Daily Archives: September 21, 2006

06MOSCOW10607, RUSSIA PREEMPTS SAAKASHVILI UNGA SPEECH: UNOMIG

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Reference ID Created Released Classification Origin
06MOSCOW10607 2006-09-21 16:03 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO6174
OO RUEHDBU
DE RUEHMO #0607/01 2641603
ZNY CCCCC ZZH
O 211603Z SEP 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2721
INFO RUCNCIS/CIS COLLECTIVE IMMEDIATE
RUEHXD/MOSCOW POLITICAL COLLECTIVE IMMEDIATE

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 010607 
 
SIPDIS 
 
SIPDIS 
 
MOSCOW 10366, MOSCOW 10439 
 
E.O. 12958: DECL: 09/21/2016 
TAGS: PREL PGOV RS GG
SUBJECT: RUSSIA PREEMPTS SAAKASHVILI UNGA SPEECH: UNOMIG 
RESOLUTION 
 
 
Classified By: Deputy Chief of Mission Daniel Russell: 1.4 (b, d). 
 
1.  (C)  Summary:  Convoking the Friends of Georgia on 
September 21, Russian Deputy Foreign Minister Karasin 
expressed concern over the deteriorating status of 
Georgian-Abkhazian relations, passed draft language on an 
UNOMIG resolution that condemns -- sharply and at length -- 
GOG operations in the Kodori gorge (see para. 9 for full 
text), detailed undemocratic actions by the GOG, reiterated 
that Russia would maintain its peacekeeping commitments and 
added that without CIS peacekeeping forces there is no 
justification for UNOMIG.  Separately, Karasin told the 
Ambassador that the resolution text was open to negotiation 
and Russia simply wanted to circulate a draft before FM 
Lavrov's upcoming meetings in New York.  End Summary 
 
2.  (C)  On September 21, Russian Deputy Foreign Minister 
Grigory Karasin convoked the representatives of the Friends 
of Georgia, noting that the importance of the topic made it 
imperative to meet; in particular, the deterioration in the 
status of Georgian-Abkhaz relations.  According to UNOMIG 
data, Karasin stated, the GOG had refused to fully withdraw 
its troops and treaty-limited equipment from the Kodori 
gorge, as stipulated by the Moscow Agreement, and the GOG had 
impeded the free movement of the CIS peacekeeping and UNOMIG 
observers.  Karasin added that 2000 Georgian military forces 
were present in the upper gorge area and UNOMIG had recorded 
16 violations by the GOG of the Moscow Agreement.  The GOR 
was concerned by the on-going efforts of the GOG military, 
engineering, and police forces to build infrastructure for a 
government-in-exile. 
 
3.  (C)  With a nod to President Saakashvili's upcoming 
address at UNGA, Karasin commented that the GOR had "serious 
grounds" to believe that he would demand the withdrawal of 
CIS peacekeeping forces from Abkhazia and assign blame to 
Russia for the ineffectiveness of these forces.  Karasin said 
that he did not intend to repeat the contents of the MFA's 
September 14 statement on developments in Georgia (reftel), 
but would only underscore that the GOR, as before, remained 
committed to its multilateral and bilateral commitments.  "We 
will carry them out in full." 
 
4.  (C)  In response to events on the ground, Karasin 
explained, the GOR would introduce new language for the 
UNOMIG resolution, and was offering a draft in advance to 
allow its partners to carefully study the GOR proposals and 
make comments and counter-proposals.  A number of the 
elements, he noted upfront, contained language that directly 
blamed the GOG for events in the Kodori gorge.  Karasin 
reaffirmed that the CIS peacekeepers were inextricably linked 
to UNOMIG's mission  and the protection of UN personnel.  The 
international community had an obligation to react, he 
argued, when agreements were violated.  GOG actions created a 
threat to regional security that were "absolutely 
inadmissible."  In order to normalize the situation, Karasin 
said, it was helpful to have a "frank and direct" assessment. 
 The violations recorded by UNOMIG and the CIS peacekeepers 
complicated GOG efforts to blame the GOR. 
 
5.  (C)  Karasin urged the FOG members to carefully study the 
proposals for discussion in New York and by the special 
representatives in Berlin on September 28.  Karasin summed up 
that he was "absolutely convinced" that all the Friends 
understood the importance of a unified approach to resolving 
this conflict, and hoped for a substantive response in 
Berlin.  Karasin closed by noting the GOR's satisfaction with 
FOG gatherings in Moscow, as a venue for conveying 
information. 
 
6.  (C)  Karasin also delivered a separate critique of 
Georgia's democratic credentials, noting with concern the 
trend in Georgia to diminish freedoms and basic rights.  He 
expressed concern over the security forces' attacks on the 
opposition and the shrinking number of independent media 
outlets, including the closure of three television stations 
and ten newspapers.  Recently, he added, the management of 
another television station had been replaced.  There had been 
 mass arrests of influential opposition figures, charged with 
coup plotting, but no evidence provided of their complicity. 
 
7.  (C)  Separately, Karasin made clear to the Ambassador 
that the draft resolution text was being distributed now to 
open the door for meaningful discussion in New York during 
Lavrov's visit.  Karasin emphasized that the text was open 
for negotiation.  He reiterated his concern about 
Saakashvili's UNGA speech and that the situation was 
spiraling out of control, noting that NATO's extension of 
Intensified Dialogue to Georgia was not a welcome development 
 
MOSCOW 00010607  002 OF 002 
 
 
and Saakashvili would draw the wrong message from it. 
 
8.  (C)  Comment:  In Security Council Secretary Ivanov's 
comments to the Ambassador (ref B) a
nd in subsequent meetings 
with MFA officials, the GOR has made clear that it finds 
Georgian efforts to internationalize the disputes, through 
expanding the negotiating formats, putting frozen conflicts 
on the UNGA agenda with its GUAM partners, and courting NATO 
membership, unacceptable.  The "frank and open" language of 
the Russian draft resolution appears to be a tit-for-tat 
response to the GOG's "Basic Principles" that offended the 
GOR.  The tenor of the debate may further intensify depending 
on the tone and direction of the Georgian President's UNGA 
address. 
 
-------------------------------- 
Text of Russian Draft Resolution 
-------------------------------- 
 
9.  (U)  Text of "Elements to the Security Council Resolution 
on the Georgian-Abkhaz conflict settlement": 
 
"The Security Council,... 
 
-- Expresses its deep concern with regard to the actions of 
the Georgian side in the Kodori valley in July 2006 in 
violation of provisions of the relevant Security Council 
resolutions containing, in particular, an appeal to the sides 
to refrain from any action that might impede the peace 
process, as well as of the Moscow agreement on cease fire and 
separation of forces of 14 May 1994, and other 
Georgian-Abkhaz agreements concerning the Kodori valley; 
 
-- Urges the Georgian side to withdraw its troops and other 
armed formations from the Kodori valley and not to undertake 
any new additional steps aimed at destabilization of 
situation in the Kodori valley; 
 
-- Also urged the Georgian side to return to the status quo 
available before the entry of its units in the Kodori valley 
and, in particular, to abandon the plans of installing the 
"the government of autonomous republic of Abkhazia as well as 
other actions capable of complicating the peace process of 
Georgian-Abkhaz settlement; 
 
-- Demands from the Georgian side to fully adhere to its 
international legal obligations, in particular regarding the 
urgent resumption of regular monitoring of the situation in 
the upper Kodori valley by joint UNOMIG and CIS peacekeeping 
force patrols and the provision in this regard of effective 
security guarantees; 
 
-- Reaffirms the important role of the CIS peacekeeping force 
in the Georgian-Abkhaz conflict zone, deplores the actions of 
the Georgian side aimed at the termination of its activities, 
and stresses that such a development would lead to a further 
aggravation of the situation in the zone of conflict with 
unpredictable consequences; 
 
-- Recalls the direct inter-connection of the UNOMIG and the 
CIS peacekeeping force mandates; 
 
-- Urges the Georgian side once again to address seriously 
legitimate Abkhaz security concerns, to avoid steps which 
could be seen as threatening and to refrain from militant 
rhetoric; 
 
-- Calls on both parties to finalize without delay the 
document on the non-resumption of hostilities and the 
international guarantees of security, and to sign it; 
 
-- Underlines that is the primary responsibility of both 
sides to provide appropriate security and to ensure the 
freedom of movement of UNOMIG, the CIS peacekeeping force and 
other international personnel and calls on both sides to 
fulfill their obligations in this regard; 
 
-- Calls on both parties to continue participation in 
quadripartite meetings on safety issues in Chuburhindzhi on a 
regular basis in order to be able to reaction promptly to the 
mutual security concerns or threats in the security sphere 
and to this end to develop, agree and endorse the rules of 
procedure o such quadripartite meetings; 
 
-- Requests the Secretary General to include the detailed 
information on the Kodori valley in the next report on the 
situation in Abkhazia, Georgia." 
End Text 
BURNS

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06MOSCOW10606, AEROFLOT-BOEING DEAL: STILL ALIVE – FOR NOW

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Reference ID Created Released Classification Origin
06MOSCOW10606 2006-09-21 15:24 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO6125
PP RUEHAG
DE RUEHMO #0606/01 2641524
ZNY CCCCC ZZH
P 211524Z SEP 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 2719
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 010606 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB AND EUR/RUS 
USDOC FOR 4321/ITA/MAC/EUR/RISA EDWARDS AND BEADLE 
USDOC FOR 3004/CS/ADVOCACY/BLOOM 
NSC FOR GRAHAM AND MCKIBBEN 
 
E.O. 12958: DECL: 09/21/2016 
TAGS: ECON PREL EAIR RS
SUBJECT: AEROFLOT-BOEING DEAL: STILL ALIVE - FOR NOW 
 
REF: HOLMAN EMAIL 9/20 
 
Classified By: Econ M/C Quanrud for reasons 1.5b and d. 
 
1. (C) Summary: A surprising "white knight" - billionaire 
Alexandr Lebedev, minority shareholder in Aeroflot - with $40 
million from his own pocket has resuscitated the Boeing deal 
that as of September 15th, looked near demise.  Lebedev's 
move might give the Kremlin a face-saving to allow the Boeing 
sale. The deal also gives the Kremlin breathing space, 
allowing Putin, on the eve of meeting with German Chancellor 
Merkel and French President Chirac, to hold up the prospect 
of large-scale Airbus purchase as possible leverage to 
acquire a greater share in EADS.  End Summary. 
 
The Kremlin ) Maneuvering Behind the Curtain 
-------------------------------------------- 
 
2. (C) Early last week, Boeing was hopeful that after so many 
false starts, the Kremlin might finally give the go-ahead to 
Aeroflot's Board to approve the purchase of 22 Boeing 787s at 
its planned September 14 meeting.  Even the announcement of 
Russian state-owned bank VTB purchasing a 5 percent share of 
European Aerospace and Defense Company, EADs, did not dash 
hopes here in Moscow.  (Note: While Boeing CEO Carson 
expressed concern that the EADs purchase portended trouble, 
Boeing Russia president Sergey Kravchenko (please protect) 
was less concerned.  Kravchenko told us this week that EADs 
move to quash Russian aspirations for a voice on the board 
could have only enhanced Boeing's partnership in the eyes of 
the Kremlin.  End Note) 
 
3. (SBU) A more troubling sign, however, was the rescheduling 
of the Board meeting from September 14 to the evening of 
September 15.  No explanation was given at that time, but it 
is now apparent that Aeroflot's Board was waiting for a 
signal from the Kremlin.   The guidance never came, and the 
September 15 meeting adjourned with the decision once again 
hanging in the air - and perhaps, with an even more uncertain 
fate.  Unlike previous delays, when it was announced just 
when the board would next take up the decision, this time 
Aeroflot said that the decision has been postponed 
"indefinitely." 
 
4. (C) The press has had a field day speculating the reasons 
for the Board's inaction, but the overriding conventional 
wisdom is that the Kremlin wanted to retaliate for the 
Rosoboronexport and Sukhoy sanctions by holding hostage the 
Boeing decision.  An additional consideration it seems was 
the Kremlin's reluctance to do anything precipitous in the 
lead up to the Putin-Chirac-Merkel meeting this weekend. 
 
Enter &White Knight8 Lebedev 
---------------------------- 
 
5. (U) In an extraordinary move on September 19, Russian 
businessman Alexandr Lebedev, whose company National Reserve 
Corporation (NRK) owns 30 percent of Aeroflot, put his own 
money on the table to keep the deal open.  He announced he 
had offered Boeing $40 million to keep the current delivery 
slot (of 2010) open for Aeroflot until the end of this year, 
and that Boeing had accepted his offer.  Reftel notes that 
NRK and Boeing signed a preliminary contract that provides 
for the same conditions that were offered to Aeroflot, with 
first delivery of planes starting in 2010. NRK is the holder 
of the slots but would transfer them back to Aeroflot. 
 
6. (C) The one-day postponement of the meeting set in motion 
the Lebedev decision, our contacts told us.  Reading the 
Kremlin's signals - or lack of signals - key players met 
Thursday evening to come up with a game plan in case the 
Aeroflot Board failed to act.  This is not the first time 
Lebedev has tried to save the Boeing deal.  Just two weeks 
ago, he was quoted in the press saying that while he 
supported Aeroflot's purchase of Boeing planes, he also urged 
a similar purchase of Airbus planes in the near future -- a 
solution which many believed would be palatable to the 
Kremlin, allowing the 787 purchase go ahead now.  Lebedev, 
who also is a member of the Duma for the ruling United Russia 
party, is reportedly fed up with the politics behind this 
drama ) which could ultimately cost his business interests 
dearly.  Absent the 787 purchase, Aeroflot will have to find 
alternative long-range aircraft.  Leasing, he calculates, 
would cost the company $800 million over the cost of the 
proposed 787 purchase. 
 
 
MOSCOW 00010606  002 OF 002 
 
 
7. (SBU) Even after the Lebedev announcement, the Russian 
press speculated that Aeroflot will split the deal between 
Boeing and Airbus, with the original terms of a 22 Boeing 
plane purchase remaining in place.  Once the deal with Boeing 
is finalized, Aeroflot would re-energize negotiations with 
Airbus for an additional number of planes.  Aeroflot Chief 
Executive Valery Okulov told reporters at a conference in 
Itkursk September 20 that the firm would purchase the same &
#x000A;number of Airbuses in 2012-2016.  Boeing discounts these 
stories, arguing that Airbus does not need more than the 22. 
But as long as these stories circulate, the Kremlin 
negotiates from a stronger position with the Europeans on 
EADs. 
 
Other Fallbacks Possible 
------------------------ 
 
8. (C) November 1st is the next critical date.  Our contacts 
say that Aeroflot Board will need to meet and must give its 
final approval by this date to ensure the 2010 delivery dates 
are retained.  Not only are the 22 787s at stake.  Also 
linked to the sale of the 787s are six McDonnell-Douglas 
MDD11 cargo planes Boeing intends to sell to Aeroflot.  If 
Boeing pulls its planes off the table, Aeroflot loses out on 
both a modernized passenger and cargo fleet.  (Comment: We 
believe Boeing is serious that November 1 is the real 
drop-dead date.  We understand that Boeing did indeed pull 
its planes off the table - i.e. withdrew its commitment to 
the 2010 delivery date - at the September 15 meeting when it 
became clear the Aeroflot Board would not act. The fact that 
the next Board date has not yet been announced is a matter of 
some concern. End Comment.) 
 
Comment 
------- 
 
9. (C) The longest Boeing sales campaign in the history of 
the firm (and the prospect of the largest single U.S. 
manufactured goods sale to Russia) will be with us a while 
longer, it appears.  Lebedev's voice of reason is a welcome 
addition to the debate, but we see his bail-out offer as a 
heroic attempt of a businessman to preserve the value of his 
investment rather than a signal from the Kremlin.  This 
latest move will keep the 787 deal alive in its current 
configuration for several more weeks, after which it could 
die completely (if it has not yet been finalized) or will no 
doubt start to significantly morph into a smaller or more 
expensive, and certainly a less timely deal -- for Aeroflot. 
 
BURNS

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06MOSCOW10605, KREMLIN UNHAPPINESS CAUSES MOSCOW’S “DOMASHNIY”

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Reference ID Created Released Classification Origin
06MOSCOW10605 2006-09-21 14:46 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO6029
RR RUEHDBU
DE RUEHMO #0605 2641446
ZNY CCCCC ZZH
R 211446Z SEP 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 2718
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE

C O N F I D E N T I A L MOSCOW 010605 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/RUS, DRL 
 
E.O. 12958: DECL: 09/21/2016 
TAGS: PGOV PHUM KDEM SOCI RS
SUBJECT: KREMLIN UNHAPPINESS CAUSES MOSCOW'S "DOMASHNIY" 
CHANNEL TO PULL TALK SHOW 
 
 
Classified By: Polmincouns Alice G. Wells.  Reasons:  1.4 (b) and (d). 
 
1. (C) Ekho Moskvy Editor-in-Chief Aleksey Venediktov 
confirmed to Embassy September 19 that a newly-minted 
television program hosted by him and telejournalist Svetlana 
Sorokina had been pulled from the air following a September 
10 episode that the authorities had apparently found too 
controversial.  According to Venediktov the program, "V kruge 
sveta," was the brainchild of STS Media Director Aleksandr 
Rodnyanskiy who for more than one year had lobbied his 
friends Venediktov and Sorokina to be its hosts.  Both had 
resisted Rodnyanskiy's overtures, said Venediktov, because 
they thought the "Domashniy" target audience would not be 
interested in an edgy political program.  ("Domashniy" 
generally confines itself to lifestyle programming.) Sorokina 
and Venediktov agreed only when Rodnyanskiy promised them 
that the only off-limits subject would be President Putin. 
 
2. (C) The program debuted September 2 and aired only four 
times before, according to Venediktov, running afoul of the 
Kremlin.  The September 11 program that triggered "V kruge 
sveta's" cancellation was devoted to jury trials and featured 
as guests publicist Marietta Chudakova and lawyer Genrikh 
Pavda. The two, with hosts Venediktov and Sorokina, conducted 
a no holds-barred discussion touching on sentences meted out 
to Chechen nationals in Russia, verdicts in hate crime 
trials, the recent disturbances in Kondopoga, and the Ulman 
case.  Putin's name, said Venediktov, was not mentioned, but 
Russia's experiment with jury trials was termed a failure. 
 
3. (C) Domashniy's general director warned Venediktov 
September 13 that the program was in trouble, and on 
September 15, the director told Venediktov that Presidential 
Administration Chief Vladislav Surkov had called Alfa Group 
head Petr Aven (Alfa Group is part owner of STS Media), who 
pressured Rodnyanskiy.  Rodnyanskiy agreed to pull the 
program.  "Aiding" Rodnyanskiy's decision to cancel the 
program, according to Venediktov, was a recent comment 
allegedly made by President Putin to Aven about Rodnyanskiy's 
"untrustworthiness."  Said Venediktov, "Rodnyanskiy 
understands completely that his continued survival at STS 
depends on Putin."  Venediktov was philosophical about the 
cancellation, complaining only that his friend Rodnyanskiy 
had to date not called him to apologize. 
 
4. (C) Comment:  The cancellation of "V kruge sveta" is 
another example of the Kremlin's sensitivity to even indirect 
media criticism.  After only four episodes, it is unlikely 
that the program had acquired a significant viewing audience 
and the discussion, although freewheeling, steered clear of 
the Presidential Administration, but was evidently 
unflattering enough to cause Surkov to pick up the phone. 
BURNS

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06MOSCOW10603, A CLOSER LOOK AT THE MURDER OF RUSSIA’S #2 BANKER

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If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #06MOSCOW10603.
Reference ID Created Released Classification Origin
06MOSCOW10603 2006-09-21 13:59 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO5964
PP RUEHDBU
DE RUEHMO #0603/01 2641359
ZNY CCCCC ZZH
P 211359Z SEP 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 2715
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 010603 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/RUS 
TREASURY COX/ALIKONIS/BAKER 
COMMERCE FOR 4231/IEP/EUR JBROUGHER 
NSC FOR MCKIBBEN AND GRAHAM 
 
E.O. 12958: DECL: 09/20/2016 
TAGS: EFIN ETTC ECON PTER PREL RS
SUBJECT: A CLOSER LOOK AT THE MURDER OF RUSSIA'S #2 BANKER 
 
REF: MOSCOW 10248 
 
Classified By: Ambassador William J. Burns, Reasons 1.4 (b/d). 
 
1. (C) Summary. One week after the brutal murder of First 
Deputy Central Bank Chairman Andrey Kozlov, there have been 
no apparent breaks in the case, and few believe the 
perpetrators will ever be caught. In contrast to the cynicism 
surrounding the criminal investigation, a wide swath of the 
economic elite believe that the Government is taking Kozlov's 
murder seriously and is intent that his death not set back 
bank reform in Russia.  The only murder of a senior federal 
official in the post-Soviet era also has many questioning the 
depth of what they had come to feel as a certain degree of 
normalcy, and wondering if corruption has risen to the point 
where it could unravel ten years of economic institution 
building. Certainly opponents of bank reform have acted 
boldly -- many hopes are now pinned on the GOR's response 
being equally bold.  End Summary. 
 
2. (SBU) Despite President Putin's September 15 invocation of 
a law enforcement task force headed by Procurator General 
Chaika himself to look into the September 13 murder of First 
Deputy Central Bank Chairman Andrey Kozlov, there have been 
no big breaks in the case to date.  Over the past few days, 
details of the investigation have leaked out, including the 
suggestion that someone inside Kozlov's staff may have tipped 
off the assassins to his whereabouts the night of the 13th -- 
an allegation that has shocked the closely-knit reformist 
community.  Unsurprisingly, none of our contacts believe the 
killers will be brought to justice, but most, including 
Elvira Nabiullina (former Deputy Economic Minister and 
Advisor to G-8 Sherpa Shuvalov) and Former Economics Minister 
Yevgeniy Yasin, steeply discount the possibility that the 
murderers enjoyed senior GOR-backing.  It seems to be more 
the case that the crime was committed cleverly, in a place 
without video surveillance, and by professionals. 
 
3. (C) Kozlov's death has seriously shaken a wide swath of 
Russia's economic elite -- both in an out of government. 
Kozlov was a charter member of that layer of bureaucrats from 
the 1990's who were rarely in the headlines, but who 
nonetheless were the worker-bees of early reform efforts. 
Like Arkadiy Dvorkovich, Oleg Vyugin, Mikhail Zadornov, 
Alexander Zhukov, and others, Kozlov learned market economics 
on the job -- writing and then implementing the laws and 
regulations that formed the backbone of Russia's initial 
economic transformation.  Like them, he quietly rose to 
prominence -- unconnected to any clans or regional power 
bases (like those from St. Petersburg) or private sector 
patrons.  Their reform work continues under the radar, but 
Kozlov's death is a reminder that they are nevertheless 
successfully grappling with the hard nut of remaining reform 
agenda in Russia.  Indeed, as Anatoliy Chubays pointed out 
recently to Ambassador, Kozlov's murder is a tragic reminder 
that tangible headway is being made in cleaning up the 
banking sector -- with the murderers lashing back at reform 
efforts that have in recent years closed 108 banks. 
 
4. (C) The murder is seen by many as a signal that the bad 
days of the early 1990's are coming back, or that they were 
never really that far away -- both of which are unnerving 
revelations.  "It is back" was Zadornov's comment to us at 
Kozlov' wake.  "Before it was the mafia . . now it 
bribe-taking bureaucrats," commented Sergey Skaterchikov, the 
founder of Russia's first financial new service (later sold 
to Bloomberg).  Corruption is seen as a playing a significant 
role in Kozlov's death, as his work involved the tracking of 
suspicious bank transfers.  Recent technology upgrades had 
made it easier to spot patterns of transfers that might 
otherwise not individually break the $10,000 transaction 
threshold. 
 
5. (C) Western bankers are worried how the system they have 
come to know will hold together going forward.  Citibank reps 
in Moscow note that Kozlov had been an important cog in the 
machine that allowed them to expand their business in Russia 
free of the bureaucratic delays common in so many other 
spheres of the economy.  It was not that Kozlov did them any 
favors, they note, it was more that he allowed the system to 
work without any special discrimination against foreign 
banks.  Likewise, USG and other assistance programs closely 
tied to Kozlov in the AML and bank supervision realm are, at 
least for now, up in the air. 
 
 
MOSCOW 00010603  002 OF 002 
 
 
 
6. (C) The USG has lost a particularly close interlocutor. 
Kozlov, who served as head of the Financial Services 
Volunteer Corps (FSUC) in the late 1990s, was a strong 
supporter of continued US
AID assistance to the Central Bank 
on deposit insurance, harder supervision and anti-money 
laundering.  He had recently endorsed a two-year AML program 
with USAID, FSUC and Citibank support.  We will be watching 
developments at the Central Bank closely to see whether the 
program can continue to go forward. 
 
 
7. (C) Central Bank Chairman Sergey Ignatiev (who canceled 
his trip to the G-7/G-8 meetings in Singapore to stay for 
Kozlov's wake) is reported by close colleagues to be 
particularly distraught over the killing, and personally 
determined to carry Kozlov's work forward.  The vast majority 
of the CBR and financial contacts we polled this week 
(perhaps out of wishful thinking or maybe just sheer 
determination) say they believe Putin is serious about 
continuing bank reform and clamping down on illegal bank 
activities.  Chubays told Ambassador the same thing.  If this 
is true, Putin's new law enforcement task force  -- which for 
the first time brings together both the civil and law 
enforcement authorities under one efforts -- needs to show 
some early victories, and Ignatiev needs to find someone with 
both skills and political gravitas to replace Kozlov and give 
his work new direction. 
BURNS

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