07MOSCOW1528, AMBASSADOR’S APRIL 5 MEETING WITH CENTRAL BANK

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Reference ID Created Released Classification Origin
07MOSCOW1528 2007-04-06 09:26 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO8502
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #1528/01 0960926
ZNY CCCCC ZZH
P 060926Z APR 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 8964
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0330

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 001528 
 
SIPDIS 
 
SIPDIS 
 
DEPT PASS FEDERAL RESERVE 
DEPT FOR EUR/RUS, EUR/ERA, IO, 
TREASURY FOR BAKER 
 
E.O. 12958: DECL: 04/05/2017 
TAGS: ECON EINV RS
SUBJECT: AMBASSADOR'S APRIL 5 MEETING WITH CENTRAL BANK 
GOVERNOR IGNATIEV 
 
REF: A. MOSCOW 1515 
     B. MOSCOW 1514 
     C. MOSCOW 1249 
 
MOSCOW 00001528  001.2 OF 002 
 
 
1. Summary. (SBU) In his April 5 meeting with the Ambassador, 
Central Bank Governor Sergey Ignatiev reiterated the 
importance placed by the GOR on WTO succession, downplayed 
the likelihood of the Central Bank losing its supervisory 
authority over the banking system, and was optimistic about 
Russia's macro-economic picture for the next several years. 
He also touched briefly on UNSCR 1737. End Summary. 
 
WTO 
--- 
 
2. (SBU) Echoing the recent comments of Ministers Kudrin and 
Gref (ref a,b), Ignatiev remarked that it was of utmost 
importance that WTO succession happens this year.  He did not 
predict any negative fallout of WTO membership on Russian 
banks. 
 
The Bank's Supervisory Role 
--------------------------- 
 
3. (C) Ignatiev downplayed the possibility of the Central 
Bank's supervisory authority over the financial system being 
revoked or even altered.  He said he was surprised when, in 
February, Duma Banking Chairman Reznik proposed that the CBR 
and the Federal Financial Monitoring Service be merged into a 
mega-regulator. He had in fact met with Reznik two days 
before the latter made this proposal, but had not be 
forewarned about it. The media frenzy about the perceived 
challenge to the CBR's authority was unfortunate, but he did 
not think the CBR was under much a threat. (Note: the media 
speculation was fueled by a series of letters by the presumed 
mastermind behind the assassination of Deputy Central Bank 
Governor Andrei Kozlov last September; the recently published 
letters accuse the Central Bank of illicit financial 
activity. End Note.)  A working group consisting of the 
Central Bank, Finance Ministry, other GOR agencies, banking 
associations and "all interested parties" will be formed to 
discuss banking supervision authority.  But Ignatiev seemed 
confident that supervision authority would remain with the 
CBR, at least for the foreseeable future. 
 
A Rosy Economic Picture 
------------------------ 
 
4. (SBU) Russia's macro-economic health will remain strong in 
the coming year, despite the spending pressures inherent in 
an election year, remarked Ignatiev. The accumulation of 
reserves has been an important monetary sterilization tool, 
but the need to maintain such high levels is lessening. The 
ruble will continue to appreciate vis-a-vis the dollar, 
though at slower rate than in 2006. Ignatiev expressed minor 
concern about the rapid growth in consumer lending and 
increase in non-performing loans, but believes banks were 
already adjusting their loan portfolios and business models. 
 
UNSCR 1737 
--------- 
 
5. (SBU) Ignatiev professed little knowledge of UNSCR 1737, 
which requires member states to freeze assets belonging to 
Iranian proliferators.  Nor would he predict when a 
Presidential decree enacting 1737 would be signed. Sergey 
Tatarinov, the head of the Central Bank's International 
Division who also attended the meeting, posited that there 
was no political consensus on the decree. (Comment: The 
Central Bank is a party to the committee drafting the 
Presidential Decree. Other Bank officials have cautioned that 
such a decree would still not provide the sufficient 
authority for the Bank to freeze and seize such assets. End 
Comment.) Ignatiev did confirm our understanding that the 
Bank is monitoring suspect accounts (ref c).  Ambassador 
acknowledged that effort, but reiterated our strong interest 
in early conclusion of the Presidential decree. 
 
Comment 
------- 
 
6. (C) Ignatiev seemed unperturbed by the recent brouhaha 
surrounding the CBR's supervisory authority. The press had 
even speculated that the CBR would be stripped of its 
supervisory role - which would have made Russia the only 
western country where the Central Bank did not play such a 
 
MOSCOW 00001528  002.2 OF 002 
 
 
role. Ignatiev will attend the Spring Bank/Fund meetings, but 
has no individual meetings scheduled. He understands English 
well, but prefers to speak in Russian. 
 
7. (C) Tatarinov's comments about UNSCR 1737 also adds 
further confusion to the status of GOR implementation of 
UNSCR 1737; we have heard everything from the decree was on 
Putin's desk waiting his signature to still being hashed out 
in the inter-agency process.  The MFA, MinFin and even other 
Central Bank officials have repeatedly told us the GOR was 
committed to full implementation of UNSCR 1737. 
 
BURNS

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