Monthly Archives: March 2008

08MOSCOW884, RUSSIA ASKS FOR A “STRAIGHT ANSWER” ON AFGHAN

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Reference ID Created Released Classification Origin
08MOSCOW884 2008-03-31 14:59 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0001
OO RUEHWEB

DE RUEHMO #0884 0911459
ZNY CCCCC ZZH
O 311459Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7413
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHZG/NATO EU COLLECTIVE PRIORITY
RUEHBUL/AMEMBASSY KABUL PRIORITY 0505
RUEHNO/USMISSION USNATO PRIORITY 6803

C O N F I D E N T I A L MOSCOW 000884 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/31/2018 
TAGS: PGOV PREL MARR AF RS
SUBJECT: RUSSIA ASKS FOR A "STRAIGHT ANSWER" ON AFGHAN 
MILITARY AID 
 
REF: A. 07 MOSCOW 5098 
     B. MOSCOW 520 
 
Classified By: Deputy Chief of Mission Daniel Russell for reasons 1.4 ( 
b/d). 
 
1. (C) MFA Afghanistan Desk Chief Yuri Khokhlov called in 
Poloff on March 31 to tell us Russia sought a "straight 
answer" from the U.S. on whether there was interest in the 
Russian offer to provide military aid to Afghanistan (refs). 
He said that while the GOR has dealt bilaterally with 
Afghanistan on this issue, it recently learned that Afghan 
reluctance to accept the weapons was precipitated by the U.S. 
and NATO.  According to Khokhlov, the Afghan MOD told the GOR 
it was interested in the Russian weapons but had been 
pressured by NATO not to accept them.  The Russian Embassy in 
Kabul sought clarification from NATO representatives, who 
said that NATO planned to move the Afghan National Army (ANA) 
away from using Soviet-era weapons supplied by Poland and the 
Czech Republic and toward NATO compatible weapons. 
 
2. (C) Khokhlov stressed that by rebuffing the Russian offer, 
the U.S. was sending a "strange message" at a time when the 
GOR and NATO were discussing expanding cooperation in 
Afghanistan.  He explained that providing weapons to the ANA 
in order to improve its security abilities was a "key 
component" of the GOR strategy for Afghanistan signed by 
Putin.  Russia was "ready to go very far" in assisting the 
ANA -- the GOR simply wished to know if it should continue to 
pursue this avenue any longer.  Khokhlov said the timing of 
this message to the U.S. was not coincidental given Putin's 
attendance at the upcoming NATO summit.  The Russians chose 
to deliver the message at the working level but, Khokhlov 
assured us, the decision to send this message had been made 
at a high level. 
BURNS

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08MOSCOW883, GOR REACTION TO LUKASHENKO: U.S. REDUCTION “UNWISE”

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Reference ID Created Released Classification Origin
08MOSCOW883 2008-03-31 14:23 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0004
OO RUEHWEB

DE RUEHMO #0883 0911423
ZNY CCCCC ZZH
O 311423Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7412
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L MOSCOW 000883 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/31/2018 
TAGS: PREL PGOV BO RS
SUBJECT: GOR REACTION TO LUKASHENKO: U.S. REDUCTION "UNWISE" 
 
REF: MINSK 00215 
 
Classified By: Political M/C Alice G. Wells.  Reasons 1.4 (B/D). 
 
1.  (C) MFA Second CIS Department Director Viktor Sorokin 
told us March 31 that the GOB did not consult with the GOR 
about its move and PM Zubkov, during his March 21 visit to 
Minsk, was briefed on the developments after the fact and was 
"asked to understand" the GOB's action.  Sorokin maintained 
that the GOR considered the situation "worrisome." and 
thought that reducing the size of the U.S. Embassy was 
"unwise." 
 
2.  (C) Sorokin, arguing that the GOR did not have much 
leverage over Lukashenko, said that the GOR advised that the 
GOB exercise restraint and refrain from "radical steps."  He 
maintained that the U.S. policy seeking isolation of rather 
than engagement with Belarus had led to deteriorating 
U.S.-Belarus relations.  Sorokin attributed the culmination 
of the worsening relationship -- Lukashenko's regime's 
request to reduce staff at the U.S. Embassy Minsk -- to U.S. 
sanctions against Belneftekhim (Belarus Oil and Chemical 
Co.), which is one of the cornerstone companies contributing 
to Belarus's state budget.  Cornered and deprived of economic 
opportunities, the Belarus leadership turned to the last 
resort, he added. 
 
3.  (C) In response to our concerns over the opposition 
crackdown, Sorokin simply said that it was an internal 
matter, which was being resolved with the release of most of 
those who were detained on March 25. 
BURNS

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08MOSCOW882, NO PUTIN-VORONIN DEAL ON TRANSNISTRIA, SAYS GOR

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Reference ID Created Released Classification Origin
08MOSCOW882 2008-03-31 14:09 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0017
OO RUEHWEB

DE RUEHMO #0882 0911409
ZNY CCCCC ZZH
O 311409Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7411
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L MOSCOW 000882 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/31/2018 
TAGS: PREL PINR PBTS OSCE MD RS
SUBJECT: NO PUTIN-VORONIN DEAL ON TRANSNISTRIA, SAYS GOR 
 
REF: MOSCOW 805 
 
Classified By: Political M/C Alice G. Wells.  Reasons 1.4 (B/D). 
 
1.  (C) Both MFA Transnistria negotiator Valeriy Nesterushkin 
and Second CIS Department Director Viktor Sorokin denied an 
impending Putin - Voronin deal to resolving the Transnistria 
conflict (reftel).  On March 27, Nesterushkin told us that 
there was no change in the GOR position: without the two 
partners in conflict negotiating directly, there would be no 
resolution.  Nesterushkin, lamenting the "missed opportunity" 
for a 5 plus 2 meeting during the OSCE Madrid Ministerial in 
November last year, argued that the negotiation process would 
work not through intimidation and pressure but through 
engagement.  He informed us that Smirnov had not replied to a 
possible 5 plus 2 meeting in Odessa in April 14-16. 
 
2.  (C) Per Nesterushkin, the change in the negotiation 
teams, including DAS Kramer's departure,  Ukraine's 
Veselovskiy's move to Brussels, the cabinet shuffle in 
Moldova, and Transnistria's April 2 confidence vote on "FM" 
Litskai, could further complicate the situation and delay the 
launch of a 5 plus 2 meeting.  Nesterushkin saw only one 
option between Voronin, who wants to impose Moldova's 
constitution on Transnistria, and Smirnov, who wants 
independence -- a form of federation in order to seek a model 
of co-existence.  He advised against an "erroneous" idea that 
once agreed with Putin, all deals were good for Smirnov. 
 
3.  (C) Sorokin echoed Nesterushkin, saying that there was no 
new development on the Transnistrian front and predicted that 
more serious moves would happen only after the early May 
presidential inauguration. 
BURNS

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08MOSCOW875, MEDVEDEV’S ECONOMIC THINK TANK: INSTITUTE FOR

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Reference ID Created Released Classification Origin
08MOSCOW875 2008-03-31 11:05 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO8893
OO RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #0875/01 0911105
ZNY CCCCC ZZH
O 311105Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7403
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 000875 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/RUS 
DOC FOR 4231/IEP/EUR/JBROUGHER 
TREASURY FOR TORGERSON 
NSC FOR WARLICK 
STATE PLS PASS FOR USTR HAFNER 
 
E.O. 12958: DECL: 03/31/2018 
TAGS: ECON EINV EIND PGOV PREL RS
SUBJECT: MEDVEDEV'S ECONOMIC THINK TANK: INSTITUTE FOR 
CONTEMPORARY DEVELOPMENT 
 
REF: 07 MOSCOW 2527 
 
MOSCOW 00000875  001.2 OF 002 
 
 
Classified By: ECON M/C ERIC T. SCHULTZ.  REASONS 1.4 (B/D). 
 
------- 
SUMMARY 
------- 
 
1. (C) On March 18, President-elect Medvedev participated in 
the opening seminar of the Institute for Contemporary 
Development, the economic think tank that many observers say 
will become the brain trust for Medvedev's economic policies. 
 Press reports have compared Medvedev's endorsement of the 
Institute with Putin's creation of the Center for Strategic 
Research, or the Gref Center, when he became Prime Minister 
in 1999.  Medvedev asked Igor Yurgens, of Renaissance 
Capital, to lead the new Institute.  Yurgens downplayed the 
Gref Center comparisons in a meeting with us, saying he wants 
the Institute to be independent of the government and provide 
a range of views and policy options to Medvedev, starting 
with its first project: growing the Russian middle class. 
End summary. 
 
------------------------- 
MEDVEDEV'S NEW THINK TANK 
------------------------- 
 
2. (SBU) On March 18, President-elect Medvedev participated 
in a closed-door discussion on the impact of the current U.S. 
financial situation on the Russian economy at the new 
Institute for Contemporary Development.  Press coverage 
following the session centered on the Institute's ties to the 
President-elect and comparisons with the Gref Center in the 
early years of the Putin administration.  Putin established 
the Gref Center in 1999 to generate ideas for his economic 
policies and to draft a reform program.  Prior to March 18, 
the Institute for Contemporary Development was known as the 
RIO Center, a think tank created by Communications Minister 
Reyman and Vice President of the Union of Industrialists and 
Entrepreneurs (RSPP) Igor Yurgens in 2003 (reftel). 
 
3. (SBU) Yurgens will head the new Institute's executive 
board, which includes a number of prominent economists, many 
of them known to the Embassy, such as Ruslan Grinberg from 
the Academy of Sciences, former Labor Deputy Minister Evgeniy 
Gontmakher, middle class expert Tatyana Maleva, and economist 
Vladimir Mau.  Gontmakher told econoffs on March 25 that the 
Institute had four main directions: International Relations, 
which would be headed by either Sergei Prikhodko or Sergei 
Yastrzhembskiy from the Kremlin; Socio-economic issues, 
headed by Gontmakher; Domestic policy, directed by political 
think-tanker Boris Makarenko; and Information Technology, 
whose head has not yet been designated. 
 
4. (SBU) Medvedev will chair the Supervisory board of the 
Institute with Minister Reyman and Economic Development and 
Trade (MEDT) Minister Nabiullina as deputy chairs. 
Presidential Administration Expert Department Head Arkady 
Dvorkovich and Chairman of the Supreme Arbitration Court, 
Anton Ivanov, are also on the board. 
 
---------------------- 
YURGENS ON HIS NEW JOB 
---------------------- 
 
5. (C) In a March 19 meeting with visiting NSC Senior 
Director for Russia Mary B. Warlick, Yurgens confirmed that 
he had been tapped by Medvedev to head the new "think tank" 
but downplayed comparisons to the Gref Center, noting that 
his Institute would be one voice among many advising the new 
president.  Yurgens said he had told Medvedev that the 
Institute needed to be completely independent in order to its 
job well.  To that end, private sector representatives on the 
Board, such as Severstal's Alexander Mordashev, would help 
raise an endowment to fund the Institute's activities. 
Yurgens added he anticipated difficulties with Dvorkovich and 
others in the government who, though well-meaning, were 
likely to try and direct the Institute's activities. 
 
6. (C) Yurgens said that he was impressed by Medvedev so far 
and was optimistic about his presidency.  He noted that at 
the briefing for Medvedev on the U.S. economy Medvedev had 
 
MOSCOW 00000875  002.2 OF 002 
 
 
interacted with the analysts and had encouraged a very frank 
and open briefing.  Yurgens said Medvedev had also been 
receptive to the main conclusion of the briefing, that 
greater economic openness on Russia's part would increase its 
chances of being a "safe haven" during troubled times. 
Yurgens added that unlike his predecessor, Medvedev was too 
young to have known the USSR and did not consider its demise 
a "tragedy."  This also augured well for Russia's future and 
in particular for its relations with the West. 
 
7. (C) Yurgens said the Institute would focus on one issue at 
a time.  Its first topic was to be
growing the Russian middle 
class.  For this topic and for the others to follow, the 
Institute's core experts would be complemented by additional 
topical experts drawn from all points of view.  Gontmakher 
told us separately that he would be organizing a conference 
on the middle class by the end of April.  He said that he had 
already written a two page brief that was sitting on 
Medvedev's desk.  Gontmakher said the main goal of the 
conference was to show Medvedev the scope of the current 
middle class problem and to suggest policy options to grow it 
by developing the labor market, the housing market, and civil 
society.  Gontmakher said the middle class project would 
continue after the conference, including establishing a 
separate center. 
 
-------------------------------- 
CRITIQUE OF MEDT'S 2020 STRATEGY 
-------------------------------- 
 
8. (SBU) Both Yurgens and Gontmakher voiced sharp criticism 
of the MEDT's recently released long-term, socio-economic 
strategy to 2020.  During a March 18 RSPP meeting, Yurgens 
criticized the document as "extremely state-centered" without 
enough focus on development of the private sector.  While 
recognizing the necessity to have direct GOR involvement in 
sectors involving national security matters, Yurgens stressed 
the need to limit government intervention in the economy. 
The RSPP plans to present their critique of the MEDT 2020 
strategy by April 7. 
 
9. (C) Gontmakher told us that the MEDT document was not a 
strategy because it does not provide any mechanisms to 
achieve their "wish list" of target indicators.  He repeated 
comments about the current economic policies that other 
economists associated with the institute have told econoffs 
before: that the current MEDT was not capable of carrying out 
Medvedev's economic priorities.  In a sidenote, he mentioned 
that MEDT Minister Nabiullina did not like being Minister and 
probably would move to the Presidential Administration after 
May.  He said that Dvorkovich wanted the job and was the 
likely candidate to replace Nabiullina. 
 
------- 
COMMENT 
------- 
 
10. (C) President-elect Medvedev's close ties to Yurgens' 
institute and the possible involvement of Kremlin 
heavyweights, such as Prikhodko and Yastrzhembskiy, suggest 
that this think tank could wield much influence in Medvedev's 
administration.  Whether it becomes an independent institute 
to provide the new president with alternative policy options, 
as Yurgens portrays it, or it follows the path of the Gref 
Center to become a policy factory for Medvedev's economic 
priorities, one thing is clear.  The institute's activities 
and its members merit our close attention. 
BURNS

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08MOSCOW870, ROSATOM TRANSITION UPDATE

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Reference ID Created Released Classification Origin
08MOSCOW870 2008-03-31 06:10 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Moscow

VZCZCXYZ0000
PP RUEHWEB

DE RUEHMO #0870 0910610
ZNR UUUUU ZZH
P 310610Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 7397
INFO RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHII/VIENNA IAEA POSTS COLLECTIVE

UNCLAS MOSCOW 000870 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KNNP ENRG PREL PARM RS
 
SUBJECT: ROSATOM TRANSITION UPDATE 
 
REF: Moscow 0408 
 
Sensitive But Unclassified, Protect Accordingly 
 
1. (SBU) Summary: The transition of the Federal Atomic Energy Agency 
to the Rosatom State Corporation is moving forward.  The uncertainty 
surrounding the retention of staff has brought anxiety and 
bureaucratic paralysis as employees wait to learn their fate in the 
new organization.  End Summary. 
 
2. (SBU) On March 26, we met with Natalya Klishina, Deputy Head of 
the Rosatom Office of Bilateral Cooperation, to get an update on the 
ongoing transformation of the Federal Atomic Energy Agency (Rosatom) 
into the Rosatom State Corporation (RSC)(Reftel).  She reported that 
Prime Minister Zubkov is expected to soon sign the executive order 
transferring Rosatom's authority to the RSC.  The day Zubkov signs 
the order will be the official starting date of the reorganization. 
Every Rosatom employee will receive a "notice letter" informing them 
that over the following two months, the RSC will make a decision 
regarding whether they will be retained by the new organization or 
dismissed. 
 
3.  (SBU) Presently, only four or five top-level staff have been 
officially assigned to the RSC.  These include Director General 
Sergey Kiriyenko and Deputy Director General Nikolay Spasskiy. 
Klishina reports that the uncertainty regarding future employment is 
negatively impacting morale and productivity.  Repeating what we 
have heard from other Rosatom officials, she speculated that many 
"newcomers" may be hired by the RSC, implying that significant 
numbers of Rosatom staff may be let go. 
 
4.  (SBU) Comment:  This period of uncertainty is not unusual in 
Russian government agency reorganizations.  It may take about six 
months for the new Rosatom Corporation structure to find its groove. 
 
 
BURNS

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08MOSCOW867, GOR NOTIFIED OF MISTAKEN SHIPMENT OF MISSILE

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Reference ID Created Released Classification Origin
08MOSCOW867 2008-03-31 06:08 2011-08-30 01:44 SECRET Embassy Moscow

VZCZCXYZ0002
OO RUEHWEB

DE RUEHMO #0867 0910608
ZNY SSSSS ZZH
O 310608Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7394
INFO RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 4368
RUEHIN/AIT TAIPEI IMMEDIATE 0426

S E C R E T MOSCOW 000867 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR ISN, EAP, AND T (TIM KATSAPIS) 
 
E.O. 12958: DECL: 03/27/2018 
TAGS: PARM MTCRE PREL TW CH JA RU FR AU KS UK
SUBJECT: GOR NOTIFIED OF MISTAKEN SHIPMENT OF MISSILE 
COMPONENTS TO TAIWAN 
 
REF: STATE 30494 
 
Classified By: Political Minister Counselor Alice G. Wells For Reasons 
1.4 (b), (c), and (d). 
 
(S) On March 28 we delivered reftel nonpaper to MFA DVBR 
Section Chief Aleksandr Deyneko, who offered no substantive 
comment. 
BURNS

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08MOSCOW866, EXPERT VIEWS: MEDVEDEV’S REFORM PROSPECTS SLIM;

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Reference ID Created Released Classification Origin
08MOSCOW866 2008-03-28 15:24 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0002
PP RUEHWEB

DE RUEHMO #0866/01 0881524
ZNY CCCCC ZZH
P 281524Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 7391
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L MOSCOW 000866 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/RUS, EEB/IFD 
TREASURY FOR MEYER, TORGERSON 
DOC FOR 4231/IEP/EUR/JBROUGHER 
NSC FOR WARLICK 
 
E.O. 12958: DECL: 03/28/2018 
TAGS: ECON EFIN PGOV RS
SUBJECT: EXPERT VIEWS: MEDVEDEV'S REFORM PROSPECTS SLIM; 
POLICY DEBATE CHANGING 
 
REF: MOSCOW 721 
 
Classified By: ECMIN Eric T. Schultz, Reasons 1.4 (b/d). 
 
------- 
Summary 
------- 
 
1.  (C) A swelling number of experts has low expectations 
that the Medvedev administration will pursue pro-market 
reforms.  In separate conversations the week of March 17, 
Deputy Director of the Institute for the Economy in 
Transition (aka the Gaidar Institute) Sergei Sinelnikov and 
Alfa Bank Chief Economist Natalia Orlova are the latest 
analysts with whom we have met to add their voices to this 
chorus.  Both cited the country's current prosperity as a 
major impediment, as well as the government's unwillingness 
to give up its increasing control over the economy.  That 
said, both gave Medvedev credit for raising the need for 
reforms.  Orlova said Medvedev had identified the right 
priorities, and Sinelnikov called Medvedev's February 15 
speech in Krasnoyarsk a signal to the "siloviki" that 
Medvedev's administration would not be focused on doling out 
the spoils of power but rather on a policy debate about how 
to sustain the country's economic growth.  End Summary. 
 
----------------------------- 
Krasnoyarsk: No "There" There 
----------------------------- 
 
2.  (C) Gaidar Institute Deputy Director Sergei Sinelnikov 
sharply criticized the conventional wisdom that Medvedev's 
Krasnoyarsk speech was a first draft of the President-elect's 
economic policy roadmap.  Sinelnikov observed the speech was 
conspicuously lacking in substance.  Medvedev did not shed 
any light, for instance, on strengthening civil society, even 
though the development of Russia,s institutions lagged well 
behind that of other countries with similar GDP per capita 
measures.  According to Sinelnikov, Medvedev had no political 
motive in the sense of garnering support "because he knew he 
was going to win the election."  Instead, Medvedev used the 
speech's "extreme populism" as a means of garnering positive 
sentiment. 
 
3.  (C) Alfa Bank Chief Economist Orlova echoed Sinelnikov's 
assessment that the speech offered few details to highlight 
what policy direction the Medvedev administration might 
follow.  She said she had found the speech itself positive 
and credited Medvedev for identifying the need to address the 
shortcomings the "Four I's" represented.  The first step on 
the road to reforms was acknowledging that there were 
problems.  That said, she conceded that the Krasnoyarsk 
speech as well as Medvedev's other public comments were 
essentially "encore performances" of Putin's speeches during 
2001-03. 
 
------------------------------------ 
Outcomes Uncertain, Reforms Resisted 
------------------------------------ 
 
4.  (C) Sinelnikov restated Merill Lynch CEO Aleksashenko's 
perspective (Reftel) that nothing short of a crisis would 
spur the incoming administration to undertake broad reforms. 
Sinelnikov added that not only would the Russian economy's 
general stability minimize the perceived need for pro-market 
reforms but the uncertainty of outcomes would also increase 
the government's reluctance.  For instance, encouraging 
greater investment--one of the Four I's--would be a distinct 
challenge without tax incentives, especially in the oil and 
gas sector, which the Finance Ministry would oppose. 
(Comment: Kudrin has apparently reversed this position.  He 
announced a proposal on March 24 to reduce oil extraction 
taxes -- septel.  End Comment) 
 
5.  (C) Orlova also said she considered the country's current 
prosperity to be a hostile environment for reform.  Russia 
was too rich and its people too cynical.  Cheap credit, 
however, had helped fuel Russia's boom, and she thought that 
credit would begin to dry up as the global financial crisis 
deepened.  Russia had not yet suffered badly from the crisis, 
but talk that it was "decoupled" from the global economy, 
including the U.S. economy, was wrong.  Orlova also said the 
first reform was likely to be tax policy.  She favored a 
general cut in taxes along with increased social spending but 
feared the government would instead cut oil and gas taxes, 
 
weakening the country's fiscal position, and would at the 
same time increase funding to the inefficient and corrupt 
state corporations. 
 
6.  (C) Orlova added that the long-term nature of Medvedev's 
institutional development goals meant that they might suffer 
from slow and uneven implementation.  This was unfortunate, 
because stronger property rights, especially for small and 
medium size enterprises, were critical to growing the economy 
in the right way.  Even large companies had questionable 
control over their assets.  She said that Troika Dialog, for 
instance, one of Russia's largest domestic investment houses, 
had been denied permission by the government to sell out to a 
Japanese investment bank.  Orlova said that the Yukos affair 
had had a chillin
g effect on people's willingness to take 
risks and come up with new economic initiatives.  If this 
continued, Russia's economic growth would result in 
low-paying, low-skill jobs in retail trade and the state 
corporations.  And Russia's greatest comparative advantage, 
its human capital, would be squandered. 
 
-------------------------------- 
Multifront Reform Effort or Else 
-------------------------------- 
 
7.  (C) Sinelnikov said the most effective path toward 
economic reform was a multi-front effort.  Referring to the 
proposal on reducing Russia,s value-added tax (VAT), which 
the Ministry of Economic Development and Trade (MEDT) had 
just sent him, he said that some officials and ministries 
were already vying for priority position among the reforms 
suggested in Medvedev,s speech.  He argued, however, that 
Russia could not afford to support the development of 
institutions of civil society to the exclusion of 
infrastructure improvements, or that building an innovation 
economy should take precedence over legal reforms such as 
strengthened property rights.  Sinelnikov conceded that the 
magnitude of resources allotted would vary by area of reform, 
but he maintained there was no such thing as a "key reform." 
Addressing reforms one by one threatened a repeat of Putin,s 
second term, during which the "window of opportunity" to 
continue reforms was shut tight. 
 
8.  (C) Orlova speculated that the Medvedev administration 
would adopt a broad based approach to reforms, but more by 
inertia rather than by design.  She observed that government 
spending had been on the rise: the 2006 budget surplus 
equaled 7.6 of GDP; whereas in 2007 it slipped to 5.5 percent 
of GDP.  Budget expenditures in January 2008, furthermore, 
were double those of January 2007.  She anticipated that the 
incoming administration would cut taxes either generally or 
for specific sectors as a means of moving toward more 
value-added production.  Orlova said that social spending was 
likely to increase and that one of Presdident-elect 
Medvedev,s key challenges would be to refrain from spending 
the Stabilization Fund too fast.  She explained that pressure 
was mounting to spend the Stabilization Fund on Russia,s 
wide ranging needs.  The banking sector needed the resources 
to provide liquidity; small businesses needed access to 
inexpensive financing; funds were needed to shore up the 
country,s health care system. 
 
------------------------------- 
The New Face of Policy Debates? 
------------------------------- 
 
9.  (C) According to Sinelnikov, observers would be able to 
gauge the level of Medvedev,s seriousness about reforms 
based on his choice of advisors.    Keeping Alexey Kudrin in 
the Finance Ministry would ensure that any fiscal action to 
stimulate the economy would be thoroughly vetted for adverse 
effects on the budget and inflation.  He noted that the 
economically liberal, Western-leaning Presidential 
Administration Experts, Directorate Head Arkadiy Dvorkovich 
and Deputy Economic Development Minister Stanislav 
Voskresenskiy were becoming influential advisors to Medvedev. 
 Sinelnikov recounted that during the flight to Krasnoyarsk 
with Medvedev, Dvorkovich and Voskresenskiy edited the "Four 
I,s" speech.  Sinelnikov attributed the economic portions of 
the speech, such as cutting the VAT and increasing deductions 
for research and development spending, to their direct 
influence: "Medvedev left Moscow with one speech and arrived 
in Krasnoyarsk with another." 
 
10.  (C) Despite his critiques of the Krasnoyarsk speech, 
 
Sinelnikov said the speech sent a signal to Kremlin factions 
about the general direction of the future Medvedev 
administration.  The speech implied the focus would gravitate 
toward systemic changes and away from political favoritism. 
Medvedev would concentrate on deciding between optimal policy 
choices rather than doling out political spoils.  Sinelnikov 
said that Medvedev,s current combination of senior economic 
policy advisors underscored the point: in listening to both 
the fiscally conservative Kudrin and the more economically 
progressive Dvorkovich, Medvedev was signaling that the 
debate within the government had already shifted, away from a 
division of spoils and toward policy. 
BURNS

Wikileaks

08MOSCOW865, SERDYUKOV VS. BALUYEVSKIY: DISCORD IN THE MINISTRY

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Reference ID Created Released Classification Origin
08MOSCOW865 2008-03-28 15:18 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0027
OO RUEHWEB

DE RUEHMO #0865/01 0881518
ZNY CCCCC ZZH
O 281518Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7389
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE IMMEDIATE
RUEHZG/NATO EU COLLECTIVE IMMEDIATE
RUEKJCS/SECDEF WASHDC IMMEDIATE
RUEKJCS/JOINT STAFF WASHDC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
RUEAIIA/CIA WASHDC IMMEDIATE
RHMFISS/EUCOM POLAD VAIHINGEN GE IMMEDIATE

C O N F I D E N T I A L MOSCOW 000865 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/17/2018 
TAGS: PREL PGOV MARR RS
SUBJECT: SERDYUKOV VS. BALUYEVSKIY: DISCORD IN THE MINISTRY 
OF DEFENSE? 
 
 
Classified By: Ambassador William J. Burns.  Reasons 1.4 (b) and (d) 
 
1. (C) Summary.  Tensions within the Ministry of Defense 
erupted in the press the week of March 24, with reports that 
Chief of the General Staff Baluyevskiy had submitted his 
latest letter of resignation, and that the General Staff was 
unhappy with Defense Minister Serdyukov's "intrusion" into 
military affairs.  Most outside defense analysts applaud 
Serdyukov's reform efforts to diminish corruption and develop 
better financial controls in the Ministry; they contend that 
unhappiness among the General Staff is because its authority, 
autonomy, and ability to direct funds have been significantly 
curtailed.  There is little respect among the General Staff 
for "the furniture salesman" (as some derisively refer to 
Serdyukov) because he has no military experience or 
expertise.  Most defense experts believe no action will be 
taken on Baluyevskiy's offer of resignation until 
president-elect Medvedev takes office in May.  They expect 
that Medvedev will keep Serdyukov in order to continue his 
reform efforts.  End summary. 
 
Baluyevskiy Offers to Resign.  Again 
------------------------------------ 
 
2.  (U) Articles in leading Russian newspapers this week 
reported on a power struggle between Minister of Defense 
Anatoliy Serdyukov and the General Staff, with Chief of the 
General Staff Yuriy Baluyevskiy and other senior uniformed 
officers tendering letters of resignation.  (Baluyevskiy had 
reportedly offered to resign in February 2007, when Serdyukov 
was named Defense Minister, again in November 2007 after one 
of Serdyukov's advisors, FSB Major General Eskin, was named 
Deputy Defense Minister, and yet again in January when 
Baluyevskiy reached the mandatory retirement age.  The first 
and second offers were not accepted; in response to the 
third, Putin extended Baluyevskiy's service for an additional 
three years.)  The press articles noted that at a meeting of 
the Military Academy of Sciences in February, Baluyevskiy had 
publicly stated his doubts about Serdyukov's decision to move 
the Navy fleet's headquarters to St. Petersburg.  The 
articles also reported that Serdyukov's decision to explore 
measures to "optimize Russia's command structure," including 
removing military status from army doctors, journalists, and 
lawyers, as well as moving military academies out of Moscow, 
and selling off military property had infuriated the General 
Staff as "meddling" in its affairs. 
 
3.  (C) On March 26, the MOD issued a statement denying that 
the MOD leadership was "torn with disagreements," and 
refuting the claims that some of the MOD senior officials had 
handed in letters of resignation (though not naming 
Baluyevskiy specifically).  That same day, General-Major 
Viktor Chernov, chief of the MOD's Foreign Liaison 
Directorate, told Defense Attaches that General Baluyevskiy 
had returned from his five-week leave and resumed his duties 
as CHOD.  Other MOD officers told the DATT privately that 
Baluyevskiy had tendered his resignation, although they 
doubted that it would be accepted, with one officer noting 
that Putin personally had full confidence in Baluyevskiy's 
abilities. 
 
Tensions at MOD: Power-Hungry or Crusading Minister? 
--------------------------------------------- -------- 
 
4.  (C) MOD officers attributed the tensions to Serdyukov's 
efforts to take over control of functions previously handled 
by the General Staff.  One Russian Air Force officer told the 
DATT that, traditionally, the General Staff (and 
specifically, the CHOD) had been the ultimate "decider" in 
all military issues; the Defense Minister, although a Cabinet 
official, dealt with the "political" side of the defense 
establishment (e.g., military doctrine and armaments).  The 
"civilian control" function and "supreme command" over the 
Armed Forces was exercised by the President, rather than by 
the Defense Minister, who until recently was a uniformed 
person.  (Ekho Moskvy Editor Aleksey Venediktov told us that 
frictions were exacerbated by Baluyevskiy's expectation that 
he would be tapped to replace Sergey Ivanov as Defense 
Minister).  The on-going frictions were attributed to efforts 
by Serdyukov to change the dynamic between the Defense 
Minister and the CHOD, with the "management" side (MOD) 
usurping the "operational" authorities of the General Staff 
(although we note that Serdyukov has not been involved much 
in articulating national security and defense policy 
positions, focusing instead on the task he was brought in to 
 
 
do - "cleaning up" the Ministry). 
 
5.  (C) While some defense experts agreed that the General 
Staff was upset at what it perceived as usurpation of its 
authority, most also argued that the Generals were angry 
because Serdyukov had introduced numerous measures to prevent 
them from being able to direct funds to their pet projects
, 
associates, or into their own pockets.  Dmitriy Litovkin, of 
Izvestiya, contended that Serdyukov had brought in 
approximately 40 civilian advisors, who mostly ignored the 
General Staff's advice.  He argued that the Generals' main 
complaint against Serdyukov was that he failed to give proper 
justification for his decisions, while Serdyukov's main 
complaint against the Generals was that they ignored or 
sabotaged his decisions, did not work hard, and engaged in 
overt and covert corruption. 
 
6.  (C) Most outside experts gave Serdyukov high marks for 
his reform efforts, noting that Putin appointed Serdyukov to 
overhaul the MOD, staunch the financial hemorrhaging, and 
clean out corruption, not to oversee defense or military 
policy.  Venediktov emphasized that Serdyukov enjoyed Putin's 
full support, as he had reduced financial flows to individual 
projects and moved to privatize "cash cows."  Aleksandr 
Golts, Deputy Editor-In-Chief of the Weekly Journal, said 
defense spending before Serdyukov had been "completely 
uncontrolled," and commended the Defense Minister's efforts 
to get a handle on spending.  He noted that it was not 
surprising the General Staff was unhappy, since they were 
used to running things their own way.  He said because 
previous Defense Minister Sergey Ivanov had not interfered 
with the General Staff, they had "tolerated" him.  Contending 
that corruption within the Ministry of Defense was rife, Ivan 
Safranchuk, Director of the World Security Institute, said 
that in the past, a lot of money was spent but with little to 
show for it.  That would change due to Serdyukov's efforts, 
he contended.  "Now," he said, "the Generals can't steal 
'all' the money." 
 
7.  (C) Vitaly Shlykov, founding member of the Center for 
Defense and Foreign Policy, said that, while the Generals 
were opposed to Serdyukov, he was gaining popularity among 
the rank and file, because he was putting money and attention 
into issues that mattered to them, such as housing and 
conditions of service.  In fact, some experts said housing 
reform had been quite successful.  Serdyukov was also seen as 
someone who was interested in solving problems.  Shlykov 
posited that it would take five to six years to see real 
change in the Russian military. 
 
What Next? 
---------- 
 
8.  (C) Prior to the recent reports of intra-MOD turmoil, 
most defense analysts predicted that Serdyukov and 
Baluyevskiy would stay after the Presidential transition. 
Now, all bets are off, though most think that if Serdyukov 
stays on, Baluyevskiy will go, but not until President-elect 
Medvedev takes office in May.  Some experts speculated that 
Baluyevskiy,s absence from the recent 2 Plus 2 talks was a 
sure sign that he was on the way out, despite MOD claims that 
he had simply been on vacation.  Deputy Executive Director of 
the Council of Foreign and Defense Policy Aleksandr Belkin, 
however, suggested that neither Serdyukov nor Baluyevskiy 
would be at their present posts by the time Medvedev became 
president.  Belkin argued that Putin did not want Medvedev to 
inherit any personnel problems, and suggested that this very 
public dispute had been an embarrassment to the Kremlin. 
BURNS

Wikileaks

08MOSCOW864, WHAT’S BEHIND THE RAIDS ON TNK-BP AND BP REF: A. MOSCOW 816 B. MOSCOW 768 C. 07 MOSCOW 3054 Classified By: Ambassador William J. Burns for Reasons 1.4 (b/d)

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Reference ID Created Released Classification Origin
08MOSCOW864 2008-03-28 14:59 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO7496
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #0864/01 0881459
ZNY CCCCC ZZH
P 281459Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 7385
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 SECTION 01 OF 04 MOSCOW 000864 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT 
EUR/CARC, SCA (GALLAGHER, SUMAR) 
DOE FOR FREDRIKSEN, HEGBORG, EKIMOFF 
DOC FOR 4231/IEP/EUR/JBROUGHER 
 
E.O. 12958 DECL: 03/25/2018 
TAGS: EPET ENRG ECON PREL PGOV RS
SUBJECT: WHAT'S BEHIND THE RAIDS ON TNK-BP AND BP REF: A. MOSCOW 816 B. MOSCOW 768 C. 07 MOSCOW 3054 Classified By: Ambassador William J. Burns for Reasons 1.4 (b/d)

------- SUMMARY -------

1.(C) The backdrop to last week's raid on TNK-BP is a tale of intrigues inside intrigues with speculation running rampant over who is behind the attacks and why. We may never know but our best guess is that it is ultimately a commercial struggle for control and ownership of a highly productive asset. That struggle has been on-going for some time and has two main threads. The first is the desire on the part of some of the Russian partners, billionaires all, to exercise greater control, and derive more of the profits, than BP. The second is the GOR's desire that Gazprom purchase the Russian half of the company -- Gazprom, naturally, wants a lower price, the Russian billionaires, if they have to sell, want a high price. Others see political motives and the chance to take a slap at the British as well. However, ultimately this is a story about billions and billions of dollars. End Summary

------------------- BILLIONAIRES VS. BP -------------------

2.(C) Various theories have been circulating among the oil and gas community as well as in the local press as to the motives behind the recent attacks (refs A and B) on TNK-BP, one of the world's ten largest oil companies. Prominent among these theories is in-fighting among the shareholders, especially between BP and its Russian billionaire partners. The TNK half of TNK-BP is shared between billionaires Viktor Vekselberg (Renova company - 12.5 percent), Mikhail Fridman, German Khan and Peter Aven (Alfa Group -- 12.5, 11, and 1.5 percent) and (Amcit) Lev Blavatnik (Access Industries -- 12.5 percent). The Russian billionaires, especially those from Alfa, are feuding with BP in a spat that goes back years. As one BP official told us when the company was forming, "We have a love-hate relationship. They love us (our money), and we hate them (their corporate governance and management styles)."

3.(C) According to a western TNK-BP official, the raids should be seen as the latest in this multi-year attempt to drive out or scare away the foreign managers of the company, which made nearly $9 billion in profits last year. Khan has traditionally led the charge to get rid of the western managers who have brought to the company western business practices such as accountable corporate governance, transparency, and fiscal discipline. In particular, senior western TNK-BP executives have pointed to the company's procurement as a sore point for Khan and to a lesser extent the other billionaires. TNK-BP spends several billion dollars a year on equipment and supplies. The BP half of TNK-BP has been able to limit directed purchases and kick-backs, much to the chagrin of some of their business partners. The former BP officials in the company also point to a contentious board meeting last fall at Fridman's Chateau in the south of France. When their prediction that declining investment would lead to falling production and profits proved prescient, the Alfa partners in particular used this to argue for a change in senior management.

4.(C) Threatening the visa status of the western employees in the company has been a favorite tactic xxxxxxxxxxxx These efforts appear to have culminated in a March 25 announcement that 148 of the BP employees seconded to TNK-BP would have to temporarily be removed from the company while their visa status is clarified. xxxxxxxxxxxx

5.(C) Adding another wrinkle to the in-fighting between the billionaires and BP is that the billionaires quarrel among themselves as well. The BP managers have a much better relationship with Vekselberg and Blavatnik. They regard Vekselberg as a serious businessman and one whom they hoped would be able to buy out the other Russian partners. Blavatnik has a limited operational role in the company, reducing scope for friction. The BP managers tell us that talk of one partner or another buying out the others has been going on for some time.

------------------------------------- GAZPROM TRYING TO SAVE A FEW BILLION? -------------------------------------

6.(C) The other widely circulated theory behind the FSB raid on TNK-BP is that it is an attempt by Gazprom to knock down the billionaires' price. Gazprom and the TNK half of TNK-BP have reportedly been negotiating for months over a price for the Russian half of the company. When TNK-BP was formed in 2003, the agreement stipulated that the Russian partners would not sell their shares until January 1, 2007, a date which was subsequently pushed back a year. Over the past six months, the western managers at TNK-BP have told us that the GOR would prefer to buy out the billionaires and bring the company more fully under state control. Moreover, they have told us that although Rosneft was mentioned early on as a potential partner, the GOR apparently decided that only Gazprom would be allowed to purchase the Russian half of the company.

7.(C) On the whole, BP is sanguine about this prospect. In their view, Gazprom would likely make a more reliable and predictable partner. The negotiations over the Kovykta gas field (ref C) led to Gazprom-BP negotiations over a global strategic tie-up that in turn puts the potential partnership in TNK-BP in a positive light. The most likely model would be the
Sakhalin Energy Investment Corporation (SEIC). Although Shell was pressured into selling a majority share to Gazprom, it has been left to operate the company more or less as it sees fit. That said, Vladimir Konavalov, the head of the Petroleum Advisory Forum, told us it is possible that Gazprom may nonetheless want to reduce BP to a minority share in the company. A western TNK-BP official told us BP can live with this and that there is already a side deal in place once the purchase happens that would give Gazprom 50 percent plus one of the shares.

8.(C) The Russian billionaires on the other hand are not at all happy at the prospect of being forced to sell their shares and if push comes to shove they are determined to get the best price they can. Vladimir Milov, a former Deputy Energy Minister, told us that the GOR would prefer to avoid any hint of the Yukos affair in resolving TNK-BP's ownership. If the billionaires are forced to sell, they will get "market value." The question is who determines that market value? It will not be the market. However, it will not be Gazprom either. The billionaires have connections, influence, and above all cash with which to fight. One of the senior western TNK-BP executives told us recently that he was surprised the fight had gone on as long as it had and that it was apparent they had underestimated the billionaires. In particular, this official noted, the Alfa Group's Peter Aven appears to have considerable influence in the Kremlin. This official also noted that Gazprom is only interested in the whole of the Russian half, giving any of the billionaires an effective veto over the sale by, for instance, fomenting continuing uncertainty, as the Alfa Group may have done with these latest attacks.

9.(C) Vekselberg threw down the price gauntlet by publicly valuing the company at $60 billion late last year. This is not an arbitrary sum. The western executives at TNK-BP have told us that extrapolating from the small amount of shares currently traded publicly undervalues the company and that based on its reserves, production, and profits, Vekselberg's figure is close to the mark. The difference is considerable. However, based on those publicly traded shares (less than 3 MOSCOW 00000864 003 OF 004 percent of the total) the current market capitalization of the company is $27 billion, having dropped 10 percent following the raid. Depending on which valuation is used, Gazprom would have to pay either $3.5 or 7.5 billion dollars for each 12.5 percent stake, reason enough to fight.

10.(C) Adding grist to the theory that Gazprom is behind the investigation is the fact that under Russian law, it is the target of industrial espionage that must initiate the investigation by filing a complaint. Gazprom was almost certainly aware of TNK-BP's "Gazprom project" assessing it as a potential partner and may have chosen to use this to put pressure on the billionaires. Seen in this light, actions such as Mitvol's environmental review (ref A) are seen by many as part of a coordinated attack on the company to reduce its value and induce the sale of its Russian half.

-------------------- KREMLIN IN-FIGHTING? --------------------

11.(C) No conspiracy theory in today's Russia would be complete without some reference to the power struggle within the Kremlin, particularly in light of the impending change at the top. In a March 25 meeting, Ekho Moskvy Editor Aleksey Venediktov called the action by the FSB a warning shot to Medvedev. He speculated that very involvement of the FSB as evidence that the actions were tied to FSB Chief Patrushev and through him to Presidential Administration Deputy Sechin,s maneuvering during this political transition. Many Embassy contacts have in fact predicted a loss of influence for Sechin following the transition. Creating a scandal over TNK-BP could be a means for Sechin and his supporters to remind the President-elect of their ability to wreak political havoc. If such a scandal disrupts business dealings between Gazprom -- the rival to the siloviki-dominated Rosneft state oil company (which Sechin chairs) -- and Western partners, so much the better.

12.(C) There are, however, reasons to discount this theory. As we noted above, BP has told us that Rosneft is no longer a serious potential purchaser of the Russian half of TNK-BP. A senior western executive at Rosneft told us the same thing. In addition, many of the contacts with whom we discussed TNK-BP developments pointed out that FSB involvement isn't conclusive one way or the other. Any of the players in this game could have access to the FSB, including Gazprom and the Alfa Group.

------------------- A JAB AT THE BRITS? -------------------

13.(C) Given abysmal Russian-British bilateral relations, the press and some of our British counterparts, were quick to see an FSB raid on the highest profile British investment here as a politically motivated attack against the Brits. Ilya and Alexander Zaslavsky, the two brothers who were arrested in connection with the FSB's charges of "commercial espionage" were, respectively, heads of the Oxford-Cambridge and the British Council alumni associations. These linkages were widely publicized and embraced by many media outlets as being related to the raid on TNK-BP and BP offices.

14.(C) However, despite the prominent attention given in the press to the British angle of the story, it seems to us more likely that this is coincidental. Regardless of the state of the two countries political relations, the commercial relationship is very strong and has been largely fenced off by both governments. Some of our contacts said it was entirely possible that the connection to the British Council was simply a PR "bonus" for the FSB.

---------------------------- CONCLUSION: FOLLOW THE MONEY ----------------------------

15.(C) Fridman/Khan vs. Vekselberg, TNK vs. BP, TNK-BP vs. Gazprom, BP vs. Gazprom, FSB vs. Brits, and siloviki vs. siloviki. A BP official told us last week that this situation will probably be "messy for a while". That seems a safe bet. Our sense is that this is ultimately a MOSCOW 00000864 004 OF 004 multi-faceted fight for control and ownership of a multi-billion dollar company, which BP and its executives at TNK-BP are caught in the middle of. We'll probably never knew who ordered the raid and why or who ordered the Zaslavsky brothers' arrest and why. What we will eventually know, to paraphrase Churchill, is which bulldog emerges from under the carpet with the prize. We think it will be Gazprom, but it may take longer than they would like. BURNS

Wikileaks

08MOSCOW861, THE ART OF THE POSSIBLE IN THE JUST RUSSIA PARTY

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Reference ID Created Released Classification Origin
08MOSCOW861 2008-03-28 14:42 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0001
PP RUEHWEB

DE RUEHMO #0861/01 0881442
ZNY CCCCC ZZH
P 281442Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 7364
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L MOSCOW 000861 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/28/2018 
TAGS: PGOV KDEM SOCI PINR RS
SUBJECT: THE ART OF THE POSSIBLE IN THE JUST RUSSIA PARTY 
 
Classified By: Political M/C Alice G. Wells. Reason: 1.4 (d). 
 
1. (C) Summary:  Four Duma deputies from the left-leaning, 
Kremlin-sponsored Just Russia party offered us assessments of 
their party in Russia's fifth Duma, which convened in January 
after the December 2 parliamentary elections.  As expected, 
Just Russia has found it difficult to have an impact on 
legislation in a Duma dominated by the ruling party, and 
these deputies' ambivalence about their Kremlin-friendly 
party was readily apparent.  For these four deputies, Just 
Russia has not turned out to be the vehicle for effective 
policy they had hoped it would be, given Mironov's weak 
leadership and the ruling party's setting of the agenda and 
terms of debate; nevertheless, they took some credit for 
behind the scenes influence and lobbying.  Just Russia 
continued to experience difficulties in the regions, where 
the quality of its leaders varied significantly and local 
United Russia leaders did not welcome the competition. End 
summary. 
 
An Unholy Alliance 
------------------ 
 
2. (C) Current Just Russia Duma members Ivan Grachev and 
Oksana Dmitriyeva migrated from Yabloko via the Party of 
Industrialists and Entrepreneurs to Just Russia in advance of 
the December 2007 Duma elections.  Grachev and Dmitriyeva, 
who are husband and wife, had been the only tandem deputies 
in the third Duma, but Grachev was not elected to the fourth 
Duma, where Dmitriyeva represented St. Petersburg's Nevskiy 
district from 2004 - 2008. 
 
3. (C) With the increase in the threshold for representation 
in the Duma from five to seven percent and the change to a 
Duma membership wholly elected from party lists, Dmitriyeva, 
who had been a single-mandate Deputy in the fourth Duma, 
understood that Grachev and she would have to affiliate with 
a Kremlin-approved party if they were to remain active in 
national politics.  Dmitriyeva's good relationship with Just 
Russia Chairman Sergey Mironov, himself a native of St. 
Petersburg, and the name recognition she brought to the new 
party as a prominent St. Petersburg politician combined to 
seal the deal.  Both Dmitriyeva and Grachev joined Just 
Russia after it was created in October 2006.  In December 2, 
2007, Duma elections Dmitriyeva and Grachev both won one of 
the 38 mandates Just Russia secured in the fifth Duma.  In 
the 450-seat Duma dominated by United Russia with 315 seats, 
Just Russia came in a distant fourth following both the 
Communist Party and the Liberal Democratic Party (LDPR). 
 
4. (C) Dmitriyeva was well aware that joining Just Russia, 
which enthusiastically backed Putin successor Dmitriy 
Medvedev's bid for the presidency, entailed compromise.  In 
conversations with us throughout the campaign, she attempted 
to justify her choice: western-leaning liberals had been 
marginalized, and she was not a street politician, Dmitriyeva 
said.  She thought that her close relationship to Mironov 
would make her influential in Just Russia, especially on 
economic issues, where the party had relatively little 
expertise.  Mironov's influence with the Kremlin would 
translate into for his party that she and other like-minded 
converts to the party could use to advance their own agendas. 
 
5. (C) Dmitriyeva understood that Mironov was loyal to Putin, 
but she thought that Just Russia would need to distinguish 
itself from United Russia, and that it could safely do so on 
economic issues.  Without discarding their favorite projects, 
Dmitriyeva and Grachev chose the "art of the possible."  She 
has continued her focus on social-economic development, while 
Grachev has continued to push legislation concerned with 
small business development and the slowly emerging mortgage 
industry in Russia. 
 
Dissatisfied, So Far 
-------------------- 
 
6. (C) In a mid-March conversation, a subdued Dmitriyeva and 
Grachev told us that they were "not happy with a single piece 
of legislation that had been passed" since the new Duma 
convened in January, and their ability to shape the law was 
more limited than they had expected when elected.  The 
Presidential Administration, via United Russia, firmly 
controlled the operations of the Duma, and Dmitriyeva 
expressed dissatisfaction with the level of debate.  As one 
example of the difficulty Just Russia has had in influencing 
the legislative process, Dmitriyeva noted that an alternative 
budget the party proposed had not even been discussed before 
it was defeated.  She also alleged that United Russia 
constantly used its constitutional majority to limit other 
parties' ability to offer amendments. 
 
7. (C) United Russia, according to Dmitriyeva, used its 
Kremlin connections not just to shepherd legislation through 
the Duma, but to engage in petty harassment of other Duma 
deputies.  Although the Duma had been in session for two 
months, a number of the Just Russia deputies had yet to be 
assigned office space.  She described the current crop of 
United Russia deputies
 as "more passive" and "more faceless" 
than their predecessors.  Most of the United Russia deputies 
treated the legislature as a "gentleman's club." They rarely 
took the floor in debate on bills and, indeed, they often 
were not present during the sessions.  While Grachev agreed 
that the United Russia contingent was weaker than its 
predecessor, he cautiously endorsed the all-party list 
elections as essential to constructing -- "eventually" -- a 
"real party system." 
 
8. (C) In a separate meeting, an even more pessimistic Duma 
Deputy Gennadiy Gudkov dismissed suggestions that his Just 
Russia party could be a counterweight to United Russia. 
(Gudkov had earlier been elected to the fourth Duma from a 
single-mandate district as leader of the People's Party. 
Once elected, he joined the United Russia faction, and then 
moved to Just Russia when the People's Party merged with it 
in April 2007.)  With the December 2 elections, Gudkov said, 
the "return to a one-party system" had been accomplished. 
That outcome was natural in the "ideological vacuum" that had 
emerged following the discrediting of western-leaning liberal 
parties and democracy itself in the '90s.  Adding to Just 
Russia's ineffectuality, he said, was Mironov's "absolute 
personal loyalty" to Putin. 
 
9. (C) Gudkov told us he had frequently urged Mironov to take 
Just Russia's role as an alternative to United Russia more 
seriously.  He had urged that Mironov invite the more active 
members of his party to form a "collegial body" that would 
devise the party's strategy, in the face of overwhelming 
United Russia numerical strength, for drawing media and 
public attention to their differences with Kremlin-engineered 
policies.  Mironov had not reacted to his proposal. 
 
Liberal Democrats and 
Communists Unimpressive 
----------------------- 
 
10. (C) Gudkov was no more optimistic about possibilities for 
the other "opposition" Duma parties -- the Communists and the 
Liberal Democrats.  While Dmitriyeva and Grachev had 
described their Communist Party counterparts as "not bad," 
Gudkov thought the Communists were both too orthodox to be 
effective in today's Russia, and too willing to compromise 
with the Kremlin.  Zhirinovskiy's Liberal Democrats were both 
too loyal to Putin and too marginal a party to play a serious 
role in Russia's political life.  Gudkov predicted that the 
lack of the feedback that a good legislature should provide 
meant that problems were accumulating unrecognized and 
unresolved by the government.  Even dedicated legislators 
like Grachev and Dmitriyeva, he said, had less contact with 
the electorate, as the number of constituents in their 
districts had increased greatly with the introduction of the 
regional party list system. 
 
Former Communist 
More Upbeat 
---------------- 
 
11. (C) Former Communist Party member Ilya Ponomarev in a 
separate conversation was more optimistic about Just Russia's 
prospects than his party colleagues.  He labeled the Just 
Russia faction the "strongest in the Duma."  United Russia 
deputies were "mere executors" of the Kremlin's will while 
the Communists had been in the legislature too long to be 
taken seriously.  Ponomarev admitted, however, that Mironov 
was not "a strong leader," and that he had surrounded himself 
with "former classmates" who were personally loyal but 
ineffective party workers. 
 
12. (C) Still, Ponomarev said, Just Russia's core members 
were already cooperating closely and would eventually develop 
a strategy for making Just Russia more of a force in Russia's 
political life.  The most active Just Russia Duma deputies, 
Ponomarev said, were Dmitriyeva, Grachev, Oleg Sheyn, Galina 
Khovanskaya, Aleksandr Babakov, Svetlana Gorechova, Mikhail 
Storshinov, and Valeriy Gartung. 
 
13. (C) Aleksandr Morozov, a member of the Just Russia 
Central Committee, agreed that United Russia has monopolized 
the internal mechanics of the Duma, but claimed that Just 
Russia was effective behind the scenes.  He alleged, without 
concrete examples, that his party had proposed several 
important bills that United Russia had claimed credit for. 
Morozov also claimed that Just Russia has been influential on 
social and educational issues through its chairmanships of 
the Science and Technology and Families, Women and Children 
Committees. 
 
Worse in the Regions 
-------------------- 
 
14. (U) United Russia's easy control of the Duma was further 
cemented in the eleven regions where elections were held on 
March 2.  In addition to polling well below United Russia, 
Just Russia generally fared less well than the Communists and 
the Liberal Democratic Party.  In Yaroslavl, the party was 
administratively excluded from the ballot.  In Bashkiriya, it 
finished a distant third, with less than four percent of the 
vote, to United Russia and the Communists, while in 
Ingushetiya it received just two of the Duma's twenty-seven 
seats.  In Ivanovo, Just Russia finished fourth, again behind 
United Russia, the Communists, and LDPR. 
 
15. (C) In the regions where it was not excluded, Just Russia 
managed three to fourteen percent of the vote.  Dmitriyeva 
contended that the wide dispersion was traceable to the 
capabilities of the local Just Russia leadership.  Morozov 
added that the party's results in the regions depended 
considerably on the relationship between the local 
administration and local party leaders.  He said that in 
Yaroslavl, local SR leader Anatoliy Greshnevikov, a fiery 
critic of the local administration, had been removed from the 
ballot.  In other regions, such as Amur region, Kalmykiya and 
Adygeya, the lack of a strong local party organization had 
hampered Just Russia's efforts.  In Rostov region, serious 
internal party conflicts had resulted in the departure of a 
large number of the leadership.  On the other hand, Morozov 
noted that in Sakha, the leader of the party ranks second in 
popularity only to Putin and, as a result, the party won 
almost fifteen percent of the vote. 
 
Comment 
------- 
 
16. (C) Dmitriyeva, Grachev and Gudkov turned to Just Russia 
because they felt they had no other vehicle for participating 
in politics.  United Russia's overwhelming majority in the 
Duma and Just Russia Chairman Mironov's inability to 
simultaneously demonstrate his loyalty to the Kremlin while 
charting a distinct course for the party have meant that the 
activists' hopes that they could make their presence felt 
from within the tent have not been realized.  A system where 
the Presidential Administration drafts most legislation and 
the ability of the Duma to pursue an independent legislative 
agenda is correspondingly reduced, means that their hopes 
were probably misplaced.  The prospects of any legislator 
making a significant impact under the current arrangement are 
low. 
BURNS

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