Monthly Archives: July 2008

08MOSCOW2201, RUSSIA’S MARKETS PLUNGE AFTER PUTIN’S STATEMENTS

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Reference ID Created Released Classification Origin
08MOSCOW2201 2008-07-30 14:18 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0013
PP RUEHWEB

DE RUEHMO #2201/01 2121418
ZNY CCCCC ZZH
P 301418Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 9230
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 002201 
 
SIPDIS 
 
STATE FOR EUR/RUS, EEB/IFD 
TREASURY FOR TORGERSON 
DOC FOR 4231/MAC/EUR/JBROUGHER 
NSC FOR WARLICK 
 
E.O. 12958: DECL: 07/30/2018 
TAGS: EFIN ECON RS
SUBJECT: RUSSIA'S MARKETS PLUNGE AFTER PUTIN'S STATEMENTS 
ABOUT MECHEL 
 
Classified By: Acting DCM Alice Wells, Reasons 1.4 (b/d). 
 
------- 
Summary 
------- 
 
1.  (C) Prime Minister Putin's public criticism of Mechel, 
Russia's largest specialty steelmaker and second-largest 
coking coal producer, has highlighted the fragility of 
Russia's stock market, exposed possible divisions within the 
country's leadership, and spooked investors -- some of whom 
see the case as a reminder of the Yukos affair.  In the wake 
of the Mechel case, as well as the flight of TNK-BP CEO Bob 
Dudley, the Russian stock markets has declined dramatically, 
losing more than USD 60 billion in shareholder value in a 
matter of days.  Experts differ on the motivations behind 
Putin's attacks on Mechel, with some contending the company 
and its chairman, Igor Zyuzin are being used as scapegoats 
for the government's failure to reign in inflation, while 
others contend that Putin and his inner circle are out to 
destroy Zyuzin and seize his assets, a la the YUKOS affair. 
Whatever the cause, Putin's comments contrast with the GOR's 
supposed preference, expressed during the TNK-BP dispute, 
that senior officials should not interfere in commercial 
matters, and further undermine confidence in the government's 
commitment to economic reform and modernization.  End Summary. 
 
-------------------- 
Putin Targets Mechel 
-------------------- 
 
2.  (U) During a July 24 conference in Nizhniy Novgorod on 
Russia's metallurgical industry development, Prime Minister 
Putin said that the industry's transfer pricing practices and 
tax avoidance schemes had resulted in limited supplies 
domestically and had raised prices.  He singled out Mechel, 
accusing the company of selling coking coal domestically for 
twice the price at which the firm sold the material abroad. 
In the same address, Putin said that Mechel President Igor 
Zyuzin, absent from the conference because of "health 
reasons," had engaged in tax evasion and called upon the 
Investigative Committee of the General Procuracy to work with 
the Federal Antimonopoly Service on determining whether 
Mechel's raw materials pricing practices complied with 
applicable laws. 
 
3.  (SBU) News reports later explained that the Federal 
Antimonopoly Service had initiated a review of Mechel's 
coking coal pricing policy in May.  FAS statements indicated 
Mechel lacked "technical and economic justification" for 
refusing to sign a long-term coking coal supply contract with 
Novolipetsk Steel (NLMK), according to business daily 
Kommersant.  The FAS probe was also examining whether Mechel 
had used transfer pricing to minimize its tax obligations. 
Vedomosti reported that FAS documents related to the 
investigation noted that Lichtenstein-based Mechel Trading 
Ltd. sold Mechel's coking coal through its worldwide 
representation offices.  Deputy Prime Minister Igor Sechin, 
recently installed to oversee industry development policies, 
had also reportedly received complaints from GazpromNeft, 
SurgutNefteGaz and the Fund for Steel Pipe Industry 
Development about rising prices for metals, notably steel 
pipe.  Center for Political Technologies Deputy Director 
Boris Makarenko, who is a member of Medvedev's Institute for 
Modern Development think tank, told us that Mechel's first 
mistake was to anger its partners. 
 
4. (U) In the aftermath of Putin's initial statement, the 
country's stock markets dropped sharply.  Mechel's shares 
fell almost 30 percent, leading the decline of other 
steelmakers such as Severstal, whose shares dropped 10 
percent, and MMK, which slipped more than 9 percent. 
Declines in other blue chip stocks such as Gazprom (down 3.7 
percent) and Sberbank (down 7 percent) pushed overall market 
capitalization down approximately USD 58 billion. 
 
--------------------------------- 
Damage Control and a Second Round 
--------------------------------- 
 
5. (U) Almost immediately after Putin's statements hit the 
press, top officials moved to clarify the meaning of his 
censure of Mechel and to minimize the effect on the markets. 
On July 24 Industry and Trade Minister Viktor Khristenko was 
quoted as saying that Putin's comments related only to 
 
Mechel's sales of coke and not the company's core steelmaking 
business.  For its part, Mechel acknowledged wrongdoing and 
expressed its determination to work with the government to 
resolve any issues.  On July 28, Presidential Advisor 
Dvorkovich promised that the Russian government planned to 
look into the Mechel case in a "civilized manner," implying 
that the heavy-handed approach that had characterized the 
Yukos affair would be avoided. 
 
6. (U) Just as things seemed to be calming down, Putin spoke 
out against Mechel for a second time on July 28.  At a 
Presidium meeting of the core cabinet, Putin claimed that 
Mechel had been selling coking coal abroad for more than four 
times more than domestic sales (on July 24 he had said only 
for twice as much) and complaine
d that those sales denied the 
state its full measure of tax revenues.  Stock markets again 
dipped following Putin's statement, losing another estimated 
USD 8 billion in share value, with Mechel's shares falling to 
50 percent of their pre-July 24 value. 
 
------------------------- 
The Inflation "Conundrum" 
------------------------- 
 
7.  (C) UralSib Chief Strategist Chris Weafer explained 
Putin's comments in the context of Russia's "inflation 
conundrum," that the country has a long-term need for 
infrastructure improvement and a short-term problem of rising 
price levels.  " Moreover, the Central Bank cannot materially 
reduce the money supply since raising interest rates has 
tended to draw in net capital from abroad.  Against this 
backdrop, the report on complaints from energy companies 
about their costs for steel pipe may have genuinely raised 
Putin's ire. 
 
8. (C) Weafer speculated that the power sharing with 
President Medvedev (i.e., the tandemocracy) had removed the 
"normal safety valve of apportioning blame."  Medvedev cannot 
point the finger at the Prime Minister for the government's 
failure to control prices, as Putin did during his 
presidency, but Putin "still needed a villain to deflect 
blame from the government's failings," according to Weafer. 
Less credibly to us, Makarenko maintained that Putin did not 
anticipate the magnitude of the effect of his comments, and 
attributed this to the learning curve associated with the 
former President's hands-on management of the economy. 
 
------------- 
YUKOS Part 2? 
------------- 
 
9.  (C) Business media outlets such as Kommersant and 
Vedomosti quoted market analysts who compared the Mechel 
incident with the beginning of the Yukos affair.  Some of our 
contacts were hesitant to make the direct linkage.  Zyuzin 
had not followed Khodorkovskiy's example of becoming involved 
in politics, according to Alfa Bank Chief Economist Natalia 
Orlova.  Novolipetsk Metallurgical Company (NLMK) President 
Vladimir Lisin enjoyed access to Putin and may have worked to 
send Mechel a message that long-term contracts for inputs 
were preferable to higher-priced spot market purchases. 
Orlova suggested that Lisin and others may have their eyes on 
Mechel's coking coal assets but expressed doubt that 
steelmakers were interested in removing Zyuzin and taking 
over Mechel's core business. 
 
10. (C) Weafer observed that Zyuzin was very aware of the 
Khodorkovskiy story and was much more inclined to strike a 
conciliatory, accommodating tone with the GOR.  Mechel, he 
noted, issued a statement the day after the conference in 
Nizhniy Novgorod that had emphasized the importance of 
supporting the government's goals and of building long-term 
relationships with "key partners."  Weafer also argued that 
repeating the Yukos affair was "not at all in the 
government's interest" since it would jeopardize the flow of 
much-needed capital into Russia.  "Without increased 
investment flows, the objectives of the Putin Plan simply 
cannot be achieved," Weafer said.  The GOR did have an 
interest, however, in making sure that oligarchs and big 
business prioritize the domestic economy and support the 
state's economic policy efforts. 
 
11.  (C) However, Oleg Voronin, an associate of the Moscow 
Carnegie Center, said that according to his sources, linked 
to the security services, Severstal chairman Aleksey 
 
Mordashov, together with Magnitogorsk Metal Kombinat (MMK) 
chairman Viktor Rashkin, and United Metallurgical Company 
(OMK) chairman Anatoliy Sedykh had worked together to 
persuade Putin to take action against Mechel.  Voronin 
alleged that Putin was reluctant to become involved, but was 
reportedly convinced to act after the metals magnates 
contributed to the Fund to Support Development of the Russian 
Language -- a charity headed by Lyudmila Putina.  Voronin's 
hypothesis was that the ultimate goal of Putin's public 
criticisms of Mechel was to drive down the company's share 
price and to facilitate a take-over of the company.  At a 
minimum, metals producers planned to force Mechel to sign 
long-term contracts at fixed prices for coal deliveries. 
 
------- 
Comment 
------- 
 
12.  (C) The verdict of the marketplace with respect to the 
GOR's intervention in Mechel and the non-intervention in 
TNK-BP has been swift and negative.  We also expect to see 
heightened investor concerns expressed in the form of greater 
risk premiums, increasing the price of doing business in 
Russia.  This fallout may give us a stronger argument to make 
with the GOR about the importance of the reputational issue 
as an obstacle to investment.  However, the Mechel case is 
further evidence that the GOR's plans to modernize and reform 
the economy will not be allowed to interfere with the 
financial interests of regime insiders. 
RUBIN

Wikileaks

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08MOSCOW2200, AMBASSADORS GRAY AND MANN AT THE RUSSIAN ENERGY

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Reference ID Created Released Classification Origin
08MOSCOW2200 2008-07-30 13:49 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO9462
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #2200/01 2121349
ZNY CCCCC ZZH
P 301349Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 9228
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 02 MOSCOW 002200 
 
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: 07/08/2018 
TAGS: EPET ENRG ECON PREL RS
SUBJECT: AMBASSADORS GRAY AND MANN AT THE RUSSIAN ENERGY 
MINISTRY 
 
Classified By: M/C for Economic Affairs Eric T. Schultz for Reasons 1.4 
 (b/d) 
 
1. (C) Summary: In a July 21 meeting with Deputy Energy 
Minister Anatoly Yanovsky, Ambassadors Gray and Mann raised 
the TNK-BP dispute, which they said was undermining investor 
confidence.  Yanovsky responded that the GOR saw it as 
strictly a commercial dispute over the development of the 
company but that he personally hoped it would be resolved 
soon and praised BP's contribution to developing Russia's oil 
and gas sector.  Yanovsky made a pitch for reviving the 
bilateral energy dialogue, which he said could help mitigate 
disputes before they became public.  End Summary 
 
----------------------------- 
TNK-BP and Investment Climate 
----------------------------- 
 
2. (C) Ambassador Gray noted our concerns at the worsening 
fight for control over TNK-BP.  The company had paid out $18 
billion in dividends since its formation in 2003 and was one 
of Russia's largest tax-payers.  By any measure, it was a 
successful company and the criticism of its western managers 
seemed to us unwarranted. 
 
3. (C) Yanovsky initially responded by questioning why the 
U.S. was interested in BP,s situation given that it was a 
British company.  Gray explained that many of BP,s 
shareholders were Americans and that TNK-BP's CEO, Robert 
Dudley, was American.  Yanovsky then responded that the 
Energy Ministry had little responsibility for the oil and gas 
sector and repeated the GOR's standard line that the dispute 
was commercial and that the GOR would not intervene. 
 
4. (C) Ambassador Mann said the TNK-BP situation, and 
especially the use of state resources by one side in the 
dispute, sent the wrong signal to potential foreign 
investors, who were needed to help Russia develop its energy 
resources.  Yanovsky agreed that investors were needed, 
noting how technically challenging the Shtokman project was 
and predicting that the future of Russia's oil and gas sector 
would lie increasingly in such remote and harsh places. 
 
5. (C) Yanovsky went on to say that he hoped that the TNK-BP 
situation would soon be resolved, especially since BP had 
made such a positive contribution to Russia.  He said he 
personally saw the dispute as one over the company's future, 
with one set of shareholders (presumably he meant AAR) 
interested in maximizing the company's short-term value and 
the other (BP) its long-term development.  (Comment: A 
correct, and surprisingly frank, assessment.) 
 
----------------------------- 
Energy Dialogue and Bio-Fuels 
----------------------------- 
 
6. (C) Towards the end of the meeting, Yanovsky raised the 
issue of biofuels with the observation that they required too 
many subsidies and caused too big an increase in food prices 
(echoing comments Medvedev had made at the G-8).  Ambassador 
Gray responded that, in the U.S., oil and gas received many 
times the subsidies granted biofuels and that the high price 
of oil had contributed much more to food price increases than 
biofuels production, which help keep down the price of 
gasoline in the U.S. relative to the price of crude. 
However, he added that in his view it would take time to 
develop viable &clean8 energies and that coal would become 
an increasingly important bridge to that future, even in 
Europe where environmental concerns were strongest. 
 
7. (C) Ambassador Gray raised U.S.-Russian collaboration on 
the development of alternative &clean8 energies.  Yanovsky 
said he would welcome this discussion and said Russia would 
like to have regular meetings with the U.S. on energy issues. 
 To that end, he reiterated Russian interest in reviving the 
U.S.-Russian energy dialogue.  Yanovsky said an energy 
dialogue could be part of the broader effort to develop 
U.S.-Russian economic ties as a way to counterbalance 
political problems in the bilateral relationship.  However, 
the dialogue should not focus on each other's foreign 
investment climates, as had happened before, but should 
 
MOSCOW 00002200  002 OF 002 
 
 
instead stick to our respective energy policies and how they 
interacted with each other and with global markets. 
------- 
Comment 
------- 
 
8. (C) Comment: During the meeting, Yanovsky expressed 
concern that &Russia was the last country, or certainly not 
the first8 that Ambassador Gray had visited in his new 
capacity as Special Envoy for Eurasian Energy.  However, the 
Embassy received a letter from Deputy Prime Minister Sechin, 
arguably the most powerful figure in the energy sector, a few 
d
ays after Ambassador Gray left apologizing for his busy 
schedule, noting that he had empowered Yanovsky to speak on 
his behalf, and expressing his general openness to USG 
meetings.  This puts the meeting with Yanovsky in a 
different, more positive, light and provides an opening that 
we intend to follow up. 
 
9. (U) This cable has been cleared by Ambassador Gray. 
RUBIN

Wikileaks

08MOSCOW2183, CPC UPDATE: EXPANSION MOU “INITIALED”, AWAITING

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Reference ID Created Released Classification Origin
08MOSCOW2183 2008-07-29 13:34 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO8560
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #2183/01 2111334
ZNY CCCCC ZZH
P 291334Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 9219
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHMS/AMEMBASSY MUSCAT PRIORITY 0056
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 02 MOSCOW 002183 
 
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: 07/28/2018 
TAGS: EPET ENRG ECON PREL RS
SUBJECT: CPC UPDATE: EXPANSION MOU "INITIALED", AWAITING 
FINAL AGREEMENT 
 
REF: A. MOSCOW 470 
     B. 06 MOSCOW 4691 
 
Classified By: Eric T. Schultz for Reasons 1.4 (b/d) 
 
1. (C) Summary: Chevron Russia Vice President (and CPC 
Chairman) Andrew McGrahan told us July 28 that Chevron has 
negotiated a new MOU on CPC expansion with Transneft and 
Kazakhstan,s KazMunaiGaz (KMG).  The new MOU has been 
circulated to other shareholders for approval.  McGrahan said 
the new MOU repeals some objectionable language from a 
previous MOU, especially regarding the termination of expat 
secondees.  Language on funding the expansion was also 
changed, with current cash-flow now as the first source, 
instead of a new tariff on shippers.  The MOU also includes a 
&soft8 commitment to provide 17 million tons of crude to 
the proposed Burgos-Alexandropoulis Pipeline (BAP).  End 
summary. 
 
------- 
NEW MOU 
------- 
 
2. (SBU) McGrahan told us that Chevron, Transneft 
(representing the GOR) and KMG (representing the GOK) 
initialed an MOU on July 25th setting the framework for 
long-pending expansion of the CPC pipeline from Kazakhstan to 
the Black Sea.  According to McGrahan, the MOU has been 
shared with CPC's other shareholders and awaits final 
approval.  Once the MOU is signed, the consortium would have 
a year to come up with a detailed expansion plan to be 
executed. 
 
3. (SBU) In May, Transneft and KMG, despite having nearly 
completed an agreement with Chevron, unexpectedly announced a 
separate and different agreement that included clauses 
drastically reducing expat CPC staff in two years and 
imposing a $20/ton "investment" tariff on the current CPC 
shippers to pay for expansion.  Chevron found these clauses, 
especially the removal of expats, unacceptable.  McGrahan 
said the three parties successfully renegotiated the MOU, 
eliminating these clauses. 
 
4. (C) McGrahan said Chevron may have been able to accept 
some version of the Transneft/KMG MOU, but that the expat 
clause was a red line.  He said Chevron believes the expats 
are its main assurance that the pipeline will be built and 
operated to the quality, safety, operational efficiency, and 
transparency standards that Chevron would demand of such an 
investment. 
 
5. (SBU) McGrahan said the new MOU also effectively extends 
for another year the terms negotiated in September 2007 (ref 
B) which lowered for one year the interest rate on current 
CPC debt (owed to Chevron, BP, and other shareholders) and 
raised tariffs on shippers, in order to make the current 
pipeline financially viable while an expansion agreement was 
negotiated. 
 
6. (SBU) Scott Bowen, Chevron's Commercial Manager in Russia, 
explained that the new MOU calls for expansion to be financed 
first through current CPC cash-flow instead of the investment 
tariff on shippers.  This spreads expansion costs to all CPC 
shareholders and not solely to the shippers, including 
Chevron.  An investment tariff could still be imposed, if 
needed, but only as a third-tier option, after cash-flow and 
borrowing.  He added that a new clause, previously absent, 
allows CPC to start reserving cash for expansion while the 
parties negotiate a final plan. 
 
-------------------- 
BP AND OMAN MAY BALK 
-------------------- 
 
7. (C) Bowen and McGrahan said they were optimistic that the 
MOU would be signed soon and that the consortium would 
sanction expansion within the one year timeline.  McGrahan 
said BP and the government of Oman (one of the original 
investors) might be the partners with whom negotiations could 
be difficult.  Oman had expected to sell its 7% share to MOL, 
 
MOSCOW 00002183  002 OF 002 
 
 
the Hungarian oil company, for $700 million.  McGrahan 
explained that the GOR and the GOK both wanted to exercise an 
option to pre-empt the sale to MOL by buying Oman's share 
themselves.  However, the GOK unexpectedly issued a decree 
making the CPC pipeline a "strategic asset" in Kazakhstan, 
preventing any sale by Oman of its shares.  McGrahan doesn't 
understand the GOK's move, but expects it relates to a GOK 
interest in preventing greater Russian ownership of the 
project.  This complication may cause the Omanis to hold up 
the MOU until the situation is resolved and they allowed to 
sell their share in the consortium. 
 
8. (C) BP could be the other potential holdout because it 
doesn't have any oil to ship through the CPC but owns some $1 
billion of CPC debt.  It would therefore prefer to keep both 
interest rates
 and tariffs as high as possible. 
 
--- 
BAP 
--- 
 
9. (C) McGrahan said the new MOU includes, as did the 
September 2007 agreement, a commitment on the part of CPC to 
send 17 million tons of its future capacity of 67 million 
tons to the proposed BAP project.  McGrahan called that 
commitment "soft," however, noting that it is "subject to 
acceptable terms." 
 
------- 
COMMENT 
------- 
 
10. (C) The new MOU and new optimism on CPC expansion are 
welcome, especially after Chevron's Eurasia president told us 
in February that his company had, in effect, "given up" on 
expansion (ref A).  The GOR, having long been the obstacle to 
expansion, would do well to see this new MOU through and 
demonstrate to the international business community, 
especially in these times of doubts about Russia's investment 
climate, that it can successfully bring a mutually beneficial 
deal to conclusion. 
RUBIN

Wikileaks

08MOSCOW2182, MFA WALKS BACK THREAT OF BUDGET CUT FOR ODIHR

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Reference ID Created Released Classification Origin
08MOSCOW2182 2008-07-29 13:26 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0028
OO RUEHWEB

DE RUEHMO #2182/01 2111326
ZNY CCCCC ZZH
O 291326Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9217
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L MOSCOW 002182 
 
SIPDIS 
 
E.O. 12958: DECL: 07/29/2018 
TAGS: PREL PGOV KDEM OSCE PHUM RS
SUBJECT: MFA WALKS BACK THREAT OF BUDGET CUT FOR ODIHR 
 
REF: MOSCOW 2146 
 
Classified By: Acting DCM Alice G. Wells; reason 1.4 (b) and (d) 
 
 1.  (SBU) Summary:  While reiterating its frequent complaint 
that the OSCE's Office for Democratic Institutions and Human 
Rights (ODIHR) has performed poorly, on July 26 the Russian 
MFA walked back the assertion by the Deputy Chair of the 
Central Election Commission (CEC) of an imminent budget cut 
by Russia in ODIHR funding.  The MFA statement noted the hope 
that ODIHR's new Director will return it to its mission of 
lending assistance (when requested) for strengthening and 
developing democracy among the member states.  End Summary. 
 
2.  (C) The Russian MFA appears to have distanced itself from 
the July 24 statement by CEC Deputy Chair Igor Borisov that 
the GOR might discontinue its funding of ODIHR's election 
observation efforts if the OSCE rejects Russia's proposals 
for election observers (reftel).  MFA European Council 
section chief Tatyana Sulitskaya told us July 28 that the 
response posted on the MFA's official website on July 27 (see 
paragraph 3) was the official position of the MFA.  In its 
response to a question from the media, the MFA clarified that 
ODIHR's budget is an integral part of the total OSCE budget, 
which was unanimously adopted by the OSCE's participating 
member-states.  The MFA statement bluntly criticized ODIHR's 
election observation efforts and called for consistent rules 
for how ODIHR undertakes election monitoring, but noted the 
GOR's hope that the situation will improve under the new 
ODIHR Director, Ambassador Janez Lenarcic from Slovenia. 
 
3.  (U) Official translation of Russian MFA entry on ODIHR 
financing: 
 
Response by the Russian MFA Information and Press Department 
to a Media Question About Russia's Approaches to the 
Activities of OSCE ODIHR 
 
Question:  Does Russia consider the possibility of financing 
the Office for Democratic Institutions and Human Rights 
(ODIHR) of the Organization for Security and Cooperation in 
Europe (OSCE)? 
 
Answer:  The ODIHR budget is an integral part of the OSCE 
budget, unanimously adopted by the participating states of 
the OSCE.  In determining its stand on this issue, Russia, 
like all other states which are part of the OSCE, proceeds 
from its own vision of the priorities in its activity and of 
the usefulness of its specific executive structures 
(including ODIHR) for tackling national development tasks and 
strengthening pan-European cooperation. 
 
As to ODIHR, it has to be said bluntly:  in recent years it 
has poorly coped with the tasks laid upon it.  The previous 
leadership of the Office got carried away with the ideology 
of self-proclaimed "autonomy," and used to take decisions in 
a mode of secretiveness towards the OSCE member states, which 
all together are by definition the masters in this 
organization.  The activities of ODIHR, especially in the 
field of election observation, were distinguished by double 
standards and began to work for disunity.  Essentially, ODIHR 
continued to arbitrarily divide OSCE members into "good" and 
"not very good," which only served to split the OSCE and led 
to the appearance in its space of new dividing lines.  In 
this sense, ODIHR was in fact working against the basic 
philosophy of the OSCE, for which, strictly speaking this 
organization had been set up. 
 
We hope that the recently appointed new Director of OSCE 
ODIHR, Janez Lenarcic (Slovenia), will succeed in returning 
the Office's work to the original vocation of this OSCE 
structure -- to lend assistance to member states upon their 
requests, inter alia in fostering cooperation among them in 
the important job of strengthening and developing democracy 
across the Euro-Atlantic space. 
 
A key mainstay for the Office and a guarantee for its 
effectiveness, in our opinion, would be the adoption by the 
governing intergovernmental bodies of the OSCE of clear-cut 
rules for its activities, primarily in the area of electoral 
monitoring.  He who resists this actually contributes to the 
further weakening of trust towards ODIHR and to the 
devaluation of its role. 
 
July 26, 2008 
 
End official translation of Russian MFA entry on ODIHR 
financing. 
 
Comment: 
 
4.  (C) The MFA's statement sets out its position for a more 
restricted role for future ODIHR election observation efforts 
consistent with its behavior during Russia's two most recent 
national elections, both in which ODIHR eventually decided 
not to participate. 
RUBIN

Wikileaks

08MOSCOW2181, RUSSIAN OPPOSITION: UNITE OR SEEK KREMLIN COVER?

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Reference ID Created Released Classification Origin
08MOSCOW2181 2008-07-29 13:08 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMO #2181/01 2111308
ZNY CCCCC ZZH
R 291308Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 9214
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE

C O N F I D E N T I A L MOSCOW 002181 
 
SIPDIS 
 
E.O. 12958: DECL: 07/29/2018 
TAGS: PGOV PINR PHUM RS
SUBJECT: RUSSIAN OPPOSITION: UNITE OR SEEK KREMLIN COVER? 
 
Classified By: Acting DCM Alice G. Wells: 1.4 (b, d). 
 
1.  (C) Summary: While an informal convocation of opposition 
leaders, engineered by former PM Kasyanov, fueled rumors of a 
united opposition movement, recent conversations suggest that 
Russia's mainstream liberal parties seek accommodation or 
"constructive" relations with the Kremlin.  Following 
informal "feelers," delivered by Kremlin Deputy Chief of 
Staff Surkov, and back-to-back Medvedev and Putin meetings 
with SPS leader Chubais, SPS is considering whether to 
position itself as the loyal opposition, with potential 
access to the Rosnanotech trough of administrative resources. 
 With Yabloko's change in leadership and titular ascendance 
of the pragmatic Mitrokhin, new possibilities for cooperation 
with SPS have emerged, but financial realities and apathy 
among liberals continue to make "constructive engagement" 
with the Kremlin a preferred strategy for some national 
leaders.  One of the few points of agreement between the SPS 
and Yabloko leadership is dislike of Garry Kasparov and his 
Other Russia movement.  The threat of political extinction 
leaves many opposition leaders looking for a way to woo the 
Medvedev administration away from reliance on the ruling 
party's liberal wing.  It is not clear that a younger 
generation of more radical leaders will be satisfied with 
Kremlin cooptation. End Summary 
 
The Opposition Postures 
----------------------- 
 
2.  (C) In a July 25 meeting, Moscow Helsinki Group Chair 
Lyudmilla Alekseyeva dispelled rumors, fanned in the media, 
that her July 14 hosting of opposition leaders was aimed at 
unifying Russia's liberal opposition forces.  According to 
Alekseyeva, the event was a favor to former PM Kasyanov, as 
head of the Russian People's Democratic Union (RPDU), who 
sought a "neutral party" to host a conversation between him 
and the Union of Right Forces (SPS) leader Nikita Belykh, 
Yabloko party chairman Sergei Mitrokhin, and the leader of 
the unregistered Republican Party, Vladimir Ryzhkov. 
Alekseyeva described the meeting as friendly, despite the 
fact that the respective party heads had butted heads over 
the past year.  Alekseyeva told the press that she invited 
only "the brightest orators" that had attended her 80th 
birthday last year, thereby justifying the exclusion of Other 
Russia's Garry Kasparov, with whom both Alekseyeva and 
Kasyanov have had public falling outs. 
 
3.  (C)  While Kasyanov used the RPDU's July 13 Third 
Congress, convened one day before Alekseyeva's dinner, to 
argue for exploring the possibility of another joint 
opposition movement, this one focused on SPS, Yabloko and the 
ex-Republican Party, we see no evidence that the initiative 
has gained public or private traction.  SPS leader Leonid 
Gozman told us that party leaders were puzzled by the 
Alekseyeva gathering, but attended as part of their on-going 
effort to "love Lyudmilla."  He described Kasyanov's public 
statements as "public posturing," stressing that there was 
little point in the opposition uniting after the election 
season had concluded.  Likewise, Yabloko Chief Mitrokhin 
insisted to us that Kasyanov remained politically irrelevant. 
 The real question, he underscored, was whether SPS and 
Yabloko could find common ground at the national level, as 
they had earlier done in the Moscow City Duma. 
Interestingly, during a July 11 visit to the Embassy for visa 
processing, Kasyanov opted not to mention the upcoming dinner 
with Alekseyeva when asked about next steps in liberal 
opposition politics. 
 
SPS Weighs Another Kremlin Accommodation 
---------------------------------------- 
 
4.  (C)  According to Gozman, the SPS inner circle -- 
Anatoliy Chubais, former PM Yegor Gaidar, Belykh, Boris 
Nemtsov (who "left" the party, when his Kremlin criticisms 
became too hot for Chubais' comfort), and himself -- are 
weighing yet another run at serving as the Kremlin's 
"constructive opposition."  Gozman argued that the fate of 
SPS would reflect the outcome of the balancing act between 
Putin and Medvedev: if Putin remained ascendant, he had no 
need for an opposition vehicle and United Russia would remain 
the unrivaled party of power; if Medvedev began to accrete 
influence, he would look to dilute United Russia's dominance, 
since it was intrinsically Putin's "personal project." 
Gozman referred vaguely to "feelers" from Medvedev's camp, 
noting the irony that they were delivered by Kremlin Deputy 
Chief of Staff Vladislav Surkov, despite Surkov's own 
authorship of United Russia and the "sovereign democracy" 
theory that posited a monolithic ruling party.  Describing 
the conversations as "under the table" and "discreet," Gozman 
said that Medvedev's other option was to rely upon United 
Russia's more liberal wing. 
5.  (C)  Acknowledging that SPS's previous bid to serve as a 
loyal opposition to the Kremlin prior to the 2007 Duma 
elections had been rebuffed and the party's candidates 
subjected to "black p.r. (particularly after Belykh and 
Nemtsov temporarily supported Other Russia allies)," Gozman 
argued that SPS had little alternative but to seek an 
accommodation, wh
ich would give party members access to 
senior government positions (and attendant administrative 
resources) and a freer hand in regional elections, at a time 
when members were shut out of the Duma.  Party members were 
"tired of demonstrations" and fights with the Kremlin that 
precluded any near-term access to political power; Other 
Russia was unacceptable -- Stalinists and Communists were 
worse than Putin.  Relying on a chess analogy, Gozman said 
that SPS had reached the stage where any move resulted in a 
worsening of position.  The party was essentially bankrupt, 
with party leaders writing personal checks to ride out the 
next few months.  There was "no chance" for independent 
survival, much less political victory. 
 
6.  (C)  Predicting that the party's course would not be 
clear until the dacha season closed in September, Gozman 
pointed to two unpublicized meetings with Chubais as evidence 
of the on-going maneuvering.  Medvedev, who invited Chubais 
to dinner following the successful privatization of RAO UES, 
reportedly spent three hours discussing the lay of the land, 
expressing respect for Chubais, as well as sympathy for his 
political situation.  Similarly, Putin invited Chubais to an 
off the record chat, the first personal contact between the 
two since the Duma elections.  As a result of these 
conversations, Chubais expected to be appointed Director 
General of Rosnanotech, replacing Leonid Melamed, by the end 
of August.  (Left unsaid by Gozman was the role Rosnanotech 
could play in replenishing SPS coffers, replacing RAO UES as 
the opposition party's trough for administrative resources.) 
 
Yabloko Reevaluates Strategy Also 
--------------------------------- 
 
7.  (C)  Yabloko's Mitrokhin confided to us in a recent 
meeting that Yavlinskiy's departure would allow joint action 
with other parties, such as SPS, albeit on his party's 
strictly stipulated terms.  Reiterating conditions for 
cooperating with SPS that earlier had been laid down by 
ex-party chief Yavlinskiy -- the need to merge with Yabloko, 
the stepping aside of 1990's era political figures -- 
Mitrokhin said he was amenable to discussing a union like 
that achieved during the 2005 Moscow City Duma elections. 
Gozman confirmed to us that Mitrokhin was "easier to deal 
with" and that a concordat was possible, despite Yavlinskiy's 
intent to serve as a shadow leader from the wings.  While 
Mitrokhin insisted that Yabloko was an opposition party, he 
conceded his members' interest in finding a constructive way 
to work with the current government, as evidenced by 
Yavlinskiy's March 2008 meeting with Putin.  The party faced 
numerous hurdles, including financial problems stemming from 
business reluctance to contribute to a non-Kremlin blessed 
party; lack of access to the national media; and the apathy 
of liberal voters.  Mitrokhin downplayed internal party 
divisions, especially between Yabloko's St. Petersburg 
faction and representatives in Moscow, and noted that all 
party members except four -- Yabloko renegades Reznik and 
Yashin included -- agreed on ways to move forward at the 
Fifteenth Congress. 
 
8.  (C) Political observers believe that Yabloko's future 
hinges on the post-Yavlinskiy leadership's ability to 
compromise. Mikhail Vinogradov, General Director of the 
Center for Current Politics, commented that "the decay of the 
party is a more likely future unless it is chosen by the 
state as the major democratic party in Russia." Political 
scientist Dmitriy Oreshkin disagreed in part with skeptics, 
believing Mitrokhin would bring change "along the lines of 
organization and personnel." Whether Yavlinskiy, whose 
political principles produced political gridlock among the 
Russian opposition, will allow Mitrokhin, a simpler man of 
action, to lead the party in a new direction without 
interference remains to be seen. 
 
Unity -- Past its Sell Date 
--------------------------- 
 
9.  (C) Kremlin-insider and incoming director of the GOR's 
Democracy Institute in New York, Andranik Migranyan was among 
those experts who questioned whether Medvedev needed the 
baggage-laden parties of the 1990's, predicting to us a 
bolstering of liberal elements within United Russia instead. 
After several years of SPS and Yabloko flirtations, 
Alekseyeva also downplayed the party machinations, commenting 
wryly that Americans were giving the Russian opposition more 
than their due share of attention.  Recalling that Ryzhkov, a 
"good, honest speaker," had pleaded with the other opposition 
leaders to forget about past differences and move forward, 
Alekseyeva noted that Mitrokhin had countered with more 
rhetoric about the purity of the Yabloko brand. 
 
Checkmate for Kasparov 
---------------------- 
 
10.  (C) While some political analysts, such as Stanislav 
Kulakov, continue to argue for a "horizontal" opposition 
structure that includes all groups, including Other Russia 
and its spin-off "National Assembly," the mainstream 
opposition appears to have united around dislike of Garry 
Kasparov -- a reference to whom left Alekseyeva sputtering in 
anger. She categorically stated that Kasparov would not have 
a future in Russian politics and decried his duplicitous 
methods in manipulating the Other Russia movement. Alekseyeva 
pointedly noted that she would not work with him in the 
future, hoping to avoid the intrigue and back-biting that 
Kasparov brought to the opposition efforts. 
 
Comment 
------- 
 
11.  (C)  This opposition dance seems awfully familiar and 
its relevance -- in a United Russia-dominated, post-election 
landscape -- appears negligible.  If the Kremlin succeeds in 
wooing SPS, it's record of tactical brilliance in coopting 
the national opposition leadership will be further 
embellished, although its unclear whether the senior 
opposition standard bearers can bring along their more 
radical (and youthful) members.  For the older generation of 
opposition leaders, the prospect of influencing 
decisionmaking and winning a Medvedev administration over to 
a more moderate course is the preferred alternative to life 
in the political wilderness, where extinction is a real 
possibility. 
RUBIN

Wikileaks

08MOSCOW2180, RUSSIA ON SARG: OPTIMISM BEFORE REALISM

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Reference ID Created Released Classification Origin
08MOSCOW2180 2008-07-29 11:36 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO8472
PP RUEHAG RUEHBC RUEHDE RUEHKUK RUEHROV
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INFO RUEHEE/ARAB LEAGUE COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEHDM/AMEMBASSY DAMASCUS PRIORITY 1012
RUEHNY/AMEMBASSY OSLO PRIORITY 1730
RUEHRK/AMEMBASSY REYKJAVIK PRIORITY 0050
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RUEKDIA/DIA WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0440
RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY

C O N F I D E N T I A L MOSCOW 002180 
 
SIPDIS 
 
NEA/ELA FOR ERICA MILLER AND STEPHEN NEWHOUSE 
 
E.O. 12958: DECL: 07/29/2018 
TAGS: PGOV PREL SY LE RS
SUBJECT: RUSSIA ON SARG: OPTIMISM BEFORE REALISM 
 
REF: STATE 78880 
 
Classified By: Acting Political Minister-Counselor Margaret Hawthorne, 
for reasons 1.4 (b) and (d) 
 
1.  (C)  Summary.  We delivered reftel demarche July 28 to 
MFA Syria and Lebanon desk chief Andrei Panov, emphasizing US 
concerns over the possibility of Russian arms being diverted 
to Hizballah.  Overall, Panov characterized Syria's recent 
engagement with the international community as positive and 
emphasized that Russia considered Syria an important player 
in the Middle East and in the peace process.  He insisted 
that Russia closely monitored its arms sales to Syria and 
adhered to international agreements.  He stressed that Russia 
was against Syrian interference in Lebanese affairs, but 
issues between the two countries should be resolved 
bilaterally.  On Iraq, he noted that Syria's attitude had 
improved and they were enhancing their cooperation on border 
issues.  End summary. 
 
Arms transfers 
-------------- 
 
2.  (C)  Panov reiterated that Russian arms sales to Syria 
strictly adhered to GOR commitments under international 
agreements, and that the Russian government had strengthened 
its monitoring of arms sold to Syria.  He said there was a 
mechanism for control of these weapons and the GOR prohibits 
the transfer of these weapons to any third party. 
 
Israeli and Palestinian Issues 
------------------------------ 
 
3.  (C)  Panov said that Syria's acceptance of Israel's 
initiative on indirect talks was a good development and 
stressed that Syria continued to play a constructive role 
concerning Palestine.  He cited the Doha accord, possible 
direct talks with Israel, and hosting PA President Abbas as 
positive signs in this direction.  When pressed about Syria's 
connections to Hizballah, he responded that Russia did not 
consider Hizballah a terrorist group, and noted that Syria 
maintained relations with "certain Palestinian groups, but 
that was their choice." 
 
SARG Relations with Lebanon 
--------------------------- 
 
4.  (C)  He stressed that Russia was strictly against Syrian 
interference in Lebanese affairs, and noted that issues 
between Syria and Lebanon should continue to be resolved at 
the bilateral level, between "two sovereign nations."  He 
said that Syria previously stalled on border demarcation 
because the ruling majority in Lebanon was too anti-Syrian, 
but believed Syria would now reconsider the issue. 
 
Iraq:  Syria's Attitude Improved, but Long Border to Patrol 
--------------------------------------------- -------------- 
 
5.  (C)  Panov insisted that Syria had made many positive 
changes in its attitude with Iraq.  He commented that Syria 
was enhancing its cooperation with Iraq, as evidenced by 
several high-level Iraqi visitors to Syria.  However, he 
noted that the long Syrian-Iraqi border and the large numbers 
of Iraqi refugees living in Syria made it difficult for Syria 
to secure its border completely against foreign fighters. 
RUBIN

Wikileaks

08MOSCOW2179, RUSSIA: NO CONTRACT YET ON ZIMBABWEAN BANK NOTES

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Reference ID Created Released Classification Origin
08MOSCOW2179 2008-07-29 11:07 2011-08-30 01:44 SECRET Embassy Moscow

VZCZCXYZ0000
PP RUEHWEB

DE RUEHMO #2179 2111107
ZNY SSSSS ZZH
P 291107Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHSB/AMEMBASSY HARARE PRIORITY 0034
RUEHC/SECSTATE WASHDC PRIORITY 9212
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHSW/AMEMBASSY BERN PRIORITY 0906

S E C R E T MOSCOW 002179 
 
SIPDIS 
 
E.O. 12958: DECL: 07/29/2018 
TAGS: PGOV SADC ASEC EFIN ECON ZI RS
SUBJECT: RUSSIA:  NO CONTRACT YET ON ZIMBABWEAN BANK NOTES 
 
REF: STATE 078740 
 
Classified By: Acting Political Minister-Counselor Margaret 
Hawthorne for reasons 1.4 (b) and (d) 
 
1. (S)  We delivered reftel demarche July 28 to MFA Zimbabwe 
desk Andrei Stolyarov.  He said that at this time he was not 
aware of any request by the GOZ to obtain bank note paper 
from the Russian State Mint, and would take into account US 
concerns if the GOZ did approach Russia on this issue.  He 
said that if the Russian State Mint were to consider entering 
into any such transaction, they would need to consult with 
the MFA before doing so.  On Zimbabwe as a whole, he said 
that the GOR continued to think that sanctions were 
counterproductive at this time and favored giving the GOZ and 
the opposition more time to reach an agreement. 
RUBIN

Wikileaks

08MOSCOW2178, UNMEE–RUSSIA TO SUPPORT U.S. POSITION

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Reference ID Created Released Classification Origin
08MOSCOW2178 2008-07-29 10:58 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0036
PP RUEHWEB

DE RUEHMO #2178 2111058
ZNY CCCCC ZZH
P 291058Z JUL 08
FM AMEMBASSY MOSCOW
TO RUCNDT/USMISSION USUN NEW YORK PRIORITY 0439
RUEHC/SECSTATE WASHDC PRIORITY 9211
INFO RUEHGG/UN SECURITY COUNCIL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHDS/AMEMBASSY ADDIS ABABA PRIORITY 0100
RUEHAE/AMEMBASSY ASMARA PRIORITY 0031
RUEHBS/AMEMBASSY BRUSSELS PRIORITY 1983

C O N F I D E N T I A L MOSCOW 002178 
 
SIPDIS 
 
E.O. 12958: DECL: 07/29/2018 
TAGS: PREL PGOV KPKO UNSC RS ET ER
SUBJECT: UNMEE--RUSSIA TO SUPPORT U.S. POSITION 
 
REF: STATE 79539 
 
Classified By: Acting Political Minister-Counselor Margaret Hawthorne 
for reasons 1.4 (b) and (d) 
 
1. (C)  On July 28, MFA chief of the UN Security Council 
section Peter Ilyichev confirmed that Russia supports the US 
position on termination of the UN Mission in Ethiopia and 
Eritrea (UNMEE) because there is no longer agreement by both 
parties.  He said the GOR is reviewing a draft resolution 
circulated by the Belgian mission that provides only 90 days 
for consultations by the UN Secretary General.  Ilyichev 
commented that the GOR "tried our levers as best we could" on 
the issue, and hoped that the "regrettable" need to terminate 
UNMEE would not lead to increased violence between the two 
sides. 
RUBIN

Wikileaks

08MOSCOW2172, USTR Delegation Discusses IPR in Moscow

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Reference ID Created Released Classification Origin
08MOSCOW2172 2008-07-28 13:26 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Moscow

VZCZCXRO7668
RR RUEHLN RUEHVK RUEHYG
DE RUEHMO #2172/01 2101326
ZNR UUUUU ZZH
R 281326Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 9204
INFO RUEHLN/AMCONSUL ST PETERSBURG 5017
RUEHVK/AMCONSUL VLADIVOSTOK 2902
RUEHYG/AMCONSUL YEKATERINBURG 3261
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 MOSCOW 002172 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/RUS, EEB/TPP/IPE 
STATE PLS PAS USTR SMCCOY, JGROVES, PBURKEHEAD 
USDOC FOR 4231 FOR ITA/MAC/ORUE, WPAUGH, SWILSON 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR RS
SUBJECT: USTR Delegation Discusses IPR in Moscow 
 
This message is sensitive but unclassified and is 
not intended for Internet distribution. 
 
------- 
Summary 
------- 
 
1.  (SBU) A USTR delegation, led by AUSTR for 
Intellectual Property and Innovation Stanford McCoy, 
visited Moscow June 23-24 for meetings with GOR officials 
and industry representatives on IPR protection and 
enforcement.  USTR focused on implementation of the U.S. 
? Russia IPR side letter, and in particular, protection 
for undisclosed data for registration of pharmaceuticals. 
End summary. 
 
-------------------------------------- 
USTR Message: Keep the Focus on IPR 
-------------------------------------- 
 
2.  (SBU) AUSTR for Intellectual Property and Innovation 
Stanford McCoy, Chief Counsel for Legal Affairs Catherine 
Field and Director for Europe and Middle East Trade Paul 
Burkhead, visited Moscow June 21-25 for discussions with 
rights holders and GOR officials responsible for IPR 
protection and enforcement.  Concerned about loss of 
momentum on IPR amidst a transitioning government, the 
USTR delegation focused on progress on implementation of 
the U.S. - Russia IPR side letter, part of a bilateral 
agreement with Russia signed in 2006. 
 
3. (SBU) The delegation specifically raised with GOR 
officials the need for better coordination on IPR between 
government ministries and agencies.  The delegation also 
expressed concern about enforcement efforts, the need for 
transparency in the upcoming tender to accredit 
collecting societies, amendments to Part IV of the Civil 
Code related to TRIPs compliance, and efforts to amend 
the Law on Medicines. 
 
----------------- 
Meeting with Duma 
----------------- 
 
4. (SBU) In his meeting with the USTR delegation, Duma 
Member and Chairman for the Committee on Culture Grigory 
Ivliev, largely responsible for enactment of Part IV of 
the Civil Code, appeared well briefed on all areas of 
IPR, including enforcement issues.  He noted that the 
Duma, in addition to working with the Ministry of Culture 
to see that Part IV of the Civil Code is correctly 
implemented, is also working with the Ministry of 
Internal Affairs (MVD) on the application of Russia's 
criminal law to combat piracy. 
 
5. (SBU) USTR noted the need for greater focus on 
enforcement and that the MVD needs to create a special 
unit responsible for Internet piracy.  Ivliev agreed that 
enforcement is problematic, but commented that new 
authority provided to law enforcement bodies by Part IV 
should help.  USTR commented that nevertheless, pirates 
quickly adapt to counter-piracy measures, and that the 
U.S. and Russia need to work together to protect 
innovative and creative industries. 
 
---------------------------------------- 
Collecting Societies and Internet Piracy 
---------------------------------------- 
 
6. (SBU) Alexander Kibovksi, Head of newly created 
Federal Service for the Protection of Culture 
(RosOkhranKultura) joined Ministry of Culture officials 
to discuss with USTR how plans are progressing to 
determine which ministries and agencies will be 
responsible for the implementation of various pieces of 
Russia's copyright-related commitments in the IPR side 
letter, as well as future plans for the U.S. - Russia IPR 
Working Group.  USTR raised the need for updated 
enforcement statistics, and noted that "getting a 
positive enforcement message" back to Washington is 
important. 
 
7. (SBU) Kibovski explained that RosOkranKultura is now 
responsible for some enforcement efforts and for 
accreditation of collecting societies.  He highlighted 
 
MOSCOW 00002172  002 OF 002 
 
 
that his agency, along with the Ministry of Culture, 
would oversee the destruction of 2 million seized 
counterfeit discs (confirmed in press reports later that 
week), and planned to conduct tenders in August to 
accredit two of the six categories of collecting 
societies, but did not name which categories would be 
accredited.  Both the Ministry of Culture and 
RosOkrankultura claimed no responsibility for preventing 
internet piracy, saying that function rests with the 
Federal Supervisory Service for Mass Communications 
(Rossvyaznadzor), headed by Boris Boyarskov. 
 
--------------------------- 
Progress on Data Protection 
--------------------------- 
 
8.  (SBU) The USTR delegation had constructive 
discussions with GOR officials on a draft amendment to 
the Law on Medicines which would implement Russia's 
commitment to provide 6 years of protection for tests and 
other data submitted to register pharmaceutical patents. 
The delegation met with officials from the Ministry of 
Health and with the Federal Service for Health and Social 
Development (Roszdravnadzor) to
 discuss how amendments to 
the Law on Health would be implemented by Russian 
regulatory authorities.  Discussion focused on 
clarification of a provision in the amendment, which 
would allow the use of data published in "dedicated" 
journals, subject to a 6-year prohibition, without the 
permission of the entity owning the data. (Comment: 
Although GOR officials said the draft amendment would be 
submitted immediately to the Presidential Administration 
for approval, and then forwarded to the Duma, 
representatives of pharmaceutical companies report that 
the Ministry of Health circulated a different draft for 
comments shortly after the delegation left Moscow.) 
 
-------------- 
Industry Views 
-------------- 
 
9.  (SBU) IPR industry representatives outlined several 
areas of concern during a briefing with USTR, noting in 
particular the need for an "IPR one-stop shop" within the 
GOR - one agency or government official responsible for 
IPR.  The representative from IFPI (representing the 
Recording Industry Association of America) called for a 
decrease in monetary thresholds to make IPR cases easier 
to prosecute.  He also noted that problems remain with 
forensic analysis results of pirated goods. 
 
10. (SBU) The Russian Anti-Piracy Association (RAPO), 
representing the Motion Picture Association, warned that 
as access to broadband Internet becomes more prevalent in 
Russia, Internet piracy of movies will likely increase. 
They noted that Part IV of the Civil Code does not 
provide any authority to sell movies legally for 
download, nor does it provide for the creation of a 
collecting society for the film industry.  Business 
Software Alliance representatives praised the Embassy for 
organizing a recent seminar to raise GOR awareness of the 
need for a corporate criminal liability law that could 
hold companies, not just individuals, responsible for IPR 
violations. 
 
------- 
Comment 
------- 
 
7. (SBU) We expect the pace of IPR legislative 
improvements and enforcement efforts will pick up 
again in early fall after the summer vacation lull, 
particularly if we can agree with the Ministry of 
Culture on dates for a next IPR Working Group, 
tentatively planned for end-September. 
 
RUBIN

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08MOSCOW2171, RUSSIA PROTESTS “PROCLAMATION ON CAPTIVE NATIONS”

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Reference ID Created Released Classification Origin
08MOSCOW2171 2008-07-28 12:56 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0009
RR RUEHWEB

DE RUEHMO #2171/01 2101256
ZNY CCCCC ZZH
R 281256Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 9202
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE

C O N F I D E N T I A L MOSCOW 002171 
 
SIPDIS 
 
E.O. 12958: DECL: 07/28/2018 
TAGS: PREL PHUM PGOV RS
SUBJECT: RUSSIA PROTESTS "PROCLAMATION ON CAPTIVE NATIONS" 
 
Classified By: Charge d'Affaires Eric Rubin: Reasons 1.4 (b, d). 
 
1.  (C)  In a July 25 meeting with the Charge, MFA North 
America Director Igor Neverov raised Russian concerns over 
the 2008 presidential "Proclamation on Captive Nations Week." 
 Noting that the GOR had not made an issue of the 
proclamation before, Neverov said that the annual statement 
had caught the attention of "public figures" this year; 
specifically, the juxtaposition of "the evils of Soviet 
communism and Nazi facism."  The sentence appeared to equate 
the two, which Neverov stressed was an anathema for the 
Russian public and leadership, given the fact that the Soviet 
Union had been an ally in WW2 against the Nazis, and 
communist Soviet troops had helped defeat Hitler.  The GOR, 
Neverov clarified, was not attempting to defend Soviet 
communism -- it was "dead and good riddance" -- and 
understood the logic of the annual proclamation, but urged 
that "Cold War rhetoric" be avoided in the future.  Charge 
responded that this was the eighth such proclamation by the 
President and that no hidden message should be read into the 
statement.  Charge undertook to convey Russian concerns to 
Washington. 
 
2.  (U)  On July 26, the MFA posted a commentary (MFA 
translation provided in paragraph 5), sarcastically 
criticizing the proclamation language as a "novelty" that put 
an equal sign between Nazi facism and Soviet communism. 
These were parallels that "don't hold water."  The U.S. 
formulation, the MFA charged, hurt the feelings of Russian 
veterans, as well as veterans of other countries in the 
anti-Hitler alliance.  The MFA concluded by noting the 
"surprising tolerance" evidenced by the U.S. toward those in 
Europe attempting to "whitewash their own Nazi accomplices." 
 
3.  (SBU)  While Russian television has not focused on the 
issue, the MFA's commentary received wide play in the press. 
Several national print dailies carried stories extensively 
quoting the statement.  Liberal Kommersant noted that 
although the MFA maintained that "democratic Russia" had an 
objective assessment of the Soviet period, the Russian 
Orthodox Church had recently taken the Russian government to 
task for not having condemned Bolshevik crimes.  However, 
pro-Kremlin newspapers latched on to the accusations of U.S. 
Cold War bias, with Izvestiya concluding that "Bush may hate 
the USSR and its philosophy, but he really overdid it by 
equating communism to facism."  While the right-of-center 
Nezavisimaya Gazeta acknowledged that talk of Russian bombers 
to Cuba and the visit of Chavez to Moscow had helped fuel a 
Cold War atmosphere, the newspaper appeared to side with the 
MFA in reinforcing the decisive contribution made by the 
Soviet Union in defeating Nazism. 
 
4.  (C)  Comment:  The purity of the Soviet contribution in 
defeating Nazism is a deeply held belief in Russia, with 
Russian anger over debates in the former Soviet republics 
over the role of partisans (who sided with Hitler in 
opposition to Stalin) and the victims of the famine of the 
1930's collectivization drive (whether a Ukrainian genocide, 
or the widespread devastation of a multiethnic peasant class) 
likely contributing to the commentary's sarcastic tone. 
 
5.  (U)  Begin GOR Translation: "MFA Information and Press 
Department Commentary in Connection with the Signing by the 
U.S. President of the Proclamation on Captive Nations Week, 
2008. 
 
Last week U.S. President George Bush signed a regular 
proclamation on the theme of "captive nations," with which he 
annually comes up on the basis of a law adopted way back in 
the Cold War era.  Well, it's business as usual, but this 
time around one "novelty" has appeared: quite unambiguously 
the equal sign is put between Nazi fascism and Soviet 
communism, which are now coupled as a "single evil" of the 
20th century. 
 
Whatever the U.S. president's attitude towards the period of 
the Soviet Union and communist ideology, which, by the way, 
have been given an objective assessment in contemporary 
democratic Russia, free of ideological stereotypes of the 
past, these American "parallels" don't hold water, either 
from the viewpoint of history or in terms of universal human 
concepts.  While condemning the abuse of power and 
unjustified severity of the Soviet regime's internal 
policies, we nevertheless can neither treat indifferently 
attempts to equate Communism and Nazism nor agree that they 
were inspired by the same ideas and aims. 
 
Historical facts incontestably attest that the USSR 
contributed decisively to the victory over German facism.  It 
was thanks to the Soviet Union and the feat of arms and labor 
of the Soviet people that Europe was saved from the Nazi 
occupation and enslavement.  The memory of this will always 
live in the hearts of grateful descendants. 
The phrase under which the U.S. president signed cannot but 
hurt the hearts of not only the Russian participants of that 
war, but also we think of the veterans of the other countries 
of the anti-Hitler coalition, including American, who should 
to should fought for the common victory and shed their blood 
on the
battlefields in the name of freedom and the future. 
 
By the way, one cannot but see that such assessments simply 
feed the efforts of those, who for political and selfish ends 
are striving to falsify the facts and rewrite history.  All 
this takes place against the backdrop of the surprising 
tolerance being show in the United States toward those who in 
a number of European countries are trying to whitewash "their 
own" Nazi accomplices. 
 
It is sad that in the new realities of the 21st century the 
old Cold War for people's minds is continuing, with the use 
of dubious methods at that.  This is the wrong tack."  End 
MFA Translation 
RUBIN

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