06MOSCOW4572, 4.5M U.S. Investment, Andy Warhol and American Corner

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Reference ID Created Released Classification Origin
06MOSCOW4572 2006-04-27 12:59 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Moscow

VZCZCXRO6654
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHMO #4572/01 1171259
ZNR UUUUU ZZH
R 271259Z APR 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 5023
INFO RUCNCIS/CIS COLLECTIVE
RUEHLN/AMCONSUL ST PETERSBURG 2862
RUEHYG/AMCONSUL YEKATERINBURG 1576
RUEHVK/AMCONSUL VLADIVOSTOK 1360
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 04 MOSCOW 004572 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC for 4231/ITA/MACK/RISD/JBROUGHER/MEDWARDS 
 
E.O. 12958: N/A 
TAGS: ECON EINV PGOV SOCI PINR RS
 
SUBJECT: $4.5M U.S. Investment, Andy Warhol and American Corner 
Reopening in Samara 
 
MOSCOW 00004572  001.2 OF 004 
 
 
1. (U) Sensitive But Unclassified - Not for Internet 
Distribution. 
 
2. (SBU) SUMMARY: Ambassador Burns' visit to Samara April 17-18 
revealed a city ripe for additional U.S. investment and eager for 
increased contacts and exchanges with American academic and 
business counterparts.  The Ambassador participated in a ribbon- 
cutting ceremony for a new production line at the local Alcoa 
plant, reopened the American Center, and visited the Alcoa- 
sponsored Andy Warhol exhibition.  Government, business, civil 
society representatives and students uniformly emphasized: 
-- The region's desire to attract more U.S. investment and 
partnerships with U.S. firms, as well as the difficulties faced 
by U.S. companies as they expand beyond Moscow; 
-- The economic and social benefits that various exchange 
programs and partnerships bring to Samara; and 
-- The need for greater access to information about studying in 
the United States and the student visa application process.  END 
SUMMARY. 
------------------------------ 
U.S. BIGGEST FOREIGN INVESTOR 
------------------------------ 
3. (SBU) Ambassador Burns, accompanied by Emboffs from the 
Foreign Commercial Service and Public Affairs section, visited 
Samara April 17-18.  In Governor Titov's absence, the Ambassador 
met with acting Vice Governor and Minister of Economic 
Development, Trade and Investment Gabibullin Khasaev, and 
Minister of Education Valeriy Putko.  (Khasaev is considered one 
of Governor Titov's closest confidants and a personal friend.) 
Khasaev emphasized the importance of U.S. investment, stating 
that U.S. companies were involved in both direct investment and 
joint ventures and represented the largest percentage of foreign 
investment in the region.  Asked about plans to increase 
transparency within the taxation system and improve overall 
stability in the regional market place as a stimulus for further 
foreign investment, Khasaev replied that the regional government 
had established an office to provide advice and information on 
proposed legislation and how its implementation might affect 
business. 
 
4.  (SBU) Khasaev also discussed the creation of a special 
economic trade zone in nearby Togliatti.  He hoped that the trade 
zone, along with its associated infrastructure development, 
including construction of a super highway, would bring more 
foreign investment to the region and enhance access to markets 
for regional agricultural goods and local small businesses.  The 
Ambassador observed that such a wide range of projects would 
create many opportunities for our two countries and referred them 
to the Embassy's Commercial Section to further develop these 
opportunities. 
 
------------------- 
EXCHANGES WIN-WIN 
------------------- 
5. (SBU) Commenting on the implementation of Putin's education 
initiative, one of the country's four national priority projects 
-- other areas include health care, affordable housing, and 
agriculture -- Khasaev said the goal was to improve access to 
higher education for future generations of Samara citizens.  In 
this context Regional Minister of Education Valeriy Putko 
discussed the plan to create a national university in Samara that 
would have greater ties with U.S. universities.  Putko mentioned 
that a meeting with representatives from the U.S. State of 
Georgia had led to a discussion about the possibility of an 
exchange program that would send Russian mathematics teachers to 
schools in that state.  Speaking more broadly of the success of 
U.S.-Russian exchange programs; Khasaev commented that many 
residents in the region had received training through Open World 
and other programs focusing on political development.  He said 
such programs were instrumental in developing the region's 
management capabilities, including governmental affairs.  He and 
the Ambassador discussed other programs that have promoted 
bilateral cooperation, including the Ambassador's participation 
in an "Education for All" roundtable and a future program being 
created through Embassy Moscow and U.S. and Russian businesses to 
encourage and support young entrepreneurs. 
 
--------------------------------------------- ------------------ 
ALCOA OPENS NEW PRODUCTION LINE AND SPONSORS WARHOL EXHIBITION 
--------------------------------------------- ------------------ 
6. (SBU) The centerpiece of the Ambassador's visit was his 
participation in the ribbon-cutting ceremony for a new production 
line at Alcoa's Samara facility.  The USD 4.5 million slitting 
line is part of an overall USD 80 million commitment that Alcoa 
 
MOSCOW 00004572  002.2 OF 004 
 
 
will invest in capital improvements and technology and 
environmental, health, and safety progra
ms at its Samara and 
Belaya Kalitva (Rusal) plants.  Alcoa purchased the two 
facilities last year and the USD 80 million will serve to 
strengthen the global competitiveness of both plants.  It is 
estimated that new slitting line will pay for itself in two years 
due to a projected increase in demand in the can sheet market. 
The Ambassador, Alcoa Russia's President, Bill O'Rourke, Khasaev, 
and the Speaker of Samara's Regional Duma, Victor Sazonov, opened 
the new production line. 
 
7.  (U) Alcoa employs 5,751 people at its Samara facility and has 
a reputation for being socially responsible.  Alcoa Russia has 
provided support to veterans of WWII in Samara, established 
charity and health funds, and recently collaborated with the 
Samara Museum of Art to host the city's first Andy Warhol 
exhibition.  Alcoa's latest initiative is its Technical Education 
Support Program, which provides a number of scholarships for 
Russian students, including those studying at the Samara State 
Aerospace University (SSAU).  The purpose of the program is to 
boost the prestige of technical education, which was undermined 
by dramatic changes in Russian society following the breakup of 
the Soviet Union.   (The lack of sufficiently qualified workers 
in both vocational and technical fields was a concern also raised 
during the Ambassador's meeting with local representatives of 
U.S. firms.) 
 
8.  (U) At an evening reception in honor of the Warhol 
exhibition, the Ambassador commended officials from Alcoa, the 
Samara Museum of Art, and the Ministries of Culture and Education 
for working together to make the exhibition a reality.  He called 
on other U.S. and Russian firms to join forces and resources with 
Samara's civil society and government entities to further 
cooperation on future public-private projects that would benefit 
the broader community. 
 
--------------------------------------------- ------------ 
GOOD NEWS FOR BIG US FIRMS BUT CLIMATE STILL NOT PERFECT 
--------------------------------------------- ------------ 
9.  (SBU) Ambassador Burns hosted a roundtable April 18 for U.S. 
companies in the Samara region.  Representatives from GM AvtoVaz, 
Packard Electrical Systems (Delphi), Tenneco Automotive, Pepsi, 
Coca-Cola, CitiBank, ExpoPul (New Sensor), Marriott Renaissance 
Hotel, Samara Cable Company (Corning), and   Amerada Hess 
attended.  (Note:  Amerada Hess is 80% owner of SamaraNafta, a 
small oil producer with a very promising production future - 
currently producing approximately 7,000-8,000 b/d and aiming for 
50,000 b/d.  Amerada Hess believes it is the largest American 
investor in the Samara region with around $500 million invested.) 
The majority of the companies reported growth in the region and 
said local officials seemed supportive of foreign investment. 
All were very interested in the latest status concerning Russia's 
WTO accession and how it might affect commercial relations 
between the U.S. and Russia.  Several companies voiced concerns 
about the vagaries and inconsistencies of Russia's tax system. 
Other issues of concern included:  lack of qualified workers with 
needed vocational, technical and analytical skills, unfair 
customs duties, high inflation, and lack of access to financing. 
The dean of the group, General Manager of GM/AvtoVAZ Richard 
Swando believes the next important step for development of their 
businesses would be availability of financing.  The ExpoPul 
Director General, Vladimir Chinchikov, updated the Ambassador on 
the company's current business dispute with RBE Saratov, noting 
that ExpoPul continued to seek the support and assistance of the 
U.S. Embassy to resolve the situation.  Overall, company 
representatives seemed pleased with how their businesses were 
growing/operating in the Samara region. 
 
--------------------------- 
AMERICAN CORNER REOPENING 
--------------------------- 
10. (SBU) The Ambassador reopened the American Corner - now known 
as the American Language and Cultural Center - in its temporary 
location at the Regional Research Library.  (Note: The previous 
Director of the Regional Research Library closed the Corner on 
January 1, 2006 when PAS refused to meet her rent demands.)  Over 
70 USG exchange program alumni, the Library Director, and other 
officials gathered for an informal reception celebrating the 
reopening of the Center and introducing the recently hired 
Director, Yelena Lugavaya.  In FY05, prior to being closed, the 
Corner served about 185 visitors a month, the majority of whom 
were USG exchange program alumni.  With over 1000 alumni, the 
Samara region has one of the largest concentrations of alumni 
outside Moscow and includes participants of Open World, FLEX and 
 
MOSCOW 00004572  003.2 OF 004 
 
 
Business for Russia/Community Connections exchange programs.  The 
club includes politicians, lawyers, accountants, business people, 
professors, and teachers.  The Samara alumni are actively 
involved in community service projects, including the adoption of 
a city park on Earth Day and raising money and gathering supplies 
for children at a local orphanage.  It was due in large part to 
alumni complaints about the unfair closing of the Corner that the 
new Regional Library Director, Tatyana Kolokolova, allowed the 
Center to reopen.  (Note:  An Open World alumna Kolokolova has 
been extremely positive in her dealings with PAS, and, in 
addition to reopening the Center in a temporary location, has 
agreed to help identify a more prominent, long-term space in the 
library's main building.  The new Center will expand services by 
offering English language classes and educational consulting.) 
 
--------------------------------------------- ----- 
AEROSPACE UNIVERSITY STUDENTS KEEN TO STUDY IN US 
--------------------------------------------- ----- 
11.  (SBU) Ambassador Burns met with over 80 faculty and students 
at Samara State Aerospace University (SSAU) for a frank 
discussion on U.S.-Russia relations, U.S. foreign policy, and 
opportunities to study in the U.S.  Students' questions focused 
mainly on the opportunities to study in the U.S. and comparisons 
between the education systems of the U.S. and Russia.  They 
expressed interest in learning more about studying in the U.S. 
and changes to the student visa application process.  The 
Ambassador provided students with information about a proposed 
exchange program that would allow young Russian and U.S. 
entrepreneurs to gain on-the-job experience by working for a set 
amount of time for American or Russian companies.  He also 
suggested that students visit the reopened American Center to 
meet with the Center's Education Advisor.  Students also asked 
pointed questions about U.S. policy, the U.S. invasion of Iraq 
and withdrawal of troops, U.S. interest in Russia and its 
neighbors, and Russia's current economic situation and future. 
SSAU is one Russia's leading academic institutions with 10,500 
students studying at ten faculties in 27 specialty areas 
including: aircraft construction, aerospace engineering, radio 
engineering, information science an
d its newest faculty - 
economics and management.  The university has more than 700 
teachers and boasts 64 members of the Russian Academy of 
Sciences. 
 
--------------------------------------------- ------------------- 
MEDIA OUTREACH; PHOTO REPORT: DAY IN THE LIFE OF THE AMBASSADOR 
--------------------------------------------- ------------------- 
12. (SBU) The Ambassador met with representatives from five local 
media outlets.  In response to questions about the future of 
Russian accession to the WTO, the Ambassador said he expected 
Russia to be able to enter the WTO prior to the G-8 summit in 
July. (Note:  Subsequently, his answer was run by Interfax 
throughout Russia and abroad.)  Other issues discussed included 
the future of U.S. cooperation in the field of space exploration, 
exchange opportunities between the U.S. and Russia, the Alcoa 
investment, and the Warhol exhibition.  Local media gave 
considerable play to the Ambassador's trip to the region and the 
Alcoa ribbon--cutting ceremony.  A photojournalist from the 
Moscow-based "Ogonyok" weekly magazine accompanied the Ambassador 
throughout the trip.  On April 24 "Ogonyok" published a photo 
report entitled, "A Day in the Life of the U.S. Ambassador to 
Russia." 
 
----------------------------------- 
EQUAL ACCESS TO EDUCATION FOR ALL 
----------------------------------- 
13.  (SBU) On April 17, the Ambassador spoke at an "Education for 
All" roundtable to raise awareness of the importance of equal 
access to educational opportunities for people with disabilities. 
"Association Desnitsa", the leading local NGO that defends the 
rights of children and adults with disabilities and which 
receives support from USAID-funded Perspektiva, organized the 
roundtable.  Samara's Deputy Minister of Education, Yuriy 
Zalepukhin, representatives of Samara disability rights NGOs, 
parents' groups, and educational institutions, along with 
disabled adults and youth participated in the forum.  All 
participants voiced their willingness and readiness to move 
forward to resolve issues relating to the integration of disabled 
children into mainstream schools and to open new opportunities 
for all disabled children in the Samara region.  The event was 
well covered in the media, including TV news spots on April 17 
and 18, which highlighted the Ambassador's participation, as well 
as interviews with some of the disabled persons in attendance. 
 
------- 
 
MOSCOW 00004572  004.2 OF 004 
 
 
Comment 
------- 
14. (SBU) During his visit, the Ambassador found that Samara is 
doing well in attracting substantial U.S. investment, including 
companies such as GM, Delphi, Alcoa, Amerada Hess, Pepsi, Coca- 
Cola, Citibank, Marriott Hotels, and Corning.  Regional leaders 
recognize Samara's importance as one of Russia's top industrial 
regions and appear keen to take further steps to improve 
opportunities for foreign investment.  Only time will tell 
whether the Special Economic Zone planned for Togliatti and other 
regional initiatives, including creation of a national university 
and construction of a super highway will be implemented in a way 
that brings greater transparency, stability and economic benefits 
to the region and its citizens. 
 
ADDITIONAL CLEARS: DOE: MWHITNEY, USAID: TMYERS 
 
BURNS

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