07MOSCOW1499, SECRETARY GUTIERREZ’S MEETING WITH NATURAL

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Reference ID Created Released Classification Origin
07MOSCOW1499 2007-04-04 13:35 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO4743
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #1499/01 0941335
ZNY CCCCC ZZH
O 041335Z APR 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8919
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 1093
RHEHNSC/NSC WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 001499 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/RUS WARLICK, HOLMAN, AND GUHA 
DEPT FOR EB/ESC/IEC GALLOGLY AND GARVERICK 
DOE FOR HARBERT AND EKIMOFF 
DOC FOR 4231/IEP/EUR/JBROUGHER 
NSC FOR KLECHESKI AND MCKIBBEN 
 
E.O. 12958: DECL: 04/04/2017 
TAGS: EPET ENRG ECON PREL RS
SUBJECT: SECRETARY GUTIERREZ'S MEETING WITH NATURAL 
RESOURCES MINISTER TRUTNEV 
 
 
Classified By: Amb. William J. Burns.  Reasons 1.4 (b/d). 
 
1. (C) Summary: U.S. Commerce Secretary Carlos Gutierrez, 
accompanied by the Ambassador, met April 2 with Russian 
Minister of Natural Resources Yuriy Trutnev.  Responding to 
Gutierrez, Trutnev said that Ministry of Natural Resources' 
(MNR) inspection of the ExxonMobil-led Sakhalin-1 project was 
"routine" but warned that if they find "major problems, then 
we can't close our eyes to this."  The GOR will not go 
forward with a draft subsoil law but is discussing amendments 
to the existing legislation.  The GOR will include in the 
amendments the definition of "strategic" deposits.  Trutnev 
flagged that some in the GOR wanted to apply a more expansive 
definition to the term "strategic" than does his ministry. 
U.S. companies will be able to take a non-controlling stake 
in "strategic" projects.  Trutnev described the forestry 
sector as "deformed" and said that the GOR is interested in 
expanding domestic pulp and paper processing versus simply 
exporting raw lumber.  U.S. companies are welcomed to invest. 
 End Summary. 
 
Sakhalin-1 
---------- 
 
2. (C) Gutierrez asked Trutnev to describe the expected April 
environmental inspection of the ExxonMobil-led Sakhalin-1 
project (The inspection will be performed by Rosprirodnadzor 
(RPN), an agency within MNR.  RPN gave an unfavorable review 
to Shell's Sakhalin-2 project that many thought was a means 
to pressure Shell into cutting a deal with Gazprom).  Trutnev 
said the inspection will be "routine" but that RPN would not 
be able to provide any details before they began work.  He 
was very hopeful that the Sakhalin-1 consortium would be in 
compliance but warned that if there are "major problems, then 
we can't close our eyes to this."  Although they perform the 
inspection, MNR is not working alone within the GOR on this 
issue (license compliance).  The MNR will only be able to 
give its first impressions in May, at the earliest. 
Gutierrez responded that giving the consortium a fair hearing 
is all that we expect. 
 
Subsoil Law/Strategic Deposits 
------------------------------ 
 
3. (C) In discussing the subsoil regime, Gutierrez said that 
what our companies are looking for is greater clarity and 
predictability in order to make better business decisions. 
Trutnev said it was regrettable that "work slowed down" on 
the draft new subsoil law but that his ministry remains a 
"consistent champion of everything put in the draft."  The 
Cabinet is debating a series of 18 amendments to the current 
law, within which the MNR "has introduced all innovations 
that were in the draft law."  The MNR wants greater clarity 
and transparency by trying to exclude any room for 
interpretation in the text.  Further, the ministry is still 
pushing for licenses to be subject to civil law rather than 
administrative oversight. 
 
4. (C) Trutnev said his ministry's ideas about what should 
constitute a "strategic" reserve have not changed in the 18 
months since its proposal was submitted to the government. 
However, there are some in the government who have expanded 
the definition of "strategic" and now want to apply this to 
"already-distributed fields."  Companies can participate in 
projects to develop these reserves if they are willing to 
take a non-controlling stake in the project. 
 
Forestry Sector 
--------------- 
 
5. (C) Gutierrez said that the deal between International 
Paper and Ilim Pulp is one of the best examples of how U.S. 
and Russian firms can work together.  Other U.S. firms are 
anxious to invest in Russia's forestry sector.  Trutnev 
described the sector as "deformed."  Russia has one-quarter 
of world lumber reserves but only accounts for two percent of 
global pulp and paper processing.  The GOR wants to change 
this by attracting investment, from the U.S. or elsewhere. 
An immediate action will be to increase the export duty on 
raw lumber in an effort to stem exports, most notably to 
 
MOSCOW 00001499  002 OF 002 
 
 
Finland and China.  Trutnev said he personally would be 
supportive of any project that led to investing in domestic 
processing. 
 
6. (U) This cable was cleared by Secretary Gutierrez's 
delegation. 
BURNS

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