06MOSCOW4615, IRAN AND ENERGY THE FOCUS OF RUSSIAN-GERMAN TALKS

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Reference ID Created Released Classification Origin
06MOSCOW4615 2006-04-28 14:08 2011-08-30 01:44 SECRET Embassy Moscow

VZCZCXRO8310
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV
DE RUEHMO #4615/01 1181408
ZNY SSSSS ZZH
O 281408Z APR 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5102
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

S E C R E T SECTION 01 OF 02 MOSCOW 004615 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR E 
 
E.O. 12958: DECL: 04/28/2016 
TAGS: PREL PARM ETRD ENRG GM RS
SUBJECT: IRAN AND ENERGY THE FOCUS OF RUSSIAN-GERMAN TALKS 
 
REF: A. MOSCOW 425 
 
     B. BERLIN 1132 
 
Classified By: Ambassador William J. Burns.  Reasons:  1.4(B & D). 
 
1.  (C)  Summary:  President Putin and Chancellor Merkel 
focused on Iran and energy issues during largely positive 
talks on April 26-27 in the Siberian city of Tomsk.  Putin's 
message to Merkel on Iran was that Moscow was willing to put 
diplomatic pressure on Tehran but was extremely uneasy that 
UN Security Council action would be a slippery slope that 
could eventually lead to the use of force.  Russian experts 
were skeptical about Iran's nuclear progress.  German 
Ambassador Schmid told the Ambassador that Putin had 
underlined to Merkel that Russia would be a reliable energy 
supplier.  Publicly, Putin angrily attacked European critics 
of Gazprom's expansion plans and welcomed a deal between 
Gazprom and BASF that would allow Gazprom to expand into the 
European retail market while giving BASF interests in a 
Siberian gas field.  Merkel raised Belarus and Russia's 
implementation of its NGO law; Putin responded by arguing 
that isolation would not benefit democratic development in 
Minsk and claimed that the GOR was responsive to Russian 
civil society.  End Summary. 
. 
THE SONG REMAINS THE SAME 
------------------------- 
 
2.  (C)  President Putin and Chancellor Merkel headed up 
large inter-ministerial teams that met for talks for two days 
in Tomsk, a relatively prosperous Siberian city whose 
natural-resource based economy is complemented by a large 
academic community.  According to press reports, the GOR 
selected Tomsk as the venue of the eighth annual 
Russian-German consultations in order to highlight investment 
opportunities outside of Moscow and St. Petersburg.  German 
Ambassador Schmid, who participated in some of the talks, 
told the Ambassador that the leaders met for several rounds, 
including an extended one-on-one and two hours in a 
restricted format (Putin, Merkel, Russian Presidential 
Foreign Affairs Advisor Sergey Prikhodko and Merkel's Foreign 
Policy Advisor Christoph Heusgen).  Foreign Ministers Lavrov 
and Steinmeier met twice separately as well.  In addi4\QpDUQTomsk residents.  Newspapers contrasted the increasingly 
heated dispute between Gazprom and some of its European 
critics about the firm's market power and expansion plans and 
the ease with which a major gas deal was reached at the 
summit between Gazprom and German chemical giant BASF. 
Putin's sharp response to Gazprom's critics at the wrap-up 
also received attention.  Putin charged that Europeans were 
trying to res@e\Q1.@ need for international agreement and a 
discussion of future steps following the April 28 IAEA 
report.  Schmid told the Ambassador that the Germans did not 
hear much that was new from the Russians during the talks. 
Moscow's position was still shaped largely by its "Iraq 
experience," with Russia fearing that action in the UN 
Security Council would create a slippery slope leading to the 
use of force.  Russia was willing to use diplomatic pressure, 
but remained opposed to sanctions. 
 
5.  (S)  On the margins of the talks, the Germans and 
Russians exchanged intelligence assessments about Iran's 
program. The Russian experts were more skeptical about the 
 
MOSCOW 00004615  002 OF 002 
 
 
status of the program and had concluded that Iran had not yet 
mastered running a centrifuge cascade.  They were not 
convinced that Tehran was any closer than 6-8 years from 
developing a nuclear weapon.  Russian diplomats were looking 
to the May 2 Political Directors meeting and the May 9 
Foreign Ministers meeting to determine next steps, but the 
Germans concluded that it was going to be a tough slog to 
persuade the Russians to go much beyond cajoling Tehran. 
. 
BIG ENERGY DEAL 
--------------- 
 
6.  (C)  Schmid said that energy discussions had been more 
cordial and the atmosphere much easier than the Germans 
expected, given the raft of angry public statements lately by 
Gazprom and Putin about energy security.  There was no 
banging on the table, and the Russians had gone out of their 
way to emphasize their reliability as suppliers.  Putin told 
Merkel he appreciated the straightforward way in which the 
Germans conducted energy discussions, in contrast to some in 
the U.S. who were attempting to "contain" Russia's energy 
ambitions. 
 
7.  (C)  The gas deal between Gazprom and BASF highlighted 
the extensive economic talks at the summit, with both sides 
heralding the USD 33 billion annual trade turnover (Russian 
figures for 2005).  Schmid confirmed press stories that under 
the gas deal, Gazprom will increase its stake in the Wingas 
energy trading unit of BASF (and gain a possible role in 
German retail sales) to one share short of majority control. 
In exchange, BASF through its Wintershall subsidiary would 
gain almost a 25 percent share in a large untapped Siberian 
natural
gas field, the Yuzhno-Russkoye deposit.  Another 
expected deal, between E.ON, the former German natural gas 
monopoly, and Gazprom was unexpectedly delayed.  In addition 
to energy talks, the Russian press claimed that Volkswagen 
was interested in opening an assembly plant in Russia by 2007 
to produce Golf and Skoda-Octavia models. 
. 
NEIGHBORHOOD AND DEMOCRACY 
-------------------------- 
 
8.  (C)  According to Schmid, the Germans brought up Belarus 
with the Russians, drawing a standard Russian response 
arguing that isolation would only play into the hands of the 
authoritarians.  Moscow did confirm that it intended to raise 
the price of gas it supplies to Minsk to market rates.  There 
was a pointed discussion on the CFE Treaty; Moscow argued 
that it had acted in good faith in reaching an agreement last 
year with Tbilisi to withdraw its military bases and was 
unable at this point to withdraw ammunition and troops from 
Transnistria.  The Russians also urged increased efforts to 
address narcotics trafficking from Afghanistan. 
 
9.  (C)  Merkel raised the NGO law with Putin, pointing out 
that the West would closely monitor the law's implementation. 
 Putin responded that prior Russian law on NGOs had been 
inadequate and that Moscow had to regularize the status of 
NGOs.  He pointed out that the Russian government was 
responsive to civil society pressure, noting his decision the 
day before to change the route of the Eastern Siberian 
Pacific Ocean pipeline to address environmental concerns. 
. 
COMMENT 
------- 
 
10.  (C)  The main message from this summit was one of 
continuity.  Despite some static in Putin's first meeting 
with Merkel, the sides now seem focused on the economic and 
particularly the energy ties that drive the relationship. 
Russia has invested heavily in its bilateral ties, as 
reflected in the massive effort needed to move half the 
Cabinet to Tomsk for these meetings, and it will remain 
willing to engage at all levels to protect its interests. 
Merkel's efforts to rebalance Germany's relationship will 
make her a more challenging interlocutor for Putin than 
former Chancellor Schroeder was on certain issues, such as 
democracy or "the neighborhood," but we see no reason to 
doubt that Germany will remain committed to a close 
relationship with Russia.  As the German DCM told us in a 
separate meeting, "The talks in Tomsk indicate that the 
German-Russian 'strategic partnership' will continue, despite 
the Chancellor's more critical approach." 
BURNS

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