Daily Archives: February 14, 2008

08MOSCOW401, RUSSIA “SATISFIED” WITH BURMA’S ROADMAP FOR

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Reference ID Created Released Classification Origin
08MOSCOW401 2008-02-14 13:53 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO8181
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHMO #0401 0451353
ZNY CCCCC ZZH
P 141353Z FEB 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 6581
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE

C O N F I D E N T I A L MOSCOW 000401 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 02/14/2018 
TAGS: PGOV PREL PHUM BM RS
SUBJECT: RUSSIA "SATISFIED" WITH BURMA'S ROADMAP FOR 
DEMOCRACY 
 
REF: RANGOON 109 
 
Classified By: Political M/C Alice G. Wells for reasons 1.4 (b/d). 
 
1. (U) The MFA issued a statement February 12, expressing 
"satisfaction" with the Burmese regime's recent announcement 
of the next steps in its "Roadmap" for political change 
(reftel).  The MFA said that Russia hoped that the regime's 
decision to set dates for the "next phases of political 
change," including completing a draft constitution and 
holding a referendum on the draft, would "help reduce tension 
being fanned by certain countries around the so-called 
Myanmar question and will constitute an additional impulse to 
intensify the dialogue of all concerned political forces 
within Myanmar on the issues of the future of that state." 
 
2. (C) MFA Myanmar Desk Officer Alexey Semenikhin told us on 
February 14 that the MFA statement was consistent with 
Russian policy to support the Burmese Roadmap as the best 
method for political reconciliation and democratization.  He 
dismissed speculation that the regime may have timed the 
announcement of its next steps as a means to lessen either 
internal or external pressure following the 2007 crackdown on 
pro-democracy demonstrations.  The Generals have been 
consistent in following their democratization plan, and the 
GOR has remained committed to supporting them.  Semenikhin 
claimed that the reference to "certain countries" in the MFA 
statement was not a swipe at the U.S., but expressed the GOR 
view that attempts to isolate or punish the Burmese regime 
were counterproductive. 
 
3. (C) Semenikhin rejected any suggestion that Burma's 
democratization exercise was stage-managed by the regime, or 
that failure to include opposition groups delegitimized the 
process.  He said that the GOR had not pressed the Generals 
to release political prisoners or engage opposition groups. 
Semenikhin argued that Russia "understood there were some 
obstacles" to political reconciliation in Burma, but "most of 
the obstacles came from the National League for Democracy," 
claiming that the NLD had turned down the government's offer 
to participate in the political reform process.  Finally, 
Semenikhin noted GOR concern over U.S. efforts to pressure 
Russia and other countries to take a harder line on the 
Burmese regime, reiterating Russia's familiar position that 
the "so-called Myanmar question" was an "internal matter." 
BURNS

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08MOSCOW400, ANGARSK INTERNATIONAL ENRICHMENT CENTER: MOVING

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Reference ID Created Released Classification Origin
08MOSCOW400 2008-02-14 13:15 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Moscow

VZCZCXRO8135
PP RUEHLN RUEHVK RUEHYG
DE RUEHMO #0400/01 0451315
ZNR UUUUU ZZH
P 141315Z FEB 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 6578
INFO RUCNCIS/CIS COLLECTIVE
RUEHII/VIENNA IAEA POSTS COLLECTIVE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 03 MOSCOW 000400 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KNNP PARM RS
SUBJECT: ANGARSK INTERNATIONAL ENRICHMENT CENTER: MOVING 
FROM VIRTUAL TO ACTUAL 
 
REF: 07 MOSCOW 5591 
 
Sensitive but unclassified.  Please protect accordingly. 
 
Summary 
------- 
 
1. (SBU) Development of the International Uranium Enrichment 
Center (IUEC) in Angarsk continues to move forward, though 
the center is still a "virtual" one to be carved out of the 
existing Angarsk Chemical Complex.  Embassy was warmly 
received during a visit to the complex.  Embassy toured the 
cascade hall, the central analytical laboratory, and LEU 
transport containers.  IUEC senior management in Moscow 
confirmed that the Angarsk complex has ample excess 
enrichment capacity from which the IUEC can draw for its 
first few years.  They admitted, however, that they need to 
do more work on the IUEC's business plan.  Russian officials 
highlight the role they expect the IAEA to play in the center 
in providing safeguards and managing a fuel bank; they expect 
the IAEA to consider participation in the Angarsk IUEC at the 
March or June BOG.  Armenia's entry into the Angarsk IUEC as 
an equity partner should add momentum to the project.  The 
Angarsk IUEC project is consistent with U.S. 
non-proliferation goals, and according to Russian officials, 
is compatible with GNEP.  End Summary. 
 
Embassy Visits Angarsk 
---------------------- 
 
2. (SBU)  The Angarsk Electrolysis Chemical Complex (AECC), 
40 km from Irkutsk and in operation since 1957, is the home 
(or, more accurately, the home-to-be) for the International 
Uranium Enrichment Center (IUEC).  The Angarsk complex 
produces uranium hexafloride (UF6), enriching U-235 to a 
maximum of five percent, which is suitable for civilian uses 
only.  EST Counselor and DOE Director visited the AECC in 
December.  Rosatom Director Kiriyenko personally approved the 
visit to the once-closed city.  AECC management provided 
Embassy a tour of the complex that included stops in the 
centrifuge cascade hall, central analytical laboratory, the 
"Chelnok" facility where UF-6 is loaded into containers, and 
the Rosatom information center.  As of January, delegations 
from only the IAEA, France, Kazakhstan and Ukraine had 
visited Angarsk to explore preparations for the International 
Center. 
 
3.  (SBU) Aleksandr Teterin, head of public relations for 
AECC, escorted Embassy officers throughout their stay in 
Angarsk.  Teterin underlined AECC's commitment to support the 
development of the International Enrichment Center as it 
becomes operational.  He made it clear, however, that TENEX 
-- manager for the project in Moscow -- is the source for all 
strategic and major operational decisions.  Teterin recounted 
that the AECC complex is situated on six square kilometers of 
land, and employs 6300-6400 personnel (down from about 12,000 
in the late Soviet era).  The average wage is 21,000 
rubles/month (approx. $857), high for the area.  Rosatom 
opened an Information Center at AECC in March 2007 to improve 
public relations in the wake of the announcement of plans for 
the International Enrichment Center. 
 
4.  (SBU) Over the next ten years, Teterin affirmed, AECC 
hopes to double its enrichment capacity.  The IUEC would play 
a significant part in that growth, assuming the concept meets 
with success.  Teterin was reluctant to confirm how much 
spare capacity exists at present.  Current capacity is 
estimated at about 2.6 million SWU.  Rosatom officials have 
told us that a considerable amount of that capacity -- 
perhaps half -- is spare. 
 
Organization 
------------ 
 
5. (SBU) The International Uranium Enrichment Center emerged 
as a joint venture between Kazakhstan's Kazatomprom and 
Russia's Techshabexport (TENEX) in September 2007. 
Kazakhstan acquired a 10% equity stake in the center.  In 
early February, Armenia joined as an equity partner; its 
equity is also expected to be 10%.  TENEX officials have told 
us that Ukraine might be the next equity partner.  Presidents 
Putin and Yushchenko discussed Ukraine's participation the 
IUEC on February 12 in Moscow.  TENEX officials stress that 
what differentiates the IUEC from a typical commercial 
enrichment enterprise is that it allows equity partners that 
do not currently have an enrichment capability the 
opportunity to realize economic profit from the center. 
 
6. (SBU) The Director General of TENEX, Aleksey Grigoriev, 
 
MOSCOW 00000400  002 OF 003 
 
 
serves as Director for the International Uranium Enrichment 
Center.  The center will maintain offices in Angarsk and 
Moscow.  The center's board will likely include government 
representatives from each equity partner.  The IAEA, if it 
agrees to participate, would act in an advisory role.  At 
this point, it appears that the center has no assets; each 
partner's investment is based on the promise of future center 
revenues. 
 
Role of IAEA 
------------ 
 
7. (SBU) The International Center will operate as a 
black-box.  TENEX Deputy DG Aleksey Lebedev underlined to us 
-- as the GOR's concept paper to the IAEA has
made clear -- 
that government-to-government agreements required of each new 
partner stipulate that none will get access to enrichment 
technology.  Lebedev told us negotiations regarding IAEA 
participation in the center had gone well.   He expected the 
March or June IAEA Board of Governors meeting to consider the 
IAEA's role in the project. 
 
8. (U) While in Moscow in December, IAEA DG ElBaradei 
commended Putin's initiative in establishing the IUEC at 
Angarsk.  He noted: "The Agency has joined Russia in working 
to develop a proposal to set aside a fuel bank under IAEA 
control at Angarsk that would be available (to members) as a 
last resort.  I trust this proposal will attract broad 
international support." 
 
9. (SBU) Negotiations continue on the modalities and scope of 
possible IAEA safeguards.  Lebedev told us TENEX was open to 
more intrusive activities by the IAEA at AECC, but that the 
IAEA was not interested.  He explained that IAEA already has 
safeguards on an identical Russian-supplied facility in China 
and knows the operation well.  IAEA safeguards at IUEC will 
thus target the center's storage areas, not the enrichment 
complex.  Russia has agreed to pay IAEA for the cost of 
providing the safeguards. 
 
Two Reactor Loads in Reserve 
---------------------------- 
 
10. (SBU)  Lebedev confirmed the IUEC would set aside a 
guaranteed uranium stock under IAEA supervision (if the IAEA 
approves) at the Angarsk facility.  The stock, enough for up 
to two 1000-MW reactor core loads, would be a physical supply 
of uranium, not a virtual stock.  It could be placed in an 
existing storage at Angarsk facility this year.  Lebedev told 
us the stock would consist of varying enrichment assays to 
accommodate the requirements of various types of reactors. 
AECC's Teterin told us AECC had already set aside an area to 
house the reserve.  The volume, he said, would amount to 
about one hundred containers of LEU. 
 
Business Plan 
------------- 
 
11. (SBU) Lebedev expressed the hope that the center might be 
able to conclude initial contracts for uranium services with 
customers by the end of 2008.  Nonetheless, he admitted that 
many issues remained to be worked out regarding how the IUEC 
would operate as a business.  He expected that equity in the 
IUEC joint stock company would provide a guaranteed share of 
the dividends resulting from contracts and center operations. 
 Lebedev also surmised that the center, and therefore each 
partner, would likely have the opportunity to make an equity 
investment into the Angarsk Chemical Complex when it adds 
enrichment capacity.  He speculated this might occur in 3-4 
years, once existing capacity becomes insufficient to meet 
the combined requirements of the Angarsk plant and the IUEC. 
 
12.  (SBU) Lebedev stressed that Angarsk would phase in 
additional capacity so as not to harm the market, initially 
adding 300-400K SWU and ultimately ramping up to a total of 
one million additional SWU.  He speculated that the IUEC 
might be allowed to own 10-15% of the new capacity.  He 
pointed out that the transition of the AECC from a federal 
state unitary enterprise to a joint stock company (JSC) would 
need to be finalized before any outside investment could 
occur.  Lebedev indicated that the plant's conversion to a 
JSC should be complete by mid-2008.  This would also make the 
IUEC free from reliance on the state budget. 
 
Partners and Customers 
---------------------- 
 
13. (SBU) Russia does not exclude the participation of fuel 
cycle states as partners in the center.  However, the GOR's 
 
MOSCOW 00000400  003 OF 003 
 
 
intent, Lebedev made clear, is for equity partners to be from 
those countries without enrichment capabilities, particularly 
those with uranium reserves of their own.  The goal is to 
provide not only security of access to fuel supply for these 
countries, but also the additional incentive of offering 
ownership in an enrichment center without having to develop 
the capability indigenously.  In addition to Kazakhstan and 
Armenia, the GOR has extended invitations to join the IUEC to 
Ukraine, Uzbekistan, South Korea, Australia, Mongolia, and 
Belarus.  The center's customers would include those 
countries which have small nuclear power programs or those 
countries which have expressed interest in nuclear power, but 
lack domestic enrichment capabilities.  Customers do not have 
to be equity partners. 
 
Iran 
---- 
 
14.  (SBU) Iran remains a "potential client" if it were in 
compliance with its IAEA obligations, Lebedev said.  He 
surmised that Russia's release of fuel for the Bushehr 
reactor might eventually make it easier for Iran to 
participate.  To date, however, Iran had refused to meet the 
conditions the GOR had set out for participation: no 
indigenous enrichment and no technology transfer. 
 
Environmental Concerns 
---------------------- 
 
15. (SBU) Angarsk's Teterin emphasized to us the safe 
environmental record of AECC.  He claimed that only one tenth 
of one percent of the pollution in the Angarsk area came from 
AECC.  Despite this, Teterin acknowledged that environmental 
groups had been vociferous in their protest of plans for the 
international enrichment center.  Embassy met in Irkutsk with 
the head of the most prominent (and most critical) 
environmental NGO in the area, "Baikal Wave."  She and her 
group strongly oppose the IUEC because plans for eventual 
expansion of the complex, spurred in part by IUEC, will 
result in the production of more depleted uranium hexafloride 
waste at the AECC site.  They fear an accident could poison 
Lake Baikal, only 100 km away and home to 20% of the earth's 
supply of fresh water (in addition to being a UNESCO world 
heritage site).  Teterin said he is trying to reach out to 
the activists, but to no avail.  Baikal Wave claims it is 
being harassed by the GOR. 
 
No Back-end 
----------- 
 
16. (SBU) TENEX officials have underlined to us that the IUEC 
concept does not, as currently envisioned, include guarantees 
on spent fuel reprocessing or return to Russia.  The IUEC 
focus is on assured supply, not on the back-end.  Angarsk is 
an enrichment facility, Lebedev noted, not a reprocessing 
facility. 
 
Comment 
------- 
 
17. (SBU) The addition of Armenia as an equity partner should 
help spur IUEC development.  A greater impetus will come if 
there is IAEA BOG approval for involvement in the project. 
The fact that the Angarsk Chemical Complex has excess 
enrichment capacity available now means the IUEC's move from 
virtual to actual can take place quickly once management 
works out the details of the business model.  GOR officials 
welcome US interest in and support for the Angarsk IUEC, and 
proclaim its compatibility
with GNEP.  However, they have not 
solicited equity participation by US entities.  The Angarsk 
IUEC project remains consistent with US non-proliferation and 
fuel security goals. 
BURNS

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08MOSCOW396, INSIDE ROSOBORONEXPORT

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Reference ID Created Released Classification Origin
08MOSCOW396 2008-02-14 07:16 2011-08-30 01:44 SECRET Embassy Moscow

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMO #0396/01 0450716
ZNY SSSSS ZZH
R 140716Z FEB 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 6575
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUEKJCS/SECDEF WASHDC
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

S E C R E T MOSCOW 000396 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 02/06/2018 
TAGS: EIND ETRD PGOV PREL RS MASS
SUBJECT: INSIDE ROSOBORONEXPORT 
 
REF: A. 07 MOSCOW 5154 
     B. 07 STATE 131941 
     C. 07 STATE 203587 
 
Classified By: Ambassador William J. Burns. 
Reasons 1.4 (b) and (d). 
 
1. (C) Summary:  On February 7, officials at RosoboronExport 
(ROE), the Russian government's monopoly arms exporter, made 
it clear how little control the company has over decisions 
regarding Russia's military sales.  Most of the decisions 
affecting the company, including what products and to which 
countries to sell arms, are made by Putin and the Federal 
Service For Military-Technical Cooperation (FSVTS).  The 
officials told us ROE is in search of new markets, and seeks 
cooperation with the United States, and expressed 
bewilderment at the U.S.'s imposition of ISNA sanctions in 
2006.  While it is not clear how ROE will function as part of 
the new RosTechnologiya, ROE's former General Director has 
become the head of this new corporation.  The biggest 
challenge facing ROE, the officials said, was contending with 
competitors if ROE was to retain its status as one of the 
largest arms exporters in the world.  End Summary. 
 
----------------------- 
The Company At a Glance 
----------------------- 
 
2. (U) On February 7 ROE officials Yevgeniy Shelomanov, Head 
of the Regional Department, Aleksandr Tytuchenko, Head Expert 
of the Regional Department, and Vladimir Surzhik, Head Expert 
of the Prospective Projects Department told us their company 
is the primary intermediary for Russian arms exports, with 
offices in 43 foreign countries.  All Russian weapons 
companies export their products via ROE, although individual 
companies may sell spare parts and offer post-sale support 
directly to customers.  (Comment:  Several weapons systems 
purchasers, notably India and Algeria, have complained about 
late deliveries, lack of spare parts, and other deficiencies 
in their procurement of Russian weapons systems.  The 
decentralization of post-sale support and absence of 
responsible oversight may explain some of these problems. 
ROE officials seemed unaware of these complaints.  End 
Comment.)  The result is that ROE accounts for over 90 
percent of Russia's annual arms sales, estimated in 2007 to 
amount to USD 7.3 billion.  ROE does not manufacture any 
goods, and does not conduct any research and development of 
products.  ROE officials also told us they do not conduct any 
licensing or end-user checks on their clients. 
 
--------------------------------------------- - 
Seeks New Markets, Including The United States 
--------------------------------------------- - 
 
3. (S) ROE officials told us they hope to find new markets 
for Russian arms sales, currently second only to those of the 
United States (ref A), but emphasized that the decision of 
where to seek new markets was a political one, made by Putin 
and senior levels of government.  They did tell us, however, 
that they seek greater cooperation with the United States. 
They complained that they do not fully understand why 
sanctions have been placed on their company (ref B and C), 
and expressed disappointment that discussions they had 
regarding cooperation with the U.S. military to purchase 
reactive armor were scuttled because of them.  We explained 
U.S. sanctions law and noted that the law required the 
imposition of sanctions for the sale of certain types of 
weapons to Iran, North Korea, or Syria.  They asserted that 
no sales of weapons to Iran were prohibited under arms 
control regimes or international law.  ROE officials added 
that they do not sell certain goods to certain countries, but 
refused to elaborate, saying that this "secret list" of 
products and customers to whom they could sell was managed by 
the GOR. 
 
----------------------- 
All The President's Men 
----------------------- 
 
4. (C) ROE representatives told us their company "does not 
involve itself with strategy."  Instead, ROE sells weapons to 
countries as directed by the Russian President, usually via 
the FSVTS.  They added that ROE does not get involved with 
export licenses or end-user checks.  When asked about the 
future of ROE under its new parent company RosTechnologiya, 
the ROE representatives replied that they have not been 
informed of any changes to how ROE will function.  "We will 
continue working as we have been until we get new 
instructions," they said.  They added that RosTechnologiya's 
structure will be based on ROE's.  (Comment:  This suggests 
that RosTechnologiya will, similar to ROE, be a state 
corporation, rather than a Federal State Unitary Enterprise 
or a commercial joint stock company, expanding the scope of 
its activity and latitude in managing its own resources.  End 
Comment.)  Sergey Chemezov, ROE's former Director General, 
now heads RosTechnologiya, while ROE's leadership has passed 
to Anatoliy Isaykin. 
 
--------------------- 
ROE's Main Challenges 
--------------------- 
 
&#18
2;5. (C) ROE officials told us their biggest challenges in the 
future, like all companies, come from their competitors. 
They said that in order to maintain sales, they must develop 
new products, find new markets, and outdo their competitors. 
The weapons industry, they said, is also subject to changes 
in world politics.  They attributed their current good 
fortunes to "luck" in finding a winning combination. 
 
6. (C) ROE officials dismissed assessments that China and 
India, traditional ROE customers, would soon develop their 
own high-quality weapons and even compete with ROE.  They 
said that companies in China and India simply modify Russian 
weapons and pass them off as their own.  They were confident 
that customers would continue to buy original Russian arms, 
rather than cheap imitations. 
BURNS

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08MOSCOW394, RUSSIA AND UKRAINE RESOLVE GAS DISPUTE, AGREE TO

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Reference ID Created Released Classification Origin
08MOSCOW394 2008-02-14 03:34 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO7648
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #0394 0450334
ZNY CCCCC ZZH
P 140334Z FEB 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 6573
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L MOSCOW 000394 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT 
EUR/CARC, SCA (GALLAGHER, SUMAR) 
DOE FOR HARBERT, HEGBORG, EKIMOFF 
DOC FOR 4231/IEP/EUR/JBROUGHER 
 
E.O. 12958: DECL: 02/04/2018 
TAGS: EPET ENRG ECON PREL RS
SUBJECT: RUSSIA AND UKRAINE RESOLVE GAS DISPUTE, AGREE TO 
ELIMINATE CURRENT INTERMEDIARIES 
 
 
Classified By: DCM Daniel A. Russell for Reasons 1.4 (b/d) 
 
1. (SBU) As most watchers expected, Russia and Ukraine came 
to a last minute agreement to settle the latest gas dispute 
(reftel) and avert a cutoff of gas flows.  Announced by 
President Putin following a meeting with his Ukrainian 
counterpart just as the 6:00pm February 12th deadline 
arrived, the deal includes replacing current intermediaries 
RosUkrEnergo and UkrGazEnergo with a new entity owned jointly 
by Gazprom and Ukraine's state-owned gas company, NaftoHaz 
Ukrainy.  The agreement seems to give something to both 
sides.  Ukraine avoids a gas cutoff and eliminates the 
existing "murky" middlemen.  Russia avoids another PR 
disaster while getting Ukraine to acknowledge its debt. 
 
2. (C) It is not exactly clear, however, how the debt issue 
was resolved.  There seems to be agreement that Ukraine would 
begin repaying its debt, but the make up and amount of the 
debt as well as the exact timing of the repayment were left 
vague.  Ukrainian Prime Minister Tymoshenko, for instance, 
has acknowledged only $1.1 billion of debt, while Gazprom 
claimed a debt of $1.5 billion.  Perhaps more importantly, 
despite pronouncements by leaders on both sides that the gas 
trade be "as transparent as possible," neither side would 
provide details on the nature and role of the new 
intermediary. 
 
3. (C) Gazprom's International Affairs Director Ivan Zolotov 
told us February 13th that the Ukraine gas trade is a "purely 
commercial matter for Gazprom."  It appears that Gazprom will 
now have more direct access to revenues from the large 
industrial Ukrainian consumers that previously paid 
UkrGazEnergo.  Zolotov also pointed out that "Gazprom needs 
Ukraine and the EU as much as they need Gazprom -- we are not 
going to jeopardize these important relationships, we're in 
this to make money."  Although this type of dispute may 
repeat itself, the mutual dependency of Gazprom, Ukraine, and 
the EU should ultimately help keep the gas flowing, even if 
new non-transparent entities replace the old ones. 
BURNS

Wikileaks