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S E C R E T SECTION 01 OF 03 BAKU 000054 

SIPDIS 

COMMERCE FOR D.STARKS 
EEB/CBA FOR T.GILMAN 
DEPT PLEASE PASS TO USTR FOR C. MORROW AND P. BURKHEAD 

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.