07MOSCOW1710, RUSSIA: AMBASSADOR’S APRIL 12 MEETING WITH UAC DG

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Reference ID Created Released Classification Origin
07MOSCOW1710 2007-04-16 05:55 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO6227
PP RUEHAG RUEHROV
DE RUEHMO #1710/01 1060555
ZNY CCCCC ZZH
P 160555Z APR 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 9274
RUCPDOC/USDOC WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 001710 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EEB, EUR/RUS, AND EUR/PRA 
USDOC FOR 4321/ITA/MAC/EUR/RISA BROUGHER AND BEADLE 
USDOC FOR 3004/CS/ADVOCACY/BLOOM 
NSC FOR KLECHSKI AND MCKIBBEN 
 
E.O. 12958: DECL: 04/11/2017 
TAGS: EAIR ECON EINV PGOV PARM PINR RS
SUBJECT: RUSSIA: AMBASSADOR'S APRIL 12 MEETING WITH UAC DG 
ALEKSEY FEDEROV 
 
REF: MOSCOW 1337 
 
Classified By: Ambassador William J. Burns for Reasons 1.4 B and D 
 
1. (C) Summary.  In a April 12 meeting with the Ambassador, 
Director General of the United Aircraft Corporation (UAC) 
Aleksey Federov said that he had joined the industry effort 
to lobby GOR officials, particularly Presidential Aide Igor 
Shuvalov, for a "balanced" aviation policy to build good 
relations with both the U.S. and Europe.  Federov expressed 
optimism that despite the deal's politicization, Aeroflot 
would split its wide-bodied tender between Airbus and Boeing. 
 While a long-time EADS supporter, Federov was quite positive 
about potential UAC-Boeing cooperation now and in the future, 
including the development of civil and cargo aircraft.  He 
raised concerns about possible U.S. sanctions on MiG for a 
sale of combat aircraft to Syria and referred to the Ministry 
of Foreign Affairs' non-paper sent to the Embassy.  Federov 
said he would be open to a meeting between MiG and USG 
experts on the sale to try to avoid a misunderstanding.  End 
summary. 
 
BOEING-UAC COOPERATION AND THE AEROFLOT DEAL 
-------------------------------------------- 
 
2. (C) Federov said that while Aeroflot will buy A350s for 
delivery in 2016-2017 (with A330s to bridge the gap), Boeing 
still has "a good chance" of making a 787-Aeroflot sale.  The 
decision would be made at the political level.  Joining the 
wider industry effort to advocate for a "balanced policy" 
between Europe and the United States, Federov and Aeroflot 
CEO Valeriy Okulov have lobbied Presidential Aide Igor 
Shuvalov to allow the Boeing purchase given the 787's earlier 
delivery schedule. 
 
3. (C) Federov said that while UAC and Boeing may compete in 
the military market, they are good partners in civil aircraft 
manufacturing. In particular, he cited UAC-Boeing cooperation 
on the SuperJet, post-sale support, titanium composite 
materials, and new design technology.  Relations between 
Federov and Boeing CEO for Commercial Airplanes Scott Carson 
are good.  Federov will see him at the Paris Air Show (June 
18-24) and in Seattle for Boeing-UAC talks in July.  On the 
MS-21 narrow-body concept jet, Federov was pleased that 
Boeing agreed to a joint market-assessment group to study the 
feasibility of the concept aircraft.  He appreciated Carson's 
willingness to consider negotiations on Boeing's royalties on 
the SuperJet, either by converting some of the royalties into 
an equity stake or by accepting the same amount for a larger 
number of planes produced. 
 
U.S. SANCTIONS ON MiG? 
---------------------- 
 
4. (C) Federov said that MiG had received notice from the 
State Department via the MFA that its sales of fighter planes 
to Syria could instigate U.S. sanctions against the company. 
According to Federov, MiG only plans to exchange new combat 
aircraft (MiG-29s and MiG-31s) for exactly the same number of 
old combat aircraft (MiG-21s, MiG-23s, and MiG-25s) in Syria 
so as to not upset the balance of power in the region. 
Federov said that MiG's cooperation with Israel was important 
and the company would not do anything to jeopardize its 
activity there.  MiG asked the MFA to send a non-paper to the 
Embassy to better explain the sale.  (The non-paper states 
that no MiG planes are being sold to Syria at the present 
time.  Assessment septel.)  Federov suggested that USG and 
MiG experts should sit down together so that MiG could better 
understand U.S. sanctions law and the U.S. could get more 
details on the MiG deal with Syria. 
 
STATE OF PLAY OF RUSSIAN AIRCRAFT MANUFACTURING 
--------------------------------------------- -- 
 
5. (C) Federov divided the world's aviation markets into 
three groups - military, cargo, and civilian - and assessed 
the Russian aircraft-manufacturing industry's global market 
position in each one.  First, Federov said that Russia is one 
of the world's leaders in military aviation and would like to 
keep its relative position over the next couple of years. 
While UAC will strive to get a few more percentage points of 
global market share in the near future, military aircraft 
will not be its principal focus for now. 
 
6. (C) On the other hand, cargo aircraft will demand a lot of 
 
MOSCOW 00001710  002 OF 002 
 
 
UAC attention as the goal is to triple or quadruple 
production of transport planes over the next few years. 
Federov said that while the USSR was a global leader in 
specialized cargo aircraft, manufacturers were located in 
present-day Ukraine and Uzbekistan.  Federov envisioned 
UAC-Cargo subdivisions of light, medium, heavy, and 
super-heavy transport.  (One of the four agre
ements UAC just 
signed with EADS was for a joint venture on the conversion of 
A320s to cargo planes in both Russia and Germany.  See 
reftel.) 
 
7. (C) Federov called civil aviation his "biggest headache." 
Civil aviation production during Soviet times was overly 
political and geared only to the domestic market.  He 
lamented that the situation had only grown worse over the 
last fifteen years and that Russia had a diminished stake in 
the global market.  He said that UAC had no desire to compete 
now with Boeing or Airbus on wide-bodied aircraft, but would 
instead concentrate on the regional 90-130 seat niche 
(something neither Boeing nor Airbus does).  The SuperJet is 
a good start for UAC, but the standard SuperJet100 could only 
command about five percent of the world market.  To boost 
this share, UAC wants to build a "family" of SuperJets with 
at least three sizes: small (75-80 passengers), medium 
(80-100 passengers), and large (100-130 passengers).  UAC 
also hopes to start work on what it sees as the next 
generation narrow-body, mid-range jet: the MS-21 (90-150 
seats).  UAC feels that success with the SuperJet family and 
the MS-21 would help it achieve up to 10% of the global 
market and would allow it to surpass Bombardier. 
 
COMMENT 
------- 
 
8. (C) While Federov may belong mostly to the EADS camp, he 
seems to have developed respect for Boeing's work on the 
SuperJet and for Boeing CEO for Commercial Airplanes Scott 
Carson.  The two saw each other in London (December 9), 
Seattle (February 14-16), and in Moscow (March 11-12).  The 
royalties Sukhoy pays Boeing for its work on the SuperJet 
have been a sticking point between the two firms, but Federov 
said he appreciated Carson's willingness to consider an 
alternative solution. 
BURNS

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