armenia.  We met with MFA 
officials including Chief of the Middle Affairs division 
Karen Mirzoyan and Iran Desk Officer Garnik Badalian after 
the official visit to get a briefing on the substance of the 
visit.  They confirmed the details of the USD 30 million loan 
to the Armenian Energy Ministry (reftel).  Per the agreement, 
the Iranian construction company "Sanir" was named as the 
primary contractor.  Mirzoyan and Badalian agreed that the 
Armenian government still needed approximately USD 70 million 
to complete the pipeline and neither had a clear idea of the 
origin for the funding. However, both believed that once 
pipeline construction was started, it would be easier to find 
either GOAM or international funding to finish the project. 
Badalian believed that due to weather and bureaucratic 
realities, the actual construction of the pipeline would 
start in the spring of 2005.  Both Mirzoyan and Badalian were 
confident that gas would start to be imported from Iran by 
the agreed upon 2007 date. 
 
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ARMENIAN-IRANIAN GOVERNMENT AGREEMENTS 
-------------------------------------- 
 
3.  (C)  Mirzoyan and Badalian confirmed that the Armenian 
government and Iranian government signed the following 
agreements: 
     -- Agreement on Principles and Bases for Cooperation 
between the Republic of Armenia (GOA) and the Islamic 
Republic of Iran (GOI). 
     -- Memorandum of Understanding on the 5th Joint Session 
of Inter-Governmental Commission on Armenian Iranian ties. 
     -- Cultural Cooperation Programs for 2005-2007 between 
the GOA and the GOI 
     -- Memorandum of Understanding between the Customs State 
Committee of Armenia and the Iranian Customs Service on 
implementation of the Agreement on Administrative Assistance 
in Customs Affairs. 
     -- Memorandum of Understanding (MOU) on Cooperation 
between the Armenian and Iranian Ministries of Energy 
     -- Agreement on Financing the gas pipeline for 
Meghri-Kajaran section 
     -- Contract on Construction of the gas pipeline. 
 
 
4.  (C)  Mirzoyan and Badalian strongly felt that the MOU 
between the ministries of energy and the pipeline agreements 
were the most critical of Khatami's visit. Mirzoyan 
characterized most of the remaining agreements as more 
protocolary in nature and said that this visit was primarily 
about economic issues. Badalian stated that both sides had 
wanted to sign an agreement concerning the Kajaran tunnel, 
but due to time constraints and last minute unresolved 
details it was not possible.  Badalian believed that the 
details could be easily worked out and the agreement could be 
signed at the ministerial level in the near future.  Mirzoyan 
wryly observed that as slow as the Armenian MFA works, the 
Iranian MFA is twice as slow. 
 
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MFA VIEW OF A SUCCESSFUL VISIT 
------------------------------ 
 
5.  (C)  Mirzoyan and Badalian both felt that the visit was a 
success because it was the first visit of an Iranian 
president since the independence of Armenia.  They believed 
it also showed that Iran was able to balance it's political 
and economic interests between Azerbaijan, Armenia, and 
Turkey.  The GOA was also pleased that Khatami agreed to 
visit the genocide memorial.  Mirzoyan and Badalian were 
however concerned about what reaction the United States 
Government (USG) would have to Khatami's visit and were 
searching for any public or official reaction from the 
American press and the Department of State. 
 
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COMMENT 
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6.  (C)  While there is clear evidence that both the GOA and 
the GOI have taken concrete steps to try and increase the 
level of cooperation between both countries, serious doubts 
remain as to whether these joint projects will materialize 
and if they have any lasting effect on the economic and 
political relations between Armenia and Iran. 
EVANS