Monthly Archives: September 2008

08MOSCOW2901, RUSSIAN POLICE RAID COLLECTING SOCIETY

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Reference ID Created Released Classification Origin
08MOSCOW2901 2008-09-30 14:50 2011-08-30 01:44 UNCLASSIFIED Embassy Moscow

VZCZCXRO5026
RR RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHMO #2901/01 2741450
ZNR UUUUU ZZH
R 301450Z SEP 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 0172
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RHEHAAA/WHITE HOUSE WASHDC

UNCLAS SECTION 01 OF 02 MOSCOW 002901 
 
SIPDIS 
 
STATE FOR EUR/RUS,EEB/TPP/IPE 
STATE PLS PASS USTR FOR SMCCOY, PBURKHEAD 
USDOC 4231 FOR JBROUGHER, MEDWARDS, JTHOMPSON 
USDOC PLS PASS WPAUGH 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR ECON RS
SUBJECT: RUSSIAN POLICE RAID COLLECTING SOCIETY 
 
REF: MOSCOW 155 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY. 
1. (SBU) SUMMARY: On September 24, Moscow police raided the 
offices of the Russian Phonographic Association (RPA), a 
royalty collecting society for the music industry, including 
U.S. rights holders.  The raid occurred just four days before 
the GOR's deadline for RPA to participate in the tender to 
accredit an official collecting society for all recorded 
music producers and performers in Russia.  In spite of the 
raid, RPA representatives tell us they will still meet the 
deadline to participate in the tender.  Nonetheless, the raid 
raises questions about the overall fairness and transparency 
of the process and whether a rival collecting society was 
trying to hinder RPA's participation.  END SUMMARY. 
-------------------- 
RPA Raided by Police 
-------------------- 
 
2. (SBU) On September 24, police from the Investigative 
Department for the Southern District of Moscow raided the 
offices of RPA.  RPA is the collecting society supported by 
the RIAA.  It has been collecting royalties on behalf of 
foreign rights holders since 2004.  The raid took place just 
four working days before the deadline for RPA to participate 
in a tender administered by the Russian Agency for the 
Protection of Culture (RosOkhranKultura).  The tender will 
determine which collecting society will be officially 
accredited to collect royalties for rights holders in the 
future. 
 
3. (SBU) Under Russia's new intellectual property law (Part 
IV of the Civil Code), the federal government is required to 
accredit entities to collect royalties for the main 
categories of rights holders, including one society that 
would be responsible for collecting royalties on behalf of 
recorded music producers and performers.  The GOR 
accreditation process is supported by international recording 
industry associations, including the International Federation 
of the Phonographic Industry (IFPI) and the Recording 
Industry Association of America (RIAA). 
 
4. (SBU) According to the police warrant, the raid was based 
on an informant's tip that linked RPA to an alleged purchase 
of 121 counterfeit DVDs at a local market in the Spring of 
2008.  According to RPA representatives, police investigators 
apparently applied an artificially inflated price to the 
contraband disks to satisfy the minimum monetary threshold 
for a criminal penalty.  (Under the relevant section of the 
Russian Criminal Code, monetary damages in cases of DVD 
piracy must be at least 50,000 rubles, or about $2000.)  A 
criminal case was filed with the Ministry of Internal Affairs 
on April 30, and apparently remained dormant until last week, 
when police raided RPA's offices. 
 
5. (SBU) Police did not uncover any counterfeit DVDs at RPA's 
offices, but did confiscate several boxes of documents and 
one computer.  While RPA representatives and the company's 
lawyer were present during the raid, the police did not allow 
RPA to document or record what the police were taking, in 
apparent violation of Russian investigative procedures. 
 
-------------------------------------------- 
International Associations Suspect Foul Play 
-------------------------------------------- 
 
6. (SBU) RPA, IFPI and RIAA representatives told us they 
believe the raid may have been arranged by one of RPA's 
rivals, likely a competing "rogue" collecting society that 
purports to collect royalties on behalf of rights holders, 
but never in fact pays out any royalties.  In the view of 
RPA, IFPI and RIAA, the raid may have been an attempt to 
obstruct RPA's ability to make the September 30 filing 
deadline to participate in the RosOkhranKultura tender 
process.  Despite the confiscation of some of RPA's documents 
and the computer, RPA representatives tell us that the 
company will still be able to make the deadline and 
participate in the tender. 
 
-------------------------- 
Previous Harassment of RPA 
-------------------------- 
 
7. (SBU) In the lucrative but shady world of collecting 
 
MOSCOW 00002901  002 OF 002 
 
 
royalties in Russia, this is not the first time that RPA has 
faced harassment and obstruction of its business activities. 
In January 2008, a few days before RPA was required to 
re-register as a collecting society under new regulations, 
RPA's managing director, Vadim Botnaruk, died from wounds 
following a brutal assault, which was the second attempt on 
his life in a three-month time frame (Reftel).  Following 
Botnaruk's murder, RPA scrambled but still met the 
registration deadline. 
 
------- 
COMMENT 
------- 
 
8. (SBU) The timing of the police raid, a few days before the 
filing deadline for the collecting society te
nder, tends to 
confirm RPA, IFPI and RIAA'S suspicions that the raid may 
have been orchestrated by a rival collecting society.  This 
is a profitable, and rough, business in Russia.  While it is 
good news that RPA will still be able to participate in the 
tender, its representatives tell us they are concerned that 
the tender process may not be transparent.  We will continue 
to monitor both the police case and the tender process 
closely. 
BEYRLE

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08MOSCOW2900, RUSSIAN MARKETS CLOSE BRIEFLY AFTER “BAILOUT”

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Reference ID Created Released Classification Origin
08MOSCOW2900 2008-09-30 14:19 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0003
PP RUEHWEB

DE RUEHMO #2900/01 2741419
ZNY CCCCC ZZH
P 301419Z SEP 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 0170
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 002900 
 
SIPDIS 
 
STATE FOR EUR/RUS, EEB/IFD 
TREASURY FOR TORGERSON 
DOC FOR 4231/MAC/EUR/JBROUGHER 
NSC FOR ELLISON 
 
E.O. 12958: DECL: 09/30/2018 
TAGS: EFIN ECON RS
SUBJECT: RUSSIAN MARKETS CLOSE BRIEFLY AFTER "BAILOUT" 
FAILS TO PASS 
 
Classified By: ECON MC Eric T. Schultz, Reasons 1.4 (b/d). 
 
------- 
Summary 
------- 
 
1.  (C) One minute after the trading day began on September 
30, the Federal Financial Markets Service (FFMS) suspended 
trading for two hours apparently in anticipation of a 
meltdown in reaction to the Congressional vote against the 
Paulson Plan.  According to press reports, the FFMS "special 
order" had been prepared late on September 29 once Congress 
voted against the Plan.  The suspension of trading was 
designed to give time for the GOR's September 29 
announcements of further support to the markets to take 
effect.  When the markets opened two hours late, they 
initially fell but then stabilized by the end of the trading 
day with a modest gain on the previous day's close.  Our 
contacts applauded the GOR's efforts to prevent Russia's 
financial crisis from worsening today but retain reservations 
that the CBR's new support measures could delay much-needed 
banking sector consolidation.  End Summary. 
 
------------------------------ 
FFMS Orders Trading Suspension 
------------------------------ 
 
2.  (U) One minute after the trading day officially began on 
September 30, the Federal Financial Markets Service issued a 
"special order" to suspend trades for two hours.  On 
September 29, the FFMS reportedly prepared the order to halt 
the next day's securities trading when news emerged that the 
U.S. Congress had voted against legislation on the so-called 
Paulson Plan, whose passage many investors had hoped would 
put Russian stocks back on an upward trajectory.  News of the 
large losses on U.S. bourses following the vote in Congress 
prompted the FFMS to prepare a contingency plan for Russia, 
according to various print and broadcast media sources.  The 
news services for the main exchanges, RTS and MICEX, reported 
that a "significant" number of sell orders had been submitted 
overnight following the declines in the U.S. and Asia.  When 
trading finally resumed, the RTS and MICEX indices quickly 
fell about 2 percent before recovering to an estimated 1.5 
percent gain from the September 29 close. 
 
--------------------------- 
Additional Support Measures 
--------------------------- 
 
3.  (U) The FFMS suspension order came amidst reports that, 
on the evening of September 29, the government was planning 
new measures to provide liquidity.  Putin subsequently 
announced that the toolkit of financial resources would 
increase beyond "loans" of budget funds, lower bank reserve 
requirements, fiscal policy adjustments, and open market 
operations of short-term government debt.  The "increase," 
Putin said, would be to allow the Central Bank to play a 
larger role in furnishing liquidity, which would be available 
to smaller banks that do not normally enjoy access to the 
CBR's short-term loans as well as any Russian firm in need of 
funds to pay foreign debts. 
 
4.  (U) Under the new initiative, the Development Bank (aka 
Vneshekonombank, VEB) is to receive in the near term 
approximately $50 billion of the CBR's foreign exchange 
reserves to assist Russian firms and banks to meet their 
foreign debt obligations.  Citibank Russia's Managing 
Director for Fixed Income Eugene Belin called this the GOR's 
boldest move to date to mitigate the effects of the global 
financial crisis on Russia.  Any Russian firm in need of cash 
to make payments on any foreign debt incurred before 
September 25 would be able to file an application with VEB to 
receive the funds.  However, Belin said that no details were 
as yet available regarding the size or the repayment terms of 
the loans firms would be eligible to receive toward their 
foreign debts. 
 
5.  (U) The CBR would also increase the number of banks 
eligible to receive its no-collateral overnight loans. 
Currently, this lending is limited to the large state-owned 
banks (e.g., Sberbank, VTB and Gazprombank) and private banks 
with more than $5 billion in charter capital, according to 
MDM Fixed Income Analyst Mikhail Galkin.  No details were 
available regarding the requirements for qualifying for the 
no-collateral loans, Galkin told us. 
 
 
6.  (U) Finally, Putin said the CBR would provide favorable 
terms to banks that had defaulted on their overnight loans on 
the interbank market.  Ensuring that banks had the resources 
to meet their obligations would help sustain vital interbank 
lending and avoid the uncertainty that led to a suspension in 
securities trading on September 17, Putin noted in public 
comments.  Galkin said that he could appreciate the 
motivation behind supporting the interbank lending market but 
speculated that the proposal was a short-term initiative to 
stave off another panic. 
 
---------------------------- 
An Ideal Short-Term Solution 
---------------------------- 
 
7.  (C) Galkin told us that these measures deserve high marks 
for creativity,
as long as they are short-term uses of public 
funds.  The GOR recognized the need to take action to prevent 
a meltdown in the markets that could have led to a prolonged 
crisis of confidence.  However, he said the GOR should be 
prepared to allow firms to fail if they are unable to repay 
loans sourced from CBR reserves. 
 
8. (C) Belin concurred that giving non-bank firms access to 
the CBR's reserves was a risky proposition over the long 
term.  He speculated to us, however, that opening the CBR's 
short-term lending facilities to more banks would not 
necessarily be life support for otherwise insolvent banks. 
In the event these smaller banks defaulted on their loans, 
the CBR could begin a low-profile process of closing the bank 
or finding a buyer in a way that could maintain a sense of 
calm in the country's financial sector. 
 
------- 
Comment 
------- 
 
9.  (C) The GOR has raised the profile on its actions to 
shore up the financial sector and has demonstrated 
flexibility in addressing concerns stemming from the global 
crisis.  Increasing the availability of credit domestically, 
however, has not staved off plummeting confidence and may not 
be sufficient to stem capital flight or a continuing decline 
in the markets in the near term. 
BEYRLE

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08MOSCOW2895, DEPUTY FONMIN GRUSHKO ON NATO, OSCE MANDATE IN

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Reference ID Created Released Classification Origin
08MOSCOW2895 2008-09-30 08:37 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO4717
PP RUEHFL RUEHLA RUEHMRE RUEHROV RUEHSR
DE RUEHMO #2895/01 2740837
ZNY CCCCC ZZH
P 300837Z SEP 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 0163
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEHZG/NATO EU COLLECTIVE PRIORITY
RUCNOSC/OSCE POST COLLECTIVE PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002895 
 
SIPDIS 
 
E.O. 12958: DECL: 09/29/2118 
TAGS: PREL NATO OSCE RU GA
SUBJECT: DEPUTY FONMIN GRUSHKO ON NATO, OSCE MANDATE IN 
GEORGIA, AND NEW EUROPEAN SECURITY STRUCTURES 
 
Classified By: Ambassador John Beyrle. Reason: 1.4 D 
 
------- 
SUMMARY 
------- 
 
1. (C) Deputy Fonmin Aleksandr Grushko (whose portfolio 
includes NATO, OSCE, EU, COE) told the Ambassador that 
despite tensions, cooperation with NATO in Afghanistan 
remained strategically important to Russia.  Grushko 
criticized U.S. support for Saakashvili and a MAP for 
Georgia.  He shed no new light on OSCE/EU access in South 
Ossetia, but did not exclude the discussion of a phase two 
deployment of observers while making clear that 7,600 Russian 
troops would remain in Southern Ossetia and Abkhazia as a 
security guarantee.  Finally, Grushko said Russia would move 
forward with Medvedev's European Security Proposal but 
provided no details on when and how. End Summary. 
 
-------------------- 
NATO and Afghanistan 
-------------------- 
 
2. (C) In a Setpember 26 meeting with Deputy Fonmin Grushko, 
the Ambassador conveyed NATO's frustration with Ambassador 
Rogozin's unhelpful rhetoric, particularly criticism of 
NATO's performance in Afghanistan and threats to cancel the 
transit agreement. This contradicted the GOR's postion that 
cooperation on Afghanistan was a strategic priority. 
 
3. (C) Gruskhko replied that NATO's taking sides with Georgia 
damaged "mutual trust" and demonstrated that NATO did not see 
Russia as a "real partner."  Furthermore, it appeared Georgia 
was to be rewarded for its "aggression" in South Ossetia with 
a MAP and the creation of the Georgia/NATO Commission. 
However, after making his point that although it was no 
longer "business as usual" with NATO, Grushko conceded that 
Afghanistan was an important security concern. 
 
------- 
Georgia 
------- 
 
4. (C) Grushko read off a litany of allegations to the effect 
that that NATO and the U.S. had given Shakashvili the "green 
light" to invade South Ossetia.  As soon as Russia completed 
its withdrawal from Georgian bases in 2007, he concluded, the 
U.S. began to arm Georgia under "Train and Equip" and 
Saakashvili drew closer to NATO. Grushko suggested that U.S. 
military advisors were involved in the run-up to the August 
hostilities in Tskhinvali. 
 
5. (C) The Ambassador pushed back strongly.  Washington had 
advised Saakashvili not to respond militarily to Russia's 
provocations.  The GTEP's mission in Georgia was associated 
with counterterrorism and Georgia's participation in the Iraq 
coalition.  Grushko acknowledged that final judgment would 
have to be reserved until the facts were fully examined. 
 
---------------- 
OSCE/EU Monitors 
---------------- 
 
6. (C) The Ambassador urged that the Russians demonstrate 
more flexibility on deploying OSCE and EU observers within 
the administrative boundaries of South Ossetia.  When asked 
to justify Russia's basing 7,600 troops in Abkhazia and South 
Ossetia, Gruskho claimed that the presence of Russian troops 
was a security guarantee for the two republics and protection 
against possible Georgian aggression.  As for reported 
incidents involving harassment of ethnic Georgians (including 
the murder of a Georgian policeman) in areas controlled by 
Russian forces, Gruskho explained disingenuously that Russia 
could not assume full responsibility for what the authorities 
of "independent" South Ossetia do.  He maintained that 
Russian troops were under order not to engage in 
anti-Georgian hostilities and to protect the local 
population.  The Ambassador stressed that Russia bears full 
responsibility for the conduct of South Ossetian militias. 
7. (C) Grushko said in accordance with the September 8 
agreement, access to South Ossetia for the 8 MMOs on the 
ground before the start of hostilities would be permitted. 
Any further deployment of observers in South Ossetia would 
require a change in the existing mandate.  He did not rule 
out a discussion of a "phase two" deployment of additional 
OSCE monitors.  He said broader discussions on security 
issues would have to involve the South Ossetian and Abkhazian 
authorities as well as the Russians, and would have to 
include confidence building and economic assistance measures. 
 
MOSCOW 00002895  002 OF 002 
 
 
 He remained skeptical about the ability of the OSCE and the 
EU to "share responsibility" for security with the Russians. 
 
------------------------------- 
European Security Architecture 
------------------------------- 
 
8. (C) Grushko expounded on President Medvedev's recent calls 
for a revised Euro-Atlantic security framework that would 
move away from blocs.  In essence, the disintegration of the 
Warsaw Pact and other Soviet dominated institutions created a 
security vacuum in Europe filled in large part by the 
expansion of NATO.  Russia was prepared to cooperate with 
NATO and
other transatlantic institutions.  However, 
unchecked NATO enlargement had created dividing lines in 
Europe and given rise to "anti-Russian policies" in Ukraine 
and Georgia as well as the "unrealistic" perception in 
Washington that NATO's reach and appeal was global.  He gave 
no details on how and when Russia would pursue this 
discussion with the Europeans or the U.S. 
 
------- 
Comment 
------- 
 
9. (C) While Grushko broke no new ground on OSCE/EU monitors 
in South Ossetia, he conceded that continued cooperation with 
NATO on Afghanistan remained strategically important for 
Russia, a theme we continue to hear repeated by most 
officials we raise the issue with.  Grushko's lack of detail 
in describing Medvedev's blueprint for a new European 
security architecture was surprising, given his portfolio, 
but was also in keeping with the only slightly less vague 
concept described by FM Lavrov in his UNGA speech the next 
day.  It would appear that the MFA does not have the lead in 
this initiative.  End Comment. 
BEYRLE

Wikileaks

08MOSCOW2893, DEMARCHE DELIVERED: BOLIVIAN AND VENEZUELAN

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Reference ID Created Released Classification Origin
08MOSCOW2893 2008-09-29 14:08 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO4520
RR RUEHAG RUEHROV
DE RUEHMO #2893 2731408
ZNY CCCCC ZZH
R 291408Z SEP 08 ZDK
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 0161
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 4424
RUEHNY/AMEMBASSY OSLO 1731
RUEHUL/AMEMBASSY SEOUL 2745
RUEHSM/AMEMBASSY STOCKHOLM 1371
RUEHKO/AMEMBASSY TOKYO 4189
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEHUB/USINT HAVANA 0014

C O N F I D E N T I A L MOSCOW 002893 
 
SIPDIS 
 
E.O. 12958: DECL: 09/25/2018 
TAGS: PGOV PREL KDEM BL ASEC
SUBJECT: DEMARCHE DELIVERED: BOLIVIAN AND VENEZUELAN 
AMBASSADORS IN U.S. DECLARED PERSONA NON GRATA. 
 
REF: STATE 99473 
 
Classified By: Political M/C Alice G. Wells.  Reasons 1.4 (b) and (d). 
 
On September 29 we delivered reftel demarche to Third 
Secre-tary Ivan Pleshakov of the MFA Latin America Desk, who 
offered no substantive reply. 
BEYRLE

Wikileaks

08MOSCOW2885, NORD STREAM EXECS ADMIT PIPELINE DELAYED REF: BERLIN 1258 Classified By: Ambassador John R. Beyrle for Reasons 1.4 (b/d)

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Reference ID Created Released Classification Origin
08MOSCOW2885 2008-09-29 11:04 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO3785
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #2885 2731104
ZNY CCCCC ZZH
P 291104Z SEP 08 ZDK
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 0154
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

C O N F I D E N T I A L MOSCOW 002885 SIPDIS DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT EUR/CARC, SCA (GALLAGHER, SUMAR) DOE FOR FREDRIKSEN, HEGBORG, EKIMOFF E.O. 12958: DECL: 09/22/2018 TAGS: EPET ENRG ECON PREL RS

SUBJECT: NORD STREAM EXECS ADMIT PIPELINE DELAYED REF: BERLIN 1258 Classified By: Ambassador John R. Beyrle for Reasons 1.4 (b/d)

 ---------------------------------------- PROJECT MOVING AHEAD BUT BEHIND SCHEDULE ---------------------------------------- 

1. (C) In a September 18 meeting, Nord Stream CFO Paul Corcoran and Moscow Representative Vitaly Yusufov told us the pipeline project is about a year behind schedule due to continued fine-tuning of the route. According to Corcoran and Yusufov, the company currently expects to file all required environmental applications by January 2009, start construction by April 2010, and begin gas deliveries in 2011. 2. (C) The two Nord Stream executives said they saw little likelihood of the project being scrapped given rising EU demand for gas, limited alternatives, and strong political and commercial backing. Corcoran said the global financial crisis and credit crunch will also have little effect on the project in that the project's shareholders (Gazprom, E.On/Ruhrgas, BASF/Wintershall, and Gasunie) are bound by agreement to pay for the pipeline if financing can't be found. He said, moreover, that all of the companies have sufficient access to capital to pay, if needed, and that banks are still "lined up" to provide needed financing. He predicted that the only burden on the project from the financial crisis will be slightly higher interest rates on financing. ---------------------------- U.S. POSITION ON NORD STREAM ---------------------------- 3. (C) Corcoran questioned U.S. views on Nord Stream in the wake of Ambassador Wood's September 10 op-ed. He was confident, however, that the USG position is unlikely to affect the project's development. ------- COMMENT ------- 4. (C) Nord Stream may be delayed longer than its executives are willing to admit. In addition to environmental delays, other sector specialists have pointed to potential problems with financing and with the slow development of the new fields intended to fill the pipeline. That said, the Russian Government is almost certain to intervene on behalf of the project if need be. End comment. BEYRLE

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08MOSCOW2880, CZECH DCM SAYS PRESS REPORTS OF DIRECT OIL SALES

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Reference ID Created Released Classification Origin
08MOSCOW2880 2008-09-29 06:34 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO3577
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #2880 2730634
ZNY CCCCC ZZH
P 290634Z SEP 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 0148
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

C O N F I D E N T I A L MOSCOW 002880 
 
SIPDIS 
 
DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT 
EUR/CARC, SCA (GALLAGHER, SUMAR) 
DOE FOR FREDRIKSEN, HEGBORG, EKIMOFF 
 
E.O. 12958: DECL: 09/29/2018 
TAGS: EPET ENRG ECON PREL RS
SUBJECT: CZECH DCM SAYS PRESS REPORTS OF DIRECT OIL SALES 
PREMATURE 
 
REF: MOSCOW 2262 
 
Classified By: Econ MC Eric T. Schultz for Reasons 1.4 (b/d) 
 
----------------------------------- 
NO MOVEMENT YET ON DIRECT OIL SALES 
----------------------------------- 
 
1. (C) Czech DCM Hyneck Pejcha told us September 25 that 
recent press reports suggesting that Russia and the Czech 
Republic had agreed to eliminate middlemen in the oil trade 
are premature.  He said his government has offered to 
negotiate a framework for direct oil sales (reftel), but that 
the Russian side has not yet responded.  Pejcha said the 
Czech offer on direct sales was a "negotiating tactic;" he 
did not speculate as to how Russia might respond but said he 
expects a response from the GOR prior to upcoming 
Russia-Czech Republic Economic Cooperation Commission 
meetings in October. 
 
2. (C) Pejcha said oil supplies from Russia to the Czech 
Republic in August were 74% of normal flows and that 
September deliveries will likely be 80% to 90% of normal 
levels.  He said the flows are not constant -- they can be at 
100% for days, then drop to 50%.  He reiterated that the 
supply disruptions from Russia, however, have not been a 
problem for Czech refineries because they have alternative 
suppliers. 
 
------- 
COMMENT 
------- 
 
3. (C) If the Czech Republic is successful in negotiating 
transparent direct sales with Russia, it would demonstrate a 
second benefit of having alternative suppliers -- encouraging 
the Russians to behave commercially. 
BEYRLE

Wikileaks

08MOSCOW2878, PROTECTIONISTS WINNING WAR OF WTO (NON-)ACCESSION?

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Reference ID Created Released Classification Origin
08MOSCOW2878 2008-09-26 14:20 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0002
RR RUEHWEB

DE RUEHMO #2878/01 2701420
ZNY CCCCC ZZH
R 261420Z SEP 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 0144
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 3480
RUEHVI/AMEMBASSY VIENNA 4660
RUEHIT/AMCONSUL ISTANBUL 0776
RUEHGV/USMISSION GENEVA 5209
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RHEHAAA/WHITE HOUSE WASHDC

C O N F I D E N T I A L MOSCOW 002878 
 
SIPDIS 
 
DEPARTMENT FOR EUR/RUS 
STATE PLS PASS USTR (PORTER, KLEIN, HAFNER) 
STATE PLS PASS USDA/FAS (FLEMINGS, SALLYARDS, KUYPERS) 
 
E.O. 12958: DECL: 09/25/2018 
TAGS: ETRD EINV ECON WTO RS
SUBJECT: PROTECTIONISTS WINNING WAR OF WTO (NON-)ACCESSION? 
 
REF: A. ANKARA 1688 
     B. MOSCOW 2825 AND PREVIOUS 
 
Classified By: Ambassador John R. Beyrle, Reasons 1.4(b,d). 
 
------- 
SUMMARY 
------- 
 
1. (C) The Georgia conflict and increased international 
tensions have strengthened the hand of protectionist forces 
opposed to Russia's WTO accession.  As the GOR slows down the 
accession process by unwinding previous commitments with the 
United States and the EU, and reviewing duties on Ukrainian 
goods, WTO opponents see immediate advantage in appeasing 
vocal domestic constituents and extracting rents from 
sheltered and uncompetitive sectors of the Russian economy. 
Russian leaders are still paying lip service to the idea of 
WTO entry, provided it happens on terms favorable to Russia. 
Although the Ministry of Economic Development (MED) has put 
on a brave public face as it goes through the motions of 
accession talks, it appears increasingly unable to rein in 
other powerful ministries opposed to accession, particularly 
the Ministry of Agriculture. 
 
-------------------------------- 
Russia's Protectionist Pressures 
-------------------------------- 
 
2. (C) Over the past two weeks, President Medvedev and First 
Deputy Prime Minister Shuvalov have both stressed that Russia 
still wants to enter the WTO, but only on terms that are 
favorable to Russia.  With WTO accession appearing less 
likely in the near term, Russia's leaders have instead sought 
to further narrow self-interests and to appease vocal 
domestic constituencies that were concerned about the 
potential impact of greater foreign competition on their 
prices and market shares.  As Deutsche Bank Securities Chief 
Economist Yaroslav Lissovolik told us recently, in the 
post-Georgia environment, the balance of power has clearly 
shifted to isolationist and protectionist hard-liners, and 
the economic reform agenda, including integration into the 
world trading system, has been pushed to the back burner. 
 
3. (C) Agriculture Minister Gordeyev is a key WTO opponent 
and appears to be behind many of the proliferating 
protectionist measures.  On August 27, he threatened to 
reduce import quotas on poultry and pork products by 
"hundreds of thousands of tons."  It is widely known that 
Gordeyev and other senior ministry officials have substantial 
ownership interests in Russian meat, grain and dairy 
businesses.  Gordeyev and his ministry have actively opposed 
Russia's WTO entry for years, presumably because they are 
worried that increased foreign competition in meat, dairy and 
other domestic food markets will put pressure on the profit 
margins of domestic producers and decrease the opportunities 
to extract rents from the domestic industry.  The domestic 
poultry industry has averaged 15 percent annual growth over 
the last seven years, but is currently losing money because 
of high feed costs.  Several domestic producers have 
confirmed to us that they plan to raise their prices as soon 
as a new quota lowering the volume of imports is in place. 
 
4. (C) MinAg's protectionist streak was also plainly evident 
in the September 16 letter from the Russian Veterinary 
Service (VPSS), which is a part of the Ministry.  The letter 
refused to add U.S. meat facilities to the list of eligible 
exporters and questioned the continued validity of the 
U.S.-Russia WTO bilateral market access agreement and side 
letters signed in November 2006.  VPSS apparently did not 
clear the September 16 letter with other agencies, and the 
MFA and MED have both told us the letter did not reflect an 
official change in GOR policy.  At best, therefore, the 
letter suggests that no one within the GOR is in charge of 
coordinating the accession process and reining in agencies 
such as the Agriculture Ministry that are inclined to act 
unilaterally to protect domestic industries from foreign 
competitors (Ref B). 
 
---------------------------- 
Is WTO Still a GOR Priority? 
---------------------------- 
 
5. (C) Despite the heightened protectionist rhetoric, MED's 
trade negotiators have continued to be upbeat about Russia's 
accession.  In recent briefings for the press and Moscow's 
diplomatic community, Chief WTO Negotiator Maksim Medvedkov 
has maintained that accession is still a priority and will 
help Russia develop a diversified and innovative economy.  He 
has stated that the Duma will likely pass all necessary 
legislative amendments needed for accession by the end of the 
year, including changes in the laws governing IPR, customs 
and technical regulations. 
 
6. (C) Attempting to explain recent WTO comments from Putin, 
Medvedev and Shuvalov, Medvedkov has noted that the pace of &#
x000A;accession has been slower than the GOR had hoped -- hence the 
need to review commitments that Russia agreed to implement in 
advance of accession that the GOR believes have caused 
negative economic consequences to certain domestic 
industries.  Still, Medvedkov has made clear that the 
accession process will continue to proceed in an orderly 
fashion, and Russia will likely seek consultations to reopen 
only a few issues, including the 2005 Meat Agreement with the 
United States. 
 
------------------ 
GOR Actions Say No 
------------------ 
 
7. (C) While the Russians continue to talk a good game on WTO 
accession, actions speak louder than words.  The lack of 
significant progress in ongoing bilateral consultations, the 
reopening of bilateral trade agreements, such as the 2005 
Meat Agreement, and heightened trade tensions with Turkey and 
Ukraine, would appear to confirm that Russia has written off 
the chances of a near-term WTO accession and is instead 
embracing protectionism. 
 
8. (C) EU Diplomats have told us privately that on-going 
talks with Russia on the few remaining bilateral accession 
issues have not been making any meaningful progress.  PM 
Putin's strong desire to revive the domestic wood processing 
industry has meant that Russia is refusing to budge on the 
proposed imposition of a prohibitive tariff on timber 
exports, which could effectively put out of business Finnish 
and Swedish sawmills and wood processors. 
 
9. (C) In addition, EU diplomats tell us that "we thought we 
had a deal" on trans-Siberian overflight fees, but that 
Russia is now arguing that it only "initialed," but never 
fully signed, the bilateral agreement, and that it will not 
change its overflight fee regime until the actual date of WTO 
entry.  Under the current regime, foreign airlines that fly 
over Siberia are effectively forced to subsidize Aeroflot. 
Both EU diplomats and aviation experts have told us that a 
key component of Aeroflot's profitability is the collection 
of more than $300 million per year in trans-Siberian 
overflight fees from EU air carriers. 
 
10. (C) Likewise, Russia has made no meaningful progress with 
the Cairns Group on an acceptable level of agriculture 
subsidies.  Agriculture Minister Gordeyev emerges from every 
round of face-to-face talks, most recently in June, with 
confident press statements of significant progress.  However, 
EU diplomats here and in Geneva tell us privately that 
Gordeyev has been an aggressive negotiator and largely 
unwilling to come down from a range of $9-12 billion in 
annual agriculture subsidies.  (WTO precedent from previous 
accessions would call for a subsidy level in the range of 
$3-4 billion per year.) 
 
11. (C) Russia's two-month-old customs dispute with Turkey 
has subsided for the moment, thanks to the September 18 
signing of a Customs Protocol between the two countries (Ref 
A).  However, trade relations with Ukraine still remain 
strained.  Likely for political reasons, Russia is conducting 
a wholesale review of its trading relationship with Ukraine 
and risks Ukraine asking for WTO bilateral market access 
negotiations. 
 
12. (C) Finally, chances would seem remote -- to put it 
mildly -- that Russia could negotiate a solution to its WTO 
deadlock with Georgia.  (Even before the outbreak of 
hostilities, Georgia had blocked formal WTO talks with Russia 
after then President Putin's April 16 declaration of closer 
Russian ties to Abkhazia and South Ossetia.)  Instead, 
Russian trade negotiators continue to maintain that they can 
invoke Article XIII of the Marrakesh Agreement Establishing 
the WTO to make an end run around Georgia's opposition to 
Russia's accession.  (N.B. We do not believe that their 
arguments stand up to scrutiny). 
------- 
COMMENT 
------- 
 
13. (C) As the accession process grinds on, we expect Russia 
to be tempted to embrace additional protectionist measures in 
agriculture and beyond.  We should be prepared to push back 
against both Russia's protectionist rhetoric and its concrete 
actions.  Our consistent message should be that Russia should 
not sacrifice our shared long-term goal of WTO membership for 
Russia, and the momentum of the last two years, for the 
short-term and uneven gains offered by protectionist 
measures.  We should coordinate this message closely with the 
EU.  This message could help reinforce the position of WTO 
advocates within the GOR and Russian business circles and can 
perhaps slow the rush toward protectionism. 
BEYRLE

Wikileaks

08MOSCOW2871, EXTRANCHECK: PRE-LICENSE CHECK: MICROS

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If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08MOSCOW2871.
Reference ID Created Released Classification Origin
08MOSCOW2871 2008-09-26 09:44 2011-08-30 01:44 UNCLASSIFIED Embassy Moscow

VZCZCXYZ0007
PP RUEHWEB

DE RUEHMO #2871 2700944
ZNR UUUUU ZZH
P 260944Z SEP 08
FM AMEMBASSY MOSCOW
TO RUCPDOC/USDOC WASHDC PRIORITY
INFO RUEHC/SECSTATE WASHDC 0135
RHMFIUU/US CUSTOMS AND BORDER PROTECTION WASHINGTON DC

UNCLAS MOSCOW 002871 
 
SIPDIS 
 
USDOC FOR 532/OEA/M.HAMMES/L.RITTER 
USDOC FOR 3150/USFCS/OIO/CEENIS/MCOSTA 
 
E.O. 12958: N/A 
TAGS: BEXP ETRD ETTC RS
SUBJECT: EXTRANCHECK: PRE-LICENSE CHECK: MICROS 
ENGINEERING, NOGINSK, MOSCOW REGION, RUSSIA, LICENSE 
NO. D398931 
 
REFTEL: USDOC 04192 
 
 
1. Unauthorized disclosure of the information provided 
below is prohibited by Section 12C of the Export 
Administration Act. 
 
2. Reftel requested a Pre-license check to determine 
the legitimacy and reliability of the end-user, Micros 
Engineering, Str 200 Letija Goroda Bldg 62-CNITI, 
Noginsk, Moscow Region, Russia. The company is listed 
on BIS license application D398931 as the ultimate 
consignee of 1.8v, 12 bit, 250 MSPS ADC for broadband 
applications.  These items are controlled for national 
security (NS) and nuclear non-proliferation (NP) 
reasons under ECCN 3A001. The licensee is Maxim 
Integrated Products, Inc., 120 San Gabriel Drive, 
Sunnyvale, CA  94086. 
 
3. On September 2, 2008, FCS LES Gulnara Safarova was 
told by Micros Engineering that they do not want to 
meet with the Export Control Attach.  Gulnara 
Safarova made several calls to the company over a 
period of several days, stating the fact that Export 
Control Attach Peter Liston would like to meet with 
representatives of the Micros Engineering in order to 
conduct the pre-license check for the subject 
commodity.  Gulnara Safarova was told repeatedly that 
the company does not know anything about the commodity 
in question and would not like to meet with the ECO. 
 
4. Recommendations: Post does not recommend Micros 
Engineering, Str 200 Letija Goroda Bldg 62-CNITI, 
Noginsk, Moscow Region, Russia, as reliable recipients 
of sensitive U.S. origin commodities at this time. It 
is requested that post be notified of final 
disposition of the application, and of any shipments 
for this organization in order to conduct appropriate 
FCS follow-up and statistical reporting. 
(FCS MOSCOW/JMARKS/PLISTON) 
BEYRLE

Wikileaks

08MOSCOW2870, EXTRANCHECK: POST-SHIPMENT VERIFICATION: JSC

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Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08MOSCOW2870.
Reference ID Created Released Classification Origin
08MOSCOW2870 2008-09-26 09:44 2011-08-30 01:44 UNCLASSIFIED Embassy Moscow

VZCZCXYZ0003
PP RUEHWEB

DE RUEHMO #2870 2700944
ZNR UUUUU ZZH
P 260944Z SEP 08
FM AMEMBASSY MOSCOW
TO RUCPDOC/USDOC WASHDC PRIORITY
INFO RUEHC/SECSTATE WASHDC 0134
RHMFIUU/US CUSTOMS AND BORDER PROTECTION WASHINGTON DC

UNCLAS MOSCOW 002870 
 
SIPDIS 
 
USDOC FOR 532/OEA/M.HAMMES/L.RITTER 
USDOC FOR 3150/USFCS/OIO/CEENIS/MCOSTA 
USDOC FOR 532/OEE/MO'BRIEN 
 
E.O. 12958: N/A 
TAGS: BEXP ETRD ETTC RS
SUBJECT: EXTRANCHECK: POST-SHIPMENT VERIFICATION: JSC 
NOVO, DUBKI STREET 6, MOSCOW, RUSSIA, LICENSE NO. NLR 
 
REFTEL: USDOC 05674 
 
1. Unauthorized disclosure of the information provided 
below is prohibited by Section 12C of the Export 
Administration Act. 
 
2. Reftel 1 requested a Post-shipment verification to 
determine the legitimacy and reliability of the end- 
user, JSC Novo, Dubki Street 6, Moscow, Russia. The 
company is listed on BIS license application: NLR as 
the ultimate consignee of Ten (10) 12 lead integrated 
circuits, three hundred (300) I.C. SP3T non-reflective 
SMT switch, one hundred (100) I.C. switch SPDT, fifty 
(50) voltage variable attenuator, NLR, and one hundred 
fifty (150) I.C. DIV 4 prescaler DC electronic devices 
and components.  ECCN 3A001. Controlled for anti- 
terrorism (AT), nuclear non-proliferation (NP), 
missile technology (MT), and national security (NS) 
reasons. The exporter is Hittite Microwave 
Corporation, 20 Alpha Road, Chelmsford, MA  01824. 
 
3. On September 25, 2008, Export Control Attach Peter 
Liston and ICE LES Sergey Kishkimsky conducted the 
requested post-shipment verification with JSC Novo, 
Dubki Street 6, Moscow, Russia. The export control 
team met with Vladimir Filippovsky, President, and 
Andrey Kaznin, Commercial Director. 
 
4. JSC (Joint Stock Company) Novo was established 
circa 1992 and was founded by former Soviet officials 
of State owned institutions.  JSC Novo is located in a 
stand-alone two-story office building that house their 
production facility, administrative offices and sales 
department.  JSC Novo has 50 employees and 
manufactures police and security electronics such as 
detection equipment, x-ray, and metal detectors.  JSC 
Novo attends international security and police trade 
shows as an exhibitor and has established an export 
branch within their sales department. 
 
5. The Export Control Attach office provided a copy 
of the Commercial Invoice of the commodities for 
subject cable to JSC Novo one day before the PSV 
because Novo indicated that they do not believe that 
they had been in receipt of any commodities that would 
warrant the visit from the ECO.  During the PSV visit 
to Novo, Vladimir Filippovsky explained to the ECO 
that he carefully reviewed the Commercial Invoice with 
his Commercial Director and did not find any line 
items that Novo purchased.  Vladimir Filippovsky 
stated that JSC Novo has a long and respected history 
with the Intermediate Consignee Altex Co, and stated 
that it is possible that Altex made the purchase and 
stocked the line items in anticipation of orders from 
JSC Novo in the future. 
 
 
6. Recommendations: Post recommends JSC Novo, Dubki 
Street 6, Moscow, Russia as reliable recipients of 
sensitive U.S. origin commodities. 
(FCS MOSCOW/JMARKS/PLISTON) 
BEYRLE

Wikileaks

08MOSCOW2869, EXTRANCHECK: POST-SHIPMENT VERIFICATION: NOVO

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To understand the justification used for the classification of each cable, please use this WikiSource article as reference.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol).Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08MOSCOW2869.
Reference ID Created Released Classification Origin
08MOSCOW2869 2008-09-26 09:44 2011-08-30 01:44 UNCLASSIFIED Embassy Moscow

VZCZCXYZ0000
PP RUEHWEB

DE RUEHMO #2869 2700944
ZNR UUUUU ZZH
P 260944Z SEP 08
FM AMEMBASSY MOSCOW
TO RUCPDOC/USDOC WASHDC PRIORITY
INFO RUEHC/SECSTATE WASHDC 0133
RHMFIUU/US CUSTOMS AND BORDER PROTECTION WASHINGTON DC

UNCLAS MOSCOW 002869 
 
SIPDIS 
 
USDOC FOR 532/OEA/M.HAMMES/L.RITTER 
USDOC FOR 3150/USFCS/OIO/CEENIS/MCOSTA 
USDOC FOR 532/OEE/MO'BRIEN 
 
E.O. 12958: N/A 
TAGS: BEXP ETRD ETTC RS
SUBJECT: EXTRANCHECK: POST-SHIPMENT VERIFICATION: NOVO 
CORPORATION, DUBKI STREET 6, MOSCOW, RUSSIA, LICENSE 
NO. NLR 
 
REFTEL: USDOC 05673 
 
1. Unauthorized disclosure of the information provided 
below is prohibited by Section 12C of the Export 
Administration Act. 
 
2. Reftel 1 requested a Post-shipment verification to 
determine the legitimacy and reliability of the end- 
user, Novo Corporation, Dubki Street 6, Moscow, 
Russia. The company is listed on BIS license 
application: NLR as the ultimate consignee of Ten (10) 
power amplifiers, twenty (20) I.C. DC sige gain block, 
forty (40) integrated circuit 16 lead amplifiers, ten 
(10) I.C., SP6T positive BIAS switch, fifty (50) I.C. 
digital attenuator, ten (10) I.C., MSOP SPDT switch 
DC, ten (10) I.C., SPT switch, twenty (20) I.C., SMT 
frequency doubler, forty (40) I.C., MSOP8 SMT mixers 
(NLR), eleven (11) integrated circuits VCO electronic 
devices and components, eleven (11) I.C., DIV 8 
prescaler DC circuit n/unmounted electronic devices 
and components, eleven (11) I.C., DIV 2 prescaler 
electronic devices and components and twenty two (22) 
I.C., DIV4 prescaler electronic devices and 
components.  ECCN 3A001. Controlled for anti-terrorism 
(AT), nuclear non-proliferation (NP), missile 
technology (MT), and national security (NS) reasons. 
The exporter is Hittite Microwave Corporation, 20 
Alpha Road, Chelmsford, MA  01824. 
 
3. On September 25, 2008, Export Control Attach Peter 
Liston and ICE LES Sergey Kishkimski conducted the 
requested post-shipment verification with JSC Novo, 
Dubki Street 6, Moscow, Russia. The export control 
team met with Vladimir Filippovsky, President, and 
Andrey Kaznin, Commercial Director. 
 
4. Novo Corporation was established circa 1992 and was 
founded by former Soviet officials of State owned 
institutions.  Novo Corporation is located in a stand- 
alone two-story office building that house their 
production facility, administrative offices and sales 
department.  Novo Corporation has 50 employees and 
manufactures police and security electronics such as 
detection equipment, x-ray, and metal detectors.  Novo 
Corporation attends international security and police 
trade shows as an exhibitor and has established an 
export branch within their sales department. 
 
5. The Export Control Attach office provided a copy 
of the Commercial Invoice of the commodities for 
subject cable to Novo Corporation one day before the 
PSV because Novo indicated that they do not believe 
that they had been in receipt of any commodities that 
would warrant the visit from the ECO.  During the PSV 
visit to Novo, Vladimir Filippovsky explained to the 
ECO that he carefully reviewed the Commercial Invoice 
with his Commercial Director and only found one line 
item, the eleven (11) I.C., Div 2 Prescaler, part no. 
8542.39.0000, that Novo purchased.  Vladimir 
Filippovsky stated that Novo Corporation has a long 
and respected history with the Intermediate Consignee 
Radiant-Elcon LTD, and stated that it is possible that 
Radiant made the purchase and stocked the remaining 
line items, and are waiting for additional orders from 
Novo in the future. 
 
6. Recommendations: Post recommends Novo Corporation, 
Dubki Street 6, Moscow, Russia as reliable recipients 
of sensitive U.S. origin commodities. 
(FCS MOSCOW/JMARKS/PLISTON) 
BEYRLE

Wikileaks