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Reference ID Created Released Classification Origin
07MOSCOW402 2007-01-31 14:22 2011-08-30 01:44 SECRET Embassy Moscow

DE RUEHMO #0402/01 0311422
O 311422Z JAN 07

S E C R E T SECTION 01 OF 03 MOSCOW 000402 
E.O. 12958: DECL: 01/31/2017 
     B. STATE 7445 
Classified By: Minister-Counselor for Political Affairs Alice G. Wells. 
  Reasons 1.4 (B/D). 
1.  (S) SUMMARY:  Visiting Moscow January 18-19, EUR/PRA 
Director Anita Friedt told Foreign Ministry officials that 
increased Russian transparency on arms transfers to sensitive 
countries could lessen the possibility of sanctions under 
U.S. law.  Washington was willing to work with the Russian 
side, but Moscow would have to share more information about 
prospective transfers to address U.S. concerns.  MFA 
officials emphasized that the sanctions' effect was more 
political than practical.  The officials: 
-- Defended the transfer of the Tor-M1 air defense system to 
Iran as permissible under existing national law and 
international agreements; 
-- Explained that the vehicle-mounted Strelets system under 
consideration for Syria had been built exclusively for export 
and could not be modified; 
-- Requested additional information on the justification for 
sanctions, noting that they were unable to investigate 
allegations against the sanctioned individual Aleksandr 
Safanov; and 
-- Asked that the U.S. continue to consult with Russia on 
ballistic missile defense deployments in Europe. 
In separate meetings, defense analysts noted that it would be 
difficult for the sanctioned entities, particularly 
Rosoboronexport, to respond to U.S. requests for 
clarification.  One analyst asserted that Russia's growing 
arms export industry had become increasingly profitable while 
undermining U.S. interests -- both were goals that appealed 
to a rising number of GOR and Kremlin officials.  END SUMMARY. 
--------------------------------------------- ----- 
--------------------------------------------- ----- 
2.  (S) Foreign Ministry officials decried the December 28 
imposition of U.S. sanctions against four Russian entities 
and asserted that the arms transfers to Iran and Syria, which 
had triggered the sanctions, conformed with Russian law and 
export control regulations, as well as Moscow's international 
obligations.  Igor Neverov, Director of the North America 
Department, said Russia viewed the sanctions as a "political" 
action done more for U.S. domestic consumption.  There was 
little practical effect upon the Russian companies' 
operations and, in fact, the sanctions against 
Rosoboronexport might actually undermine U.S. companies that 
seek cooperation with that firm.  Neverov noted that the 
sanctions would make it more difficult for the Foreign 
Ministry to tamp down rising anti-U.S. sentiment and calls 
for retaliatory action against the U.S.  He added, however, 
that the Ministry would continue to argue within the GOR 
interagency community to avoid blowing the issue out of 
3.  (S) Sergey Petlyakov, Chief of the Foreign Ministry's 
Arms Technology and Transfer Policy Section, reiterated the 
GOR policy that, in addition to legal constraints, Russia's 
arms transfer decisions were guided by an analysis of the 
weapons system's effects upon regional stability.  He added 
that Moscow shared U.S. concerns about man-portable systems 
(MANPADS) falling into the hands of terrorists, which was the 
reason behind Russia's investigation last summer into the 
diversion of Russian-origin anti-tank guided missiles (ATGMs) 
from Syria to Hizballah.  The GOR had tightened its export 
control regime as a result of the ATGM case; among other 
measures, Russia will incorporate provisions for stricter 
end-use checks in future arms transfer contracts. 
4.  (S) In the case of the Tor-M1 transfer to Iran, Petlyakov 
said the system was a tactical-level system that could be 
used only for self-defense and would not destabilize the 
region.  He acknowledged that the S-300 system, whose 
transfer to Iran was still under review, was more advanced 
but still permissible under Russian law and international 
regimes.  Instability in Iran was of great concern to Russia 
because of that country's geographic proximity, Petlyakov 
continued, and was a major factor in Russia's security 
calculations when transferring weapons systems. 
5.  (S) Svyatoslav Tsukanov, Chief of the Ministry's Export 
MOSCOW 00000402  002 OF 003 
Control Policy Section, stressed that the Strelets missile 
system was a vehicle-mounted weapon built exclusively for 
export, with separately deployed aiming and guidance systems 
designed so that it could not be easily deployed by 
terrorists.  Tsukanov asserted that removing one of the 
launching tubes, as the U.S. had suggested, would not 
effectively modify the system.  In any case, both he and 
Petlyakov acknowledged that Russia harbored misgivings about 
obtaining "U.S. approval" of its arms transfers and noted 
that firms were reluctant to share potentially proprietary 
information in response to U.S
. requests for clarification 
concerning pending transfers. 
6.  (S) Tsukanov noted that one of the sanctioned entities -- 
against the individual Aleksandr Safanov -- was a common name 
in Russia, akin to "John Brown" in English and often used as 
a pseudonym when an individual wanted to cover his tracks. 
Consequently, he said that even with the background provided 
by the U.S. in conjunction with the imposition of sanctions 
on Safanov, the GOR had been unable to unearth information 
related to any real individual with this name.  He and 
Petlyakov used this case as an example of the need for the 
U.S. to provide more complete information to justify the 
imposition of sanctions. 
7.  (S) In all of her meetings with MFA officials, Friedt 
emphasized the need for dialogue.  She noted that the U.S. 
had repeatedly asked for clarification concerning a number of 
transfer cases, including the Strelets and Tor-M1, but Moscow 
had not responded adequately despite assurances from senior 
officials.  Friedt said increased transparency on arms 
transfers to sensitive countries could lessen the possibility 
of sanctions under U.S. law.  Washington was willing to work 
with the Russian side, but Moscow would have to share more 
information about prospective transfers to address U.S. 
8.  (C) Ivan Safranchuk, a defense analyst with the World 
Affairs Institute, told Friedt that many GOR officials 
believed U.S. sanctions were aimed at undermining Moscow's 
increasingly competitive market position in the arms trade, 
especially in the case of Rosoboronexport.  Safranchuk added 
that the lifting of sanctions against Sukhoy had reinforced 
the view of some observers that the U.S. lacked sufficient 
evidence in the first place.  Moreover, sanctions might 
actually boost the reputation of the smaller sanctioned firms 
because of the inadvertent "advertising."  From a political 
perspective, Safranchuk continued, Rosoboronexport would 
never be able to respond to U.S. demands for clarification as 
Sukhoy had done.  As the country's leading arms exporter, 
Rosoboronexport's reputation and prospective sales would 
suffer if others perceived it as intimidated by U.S. 
9.  (C) Independent defense analyst Pavel Felgengauer agreed 
that GOR and Kremlin officials were proud of Russia's growing 
arms export industry, which had become increasingly 
profitable, often at the expense of U.S. interests in various 
parts of the world.  Felgengauer said such a reality appealed 
to many of these officials.  Responding to Friedt's query 
regarding the "cost" of sanctions to Rosoboronexport, 
Felgengauer highlighted banking problems.  According to 
Felgengauer, Rosoboronexport is a "cash hungry" enterprise, 
which relies on cash profits to pay for items such as much 
needed refurbishment/upgrade of subsidiaries like Aftovaz. 
Felgengauer pointed out that Rosoboronexport relied on the 
Bank of New York for dollar transactions.  As long as 
Rosoboronexport is under sanctions, it will not be able to 
use the Bank of New York, which provides the best transaction 
rate, or acquire lower-interest rate Western loans.  This 
will not present a problem for "euro" transactions, but 
Rosoboronexport's arms sales to the Middle East and Asia are 
dollar transactions.  Felgengauer estimated the financial 
cost to Rosoboronexport would be approximately 1-2 percent of 
its profits. 
10.  (S) Neverov requested that the U.S. continue to consult 
closely on plans to deploy components of a missile defense 
system in Europe.  Although he made remarks before the 
announcement of U.S. negotiations with Poland and the Czech 
Republic (reftels), he said recent briefings in Moscow and 
MOSCOW 00000402  003 OF 003 
within the NATO-Russia Council in Brussels had been helpful 
in alleviating concerns in Moscow.  In this context, Neverov 
said both countries needed to highlight progress in bilateral 
relations more effectively. 
11.  (C) Both Safranchuk and Felgengauer viewed the missile 
defense deployment issue in political terms.  Safranchuk 
predicted that the issue would become a major component of 
Russia's "anti-American industry."  He argued for close and 
continuing consultation between Russia and the U.S. and 
suggested that advance notice of any significant action by 
the U.S. would derail to some extent the influence of 
hard-liners who wished to highlight the issue for political 
reasons.  Speaking more broadly, Safranchuk lamented that 
conservative forces in Russia were increasingly challenging 
the view, held throughout most of the post-Soviet period, 
that areas of agreement with the U.S. far outweighed areas of 
12.  (C) Felgengauer was even more emphatic that the issue 
was political.  Russian military officials know that 
operational deployment of any system in Europe was years away 
and, in any case, they believe an effective interceptor is 
not currently available to meet the threat from the Persian 
Gulf or North Korea.  He suggested that Russia's armed forces 
would not worry about deployment of a U.S. system until 
construction actually began; in the meantime, senior defense 
officials would complain about the proposed system for 
political mileage. 
13.  (U) EUR/PRA Director Friedt cleared this message. 


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