US embassy cable - 05YEREVAN1797

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 001797 
 
SIPDIS 
 
DEPARTMENT FOR EUR/ACE, EUR/CACEN, INR 
 
E.O. 12958: DECL: 10/04/2015 
TAGS: EAID, PREL, PGOV, AM 
SUBJECT: KERKORIAN'S LINCY FOUNDATION ROLLS OUT LATEST (60 
MILLION) PROGRAM 
 
 
Classified By: DCM A.F.Godfrey for reasons 1.4 (b,d). 
 
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SUMMARY 
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1. (C) Representatives of Amcit philanthropist and corporate 
mogul Kirk Kerkorian's Lincy Foundation told us September 25 
that their latest set of programs in Armenia would begin no 
later than mid-October.  The USD 60 million, two-year package 
of projects will include renovation of a major highway along 
the Armenia-Turkey border in the north of the country, 
physical upgrades for twenty of the country's most 
dilapidated schools and reconstruction of Yerevan's second 
tier ring roads.  As with earlier Lincy projects, only 
President Robert Kocharian and a core group of close advisors 
-- minus the MFA -- were involved in the planning phase of 
this latest program.  According to one Lincy representative, 
Kocharian initially wanted all of the USD 60 million budget 
to go to projects in Yerevan but eventually relented when one 
advisor counseled him that "ignoring the poor rural areas 
would look bad" in light of USG plans to invest heavily in 
the rural sector through the Millennium Challenge Account and 
other programs.  End Summary. 
 
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60 MILLION FOR HIGHWAYS, SCHOOLS AND STREETS 
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2. (C) Representatives of Amcit philanthropist and corporate 
mogul Kirk Kerkorian's Lincy Foundation told us September 25 
that their latest set of programs in Armenia would begin no 
later than mid-October.  A team of Lincy specialists will 
arrive in Armenia October 15 to finalize grant documents, 
ensure full political buy-in for the project, and begin 
issuing the first tranche of funds.  This much-anticipated 
second round of projects comes two years after the Lincy 
Foundation donated USD 110 million in a nationwide 
construction program that refurbished the country's major 
highways and cultural institutions (theaters and monuments) 
in downtown Yerevan. 
 
3. (C) The latest USD 60 million package of projects will 
include renovation of a major highway along the 
Armenia-Turkey border in the north of the country, physical 
upgrades for 19-20 of the country's most dilapidated schools 
and reconstruction of Yerevan's second tier ring roads.  Each 
of the project's three components boasts a USD 20 million 
budget.  One of the most ambitious projects is a new access 
road that will connect downtown Yerevan with the Komitas 
district in the city's northwest quadrant.  (Note:  While 
there is clearly a need to reduce traffic congestion in this 
part of the city, it is still unclear to us how this road 
expansion project will be implemented.  There have not been 
detailed feasibility studies of which Post is aware and 
Yerevan's Mayor has been relatively quiet about the project. 
End Note.)  Press reports have criticized this element of the 
project, claiming it will improve road access to the luxury 
homes of wealthy GOAM ministers but will do little to improve 
the lives of average citizens.  Lincy has not reacted 
publicly to these accusations to date. 
 
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CORE GROUP, MINUS THE MFA, CALLS THE SHOTS 
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4. (C) As during the first set of Lincy projects, a small 
group close to President Kocharian appears to be making the 
important decisions regarding this latest program.  Lincy 
Foundation representatives told us that Kocharian, 
Presidential Advisor Armen Gevorkyan, and Cabinet Chief of 
Staff Manuk Topuzian were the sole decision-makers and 
continue to manage Lincy-related information tightly within 
the GOAM.  One important difference this time around is that 
Minister of Foreign Affairs Vartan Oskanian has reportedly 
been excluded from the decision-making process after a 2004 
tussle in the press with Lincy Co-Chairman Harut Sassounian 
(Amcit) in which the two battled over who should take credit 
for the success of the first installment of Lincy projects. 
(Note:  Oskanian has been publicly supportive of Lincy's 
latest plans and has not hinted to Post that there is any 
tension between the MFA and Lincy.  Economic Development and 
Diaspora Relations Department contacts in the MFA, however, 
are mostly unaware of the details of this latest project, 
which seems to confirm the rumor about the MFA's exclusion. 
End Note.) 
 
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SENSITIVITIES MOVE LINCY TOWARD RURAL PROJECTS 
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5. (C) According to one Lincy representative, Kocharian 
initially wanted all of the current USD 60 million budget to 
go to projects in Yerevan but relented when one advisor (we 
assume Gevorgyan) counseled him that "ignoring the poor rural 
areas would look bad" in light of USG plans to invest heavily 
in the rural sector through the Millennium Challenge Account 
and other ongoing programs.  (Comment:  USG efforts in rural 
Armenia have also influenced the MFA to focus its 2006 
Diaspora Conference -- the largest gathering of Diasporans 
worldwide -- on rural poverty reduction.  MFA Senior Advisor 
Salpi Ghazarian, an Amcit, consulted informally with the 
Embassy before announcing the theme of the conference.  She 
said the MFA hoped a focus on rural poverty would create 
synergies with the USG's USDA and MCA programming.  End 
Comment.)  In addition, local Lincy office chief Armen 
Gyulkhasian told us earlier this year that there was a 
perception among some in Armenia that Lincy's first tranche 
of Yerevan projects was designed to create an "illusion of 
prosperity" and bolster the Kocharian administration.  He 
hinted that Lincy chose the current slate of projects in an 
effort to counter this perception. 
 
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COMMENT:  READY OR NOT, HERE COME THE DOLLARS 
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6. (C) The Lincy Foundation's decision to move quickly on the 
next tranche of projects will further strengthen Armenia's 
2005 economic indicators.  As with the previous Lincy 
program, the injection of funds into the construction sector 
will create jobs, keep a number of related businesses liquid 
and will certainly not hurt Yerevan's hot real estate market. 
 Political ramifications, while harder to quantify, are no 
less likely.  Kocharian can tout his ongoing relationship 
with Kerkorian and the Lincy Foundation as evidence of his 
friendly relations with the Armenian Diaspora community 
beyond Russia.  The Lincy projects will come to a close as 
Kocharian ends his second term in 2008 and will likely be 
part of the "legacy" he and his advisors will choose to 
publicize -- and/or use as a convenient campaign tool for 
what we expect to be a hand-picked successor. 
EVANS