Monthly Archives: November 2009

09MOSCOW2912, Russia Adopts Law on Energy Savings and Energy Efficiency

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Reference ID Created Released Classification Origin
09MOSCOW2912 2009-11-30 14:36 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Moscow

VZCZCXRO2784
OO RUEHAST RUEHDBU RUEHDH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHSL
RUEHTM RUEHTRO RUEHVK RUEHYG
DE RUEHMO #2912/01 3341436
ZNR UUUUU ZZH
O 301436Z NOV 09
FM AMEMBASSY MOSCOW
TO RHMFIUU/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
RUEHC/SECSTATE WASHDC 5547
INFO RUEHLN/AMCONSUL ST PETERSBURG 5523
RUEHYG/AMCONSUL YEKATERINBURG 3746
RUEHVK/AMCONSUL VLADIVOSTOK 3395
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RUCPDC/NOAA WASHDC
RUEAEPA/HQ EPA WASHDC
RUEHC/DEPT OF INTERIOR WASHDC

UNCLAS SECTION 01 OF 04 MOSCOW 002912 
 
SENSITIVE 
SIPDIS 
 
DOE FOR S-1/S-2 
DOE FOR PI JELKIND/LEKIMOFF 
STATE FOR EUR/RUS,S/NIS,EUR/PRA,EB/ESC,S/CBED,OES/EGC 
STATE PLEASE PASS TO USAID 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: ENRGPARMOTRASENVKGHGPGOVECONTSPLEAID RS
SUBJECT: Russia Adopts Law on Energy Savings and Energy Efficiency 
 
MOSCOW 00002912  001.2 OF 004 
 
 
THIS CABLE IS SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT 
ACCORDINGLY.  NOT FOR INTERNET DISTRIBUTION. 
 
1.(SBU) Summary: On November 24 2009, Russian President Dmitry 
Medvedev signed a law on energy savings and energy efficiency. The 
long-awaited legislation creates a framework to meet a goal to 
increase the country's energy efficiency by 40%.  In particular, the 
law restricts the sale of incandescent light bulbs, sets 
requirements for energy efficiency labeling on products, sets energy 
efficiency requirements for new buildings, and provides for 
obligatory metering in residential buildings. The legislation is 
focused on improvements in the residential, communal, and 
budget-financed areas; and to a less extent provides stimulus or 
incentives to private businesses. While a promising start, 
coordination and implementation will be a challenge.  One test will 
be pilot projects approved under the Presidential Commission for 
Modernization and Technological Development of Russia's Economy. End 
Summary. 
 
--------------------------- 
Main Provisions of the Law 
--------------------------- 
Provision 1 -Restrictions on Incandescent Bulbs 
2. The law prohibits manufacturing, importing, and selling 
incandescent bulbs of 100 watts and more from January 1, 2011. The 
law recommends a timeframe for eventual prohibition of 
manufacturing, import, and sale of 75 watt bulbs and more from 2013 
and for 25 watt and more, from 2014. A request is addressed to the 
Russian Federation Government to adopt rules of waste disposal for 
spent compact fluorescent bulbs. 
Provision 2 -Energy Efficiency Labelling 
Manufacturers/importers must provide energy efficiency class 
labeling on the following products: 
    Electricity-consuming household appliances-from 2011 
    Computer and office equipment-from 2012 
Other goods as determined by the Russian Federation Government-from 
2013 and further 
 
Provision 3 -Mandatory Commercial Accounting of Energy Resources 
3. All legal entities and state institutions must be provided with 
energy resource metering devices by January 1, 2011, and pay for 
consumed resources on the basis of the meters' data. Owners of 
residential houses or apartments in blocs and compounds will have 
the right to apply to the resource provider for meter installation, 
subject to payment [of associated costs] by installments over five 
years. Should the consumer fail to have installed a meter within the 
designated timeframe, the resource-providing organization is bound 
to install such a metering device and the consumer is to cover 
associated costs on terms of payment by installments over five 
years. 
 
Provision 4 -Energy Efficiency Requirements for New Buildings, 
Structures and Facilities 
 
4. All buildings, structures, and facilities (except individual 
homes built for one's own use, religious buildings, and small 
buildings) being commissioned after new construction or capital 
repairs shall comply with energy efficiency requirements and have 
energy resource metering devices both at the time of commissioning 
and during the operation of the building. The energy efficiency 
class of new multi-apartment buildings must be determined and 
displayed on the facade of the building. 
 
Provision 5 - Budget-funded Institutions and Government Procurement 
 
5. The law sets a goal of an annual 3% reduction in energy 
consumption for all federal budget institutions from 2011. Cost 
savings resulting from this reduction will go to the institution's 
salary funds. The purchase of incandescent bulbs of any capacity to 
be used for lighting is forbidden from 2011. With respect to 
government procurement, the Russian Federation Government shall 
approve minimum energy efficiency specifications for goods, work and 
services, as well as requirements applicable to energy service 
contracts concluded by budget-funded organizations. 
 
 
MOSCOW 00002912  002.2 OF 004 
 
 
Provision 6 -Requirements for the Maintenance of Common Property in 
Multi-Apartment Buildings and Recommendations for Garden and Dacha 
Associations of Individuals 
 
6. The Rules of Common Housing Property Management by Apartment 
Owners in a Multi-Apartment Building are complemented with mandatory 
energy saving and energy efficiency arrangements. They may include, 
among other provisions, replacement of bulbs with energy efficient 
models, availability of a double external door at house entrance 
with a door closer, devices to regulate lighting in the entrance, 
and window and entrance door se
aling. Recommended energy saving and 
energy efficiency arrangements are also established for the common 
property of garden and dacha associations of individuals. 
 
Provision 7 -Mandatory Energy Audits 
 
7. State agencies, natural monopolies, fuel and energy complex 
facilities and organizations in which the annual energy consumption 
exceeds 10 million rubles (about $345,000)  are required to carry 
out energy audits once every five years. The purpose of energy 
audits is to collect and process data on the use of energy 
resources, estimate potential savings and design necessary energy 
saving and energy efficiency activities. Energy audits will result 
in a passport to be submitted to an authorized federal agency, which 
shall determine requirements applicable to such passports. 
 
Provision 8 -Energy Saving and Energy Efficiency Enhancement 
Programs 
 
8. The law calls for energy saving and energy efficiency enhancement 
programs to be developed by all state-owned companies, budget-funded 
institutions and regulated organizations as well as regions and 
municipalities. The law establishes minimum requirements for 
regional and municipal programs. The programs shall specify target 
indicators of energy efficiency enhancement and actions toward 
achieving them. 
 
Provision 9 -Energy Service Contracts 
 
9. The law describes energy service contracts conceived to 
facilitate energy savings by individuals and legal entities without 
investing their own funds, i.e. to be financed by energy service 
companies. Payment under an energy service contract will be funded 
by a portion of saved resource costs. The law introduces obligations 
for resource-supplying organizations and managing organizations to 
propose certain energy saving and energy efficiency arrangements to 
the population, including through implementation of energy service 
contracts. 
 
Provision 10 -Transition of Long-Term Tariff Regulation 
 
10. A major incentive to increase energy efficiency of natural 
monopolies and organizations of the district utility sector is the 
application of long-term (for three or more years) tariff solutions 
and a return-on-investment method with concurrent fixed corporate 
commitments pertaining to quality and further development of the 
services provided. Under such regulation, companies will get serious 
incentives to reduce costs, including energy costs, and to increase 
the efficiency of resource use because any savings are retained by 
the entity. The law provides for a mandatory transition to long-term 
regulation within the following timeframes: 
     In the electric power sector 
For the FSK (Federal Grid Company)-from 2010 
For utilities of the MRSK (interregional distribution utilities) 
holding group-within 2010 
For other electric utilities-from 2012 
    In heat supply-from 2012 
 
Provision 11 -Establishing a Single (Interagency) System for Energy 
Efficiency Information and Analysis 
 
11. A State Information System will be established in order to 
systematize collection and exchange of energy consumption 
information at federal, regional, and municipal levels; obtain 
analytical data on the use of energy resources and energy saving 
 
MOSCOW 00002912  003.2 OF 004 
 
 
potential; and to inform Russian Federation constituents and 
population about energy saving opportunities and best practices. 
Provision 12 -Forms of State Support for Energy Saving and 
 
Enhancement of Energy Efficiency 
 
12. The law provides for the possibility to apply increasing 
multipliers to the depreciation rate or investment tax credits, as 
well as reimbursement of interest paid on loans for the 
implementation of energy saving and energy efficiency enhancement 
projects. 
 
Provision 13 -Technical Regulation 
 
13. The law establishes several requirements which pertain to issues 
subject to technical regulation (requirements to buildings, product 
trade, marking, waste disposal). In order to coordinate with 
technical regulation legislation, a concept is prescribed under 
which provisions of this law shall be effective until respective 
technical regulations have been adopted. 
 
Provision 14 -Supervision of Implementation 
 
14. The law establishes an integral system of control and 
responsibility for a breach of legislative provisions in the area of 
energy saving and energy efficiency enhancement, including through 
detailed stipulation of administrative liability for a breach of law 
and identification of agencies that will monitor the violations in 
question. 
 
--------------------------------------------- -------- 
"Laws too gentle are seldom obeyed; too severe, seldom executed" 
(American proverb) 
--------------------------------------------- -------- 
 
15. (U) Even a law perfectly written is useless unless there are 
effective mechanisms in place to implement this law. In August 2009, 
Prime Minister Putin ordered the Ministry of Economic Development 
(as lead) and several Federal Agencies to develop normative acts 
needed to implement energy efficiency legislation.  The list of 
normative acts includes 49 documents in the form of Presidential 
decrees, Government resolutions, and Federal agencies' resolutions. 
In addition, for each of the normative acts, a list of implementing 
activities outlines the responsible federal agency, and a timeframe 
for their realization. The first normative acts are to be approved 
by the Government before the end of the year. Among the first to 
come   is a Government decree to define responsibilities among 
various Federal agencies, including the Ministry of Economy, 
Ministry of Energy, Ministry of Industry and Trade, Ministry of 
Regions, Federal Antimonopoly Service, Federal Tax Service, and 
others  in the area of energy saving and increase of energy 
efficiency. 
 
--------------------------------- 
Pilot Energy Efficiency Projects 
---------------------------------- 
16. (SBU) One way to test whether the new legislation works will be 
pilot projects that have been approved under the Presidential 
Commission for Modernization and Technological Development of 
Russia's Economy.  The first project involves installing devices to 
register and regulate energy consumption. This project, managed by 
the Complex Energy Systems Company, will be implemented in selected 
cities and apartment blocks.  Ministry of Industry and Trade is in 
charge of the second project to develop production of effective 
lighting systems in Russia. The third and fourth projects involve 
modernizing some city districts and small towns with the subsequent 
spread of their experience to other parts of the country, and the 
development of an energy-efficient social sector. Tyumen, Kazan, 
Vorkuta, Apatity, and Ekaterinburg have been selected as pilot 
cities. The fifth project deals with small-scale complex energ
y 
systems and the introduction of new technology in this sector. The 
sixth project will see the implementation of new work on 
superconductors and biofuel. Prospects for developing solar and 
hydrogen energy should be explored further. According to Deputy 
Minister of Economy Voskresensky, all pilot projects, with the 
 
MOSCOW 00002912  004.2 OF 004 
 
 
exception with the one on innovative technologies, will receive no 
financial support from the Federal budget.  Mechanisms such as ESCO 
(Energy Service Companies) or concessions will be tested while 
implementing these projects. 
 
17. (SBU) Comment:  The law on energy saving and energy efficiency 
is a real breakthrough considering long-standing Russian neglect of 
energy saving and energy efficiency issues.  However, implementation 
is a concern.  Assuming the law is put on force, and all by-laws are 
approved on time, much will depend on whether the government will be 
able to manage such a complicated task.  Thus far, coordination 
among the various government agencies involved is not very good. 
 
18. (SBU) The government rejected the idea of creating a single 
agency which would be responsible for implementation of the energy 
efficiency legislation and all related programs. Having energy 
efficiency responsibilities disbursed among various agencies without 
clear responsibilities, constant coordination, and strong leadership 
could make implementation of the law quite difficult.  In addition 
to the organization structure, it would be important to have the 
energy efficiency legislation synchronized with other legislation, 
such as legislation on heat supply, technical regulation and others. 
 
19. (SBU) Another concern is that the law is heavily focused on 
residential, communal and budget-funded sectors; while providing 
very little stimulus to private businesses to enhance their energy 
efficiency.  According to Deputy Minister of Economic Development 
Voskresensky, this was done on purpose because the government 
believes that the main stimulus for businesses is the plan for 
energy price liberalization and no other stimuli are needed. And 
last, but not least, the government will have to make an enormous 
effort in order to educate the population to effectively use energy 
resources. Radically changing people's mentality is probably the 
major task of the new energy efficiency legislation. End comment. 
BEYRLE

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09MOSCOW2906, AMB BEYRLE AND DFM RYABKOV DISCUSS EURO SECY

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Reference ID Created Released Classification Origin
09MOSCOW2906 2009-11-30 12:44 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO2694
OO RUEHDBU RUEHFL RUEHLA RUEHMRE RUEHROV RUEHSL RUEHSR
DE RUEHMO #2906 3341244
ZNY CCCCC ZZH
O 301244Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5541
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE IMMEDIATE
RUEHZG/NATO EU COLLECTIVE IMMEDIATE
RUCNOSC/OSCE POST COLLECTIVE IMMEDIATE
RUEAIIA/CIA WASHDC IMMEDIATE
RUEKJCS/JOINT STAFF WASHDC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
RUEKJCS/SECDEF WASHDC IMMEDIATE
RUEHGV/USMISSION GENEVA IMMEDIATE 5440

C O N F I D E N T I A L MOSCOW 002906 
 
SIPDIS 
 
GENEVA FOR JCIC, DEPT FOR EUR/RPM, PM/RSAT, VCI/CCA 
 
E.O. 12958: DECL: 11/29/2019 
TAGS: PREL PARM MARR NATO RS AF
SUBJECT: AMB BEYRLE AND DFM RYABKOV DISCUSS EURO SECY 
TREATY, NATO, AFGHAN TRANSIT 
 
Classified By: Amb. John Beyrle for reasons 1.4 (b) and (d) 
 
1. (C) Summary: The Ambassador met with Russian Deputy 
Foreign Minister Sergey Ryabkov November 30 at the MFA and 
discussed, inter alia, the European Security Treaty, the 
Afghanistan transit agreement, and the upcoming visit to 
Moscow of Under Secretary Tauscher.  Ryabkov thanked the 
Ambassador for the news that the U.S. had received the 
Russian draft of a new European Security Treaty and urged 
careful study of the proposal.  He confirmed that Russia 
still wants agreement on a NATO "Way Forward" paper in some 
form before the ministerial.  Ryabkov hoped that issues 
pertaining to the Afghanistan transit agreement would be 
worked out in the next week or so, although he did not reveal 
if the U.S. proposal to submit transit requests entirely in 
English would be acceptable.  Ryabkov welcomed Under 
Secretary Tauscher's plan to visit Moscow December 7-8, and 
said Russian Ambassador Kislyak would be contacting the Under 
Secretary soon about details of the agenda for the visit. 
End summary. 
 
EST and NATO 
------------ 
 
2. (C) Ambassador Beyrle confirmed that the White House had 
received President Medvedev's letter and told Ryabkov the 
U.S. would study carefully the Russian draft of a European 
Security Treaty.  Ryabkov noted that the European Security 
Treaty was a broad document meant to address the needs of the 
entire Euro-Atlantic region.  The proposed treaty would deal 
with security issues "in a more structured way without 
weakening the prerogatives of individual states."  Ryabkov 
said that the draft had now been shared with the U.S. and 
"other major partners," including NATO, the EU, and CSTO. 
(Note: Ryabkov did not mention OSCE.  End note.)  In response 
to Amb. Beyrle's urging Russia to move ahead with plans for 
further engagement at the NATO-Russia Council, Ryabkov said 
much progress had recently been made in Brussels, including 
proposals for restructuring the NRC contained in a revised 
version of the "Way Forward" paper, and Russia was ready to 
make a "final push" for an agreed document.  Amb. Beyrle 
welcomed this, and hoped firm plans could be announced at the 
NATO Ministerial in early December. 
 
Afghanistan Transit Agreement 
----------------------------- 
 
3. (C) Ryabkov said that issues surrounding the Afghanistan 
transit agreement providing for over-flight of Russia by 
aircraft supplying U.S. and Allied forces in Afghanistan 
should be resolved in a few weeks.  Ryabkov noted that 
although the U.S. wanted to submit over-flight requests 
entirely in English, Germany and Spain submitted their 
requests at least partly in Russian.  Ryabkov commended "U.S. 
creativity" on the applicability of ICAO standards to the 
aircraft involved, although he implied that civilian aircraft 
chartered by the USG were not per se exempt from ICAO 
standards.  Ambassador Beyrle said the U.S. still hoped to 
conduct 20 flights before the end of 2009, meaning roughly 
one per day. 
 
U/S Tauscher Visit 
------------------ 
 
4. (C) Ryabkov said that Russian Ambassador Sergey Kislyak 
would be contacting Under Secretary Ellen Tauscher soon about 
the agenda for her visit to Moscow in December.  Ryabkov 
sought confirmation of the details of the Under Secretary's 
schedule and the makeup of her delegation.  Ambassador Beyrle 
confirmed that U/S Tauscher would arrive by December 6 for 
her December 7 meetings and would depart Moscow December 8. 
The delegation would include, inter alios, U/S Tauscher, 
Special Advisor Timbie, NSC Director Friedt, and a 
representative from OSD. 
Beyrle

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09MOSCOW2905, FAR AS A MODEL FOR CIVIL EMPOWERMENT

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Reference ID Created Released Classification Origin
09MOSCOW2905 2009-11-30 12:22 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO2670
RR RUEHDBU
DE RUEHMO #2905/01 3341222
ZNY CCCCC ZZH
R 301222Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 5539
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002905 
 
SIPDIS 
 
E.O. 12958: DECL: 11/27/2019 
TAGS: PGOV PINR KDEM ECON RS
SUBJECT: FAR AS A MODEL FOR CIVIL EMPOWERMENT 
 
REF: A. MOSCOW 2841 
     B. MOSCOW 180 
 
Classified By: Acting Pol Min Couns David Kostelancik for reasons 1.4 ( 
b, d) 
 
1. (C) Summary:  As the State Duma prepared to vote on 
legislation that would have doubled the base vehicle 
registration tax November 18, the Federation of Automobile 
Owners of Russia (FAR) had already collected 85,000 
signatures for a presidential petition against the measure. 
After unanimous United Russia backing for the legislation 
trumped unanimous opposition party disapproval in the Duma, 
the Federation Council swiftly rejected the highly unpopular 
bill.  All commentators agreed State Duma Speaker Boris 
Gryzlov's lack of awareness of the grassroots popular 
resistance to the increase greatly embarrassed United Russia 
days before an annual party conference on November 21 (Ref 
A).  The incident served to highlight the political will 
behind FAR as the organization prepares to fight vehicle 
licensing tax increases at the regional level.  FAR intends 
to become a non-governmental institution providing thoughtful 
analysis of automobile issues to policy makers.  The 
organization appears capable of mobilizing a significant 
democratic base demanding reform and greater voice in 
government, a goal which has largely eluded Russia's serious 
opposition parties. 
 
Plans for the Future 
-------------------- 
 
2. (C) Sergey Kanaev, Moscow head of FAR, met with NSC 
Russian Director Howard Solomon on November 3 and again with 
the Embassy on November 24 to describe his vision for the 
growth of the movement, as well as the short-term challenge 
of fighting a raise in regional vehicle licensing tax rates. 
 When asked whether he felt that FAR deserved the lion's 
share of credit for overturning the previous week's Duma 
legislation, Kanaev replied, "There is no point asking the 
question when everyone was against this law."  He continued 
this point, stressing that FAR's goal is not to become a 
political party -- despite press reports to the contrary -- 
but a lobbying group working with the government to represent 
automobile drivers.  The strength of the organization will 
come from representing a legitimate and politically-active 
interest group.  The movement's goal, he argued, was to 
become highly respected as a source of information and 
analysis about the views of car owners.  At that point, he 
predicted, the government would choose to consult on 
legislation out of a genuine desire to understand public 
opinion on issues.  While he admitted protest actions had 
their uses, he also believed that FAR would be most 
successful when it provided pragmatic as well as popular 
policy advice to the government.  Kanaev felt the Gryzlov 
affair was a major boon to FAR not only because federal auto 
taxes were stymied, but more importantly because it signaled 
to the administration that similar situations might be 
avoided in the future with proper consultation. 
 
3. (C) While the State Duma, after the Federation Council's 
rejection, then scrapped plans to double Federal auto 
licensing fees, their legislation effectively allows local 
governments to double licensing fees.  FAR is preparing to 
oppose these fee hikes across Russia, but Kanaev admitted 
that organizational resources were in short supply.  The 
movement is structured around a governing council composed of 
one elected representative from each Russian region.  At 
present 28 regions are represented.  An additional 19 regions 
have established FAR offices but have not yet elected a 
representative.  Kanaev was frank that it had already been 
decided not to oppose tax increases in Moscow or St. 
Petersburg because the administrative and burden involved in 
organizing successful protests in those cities was too great. 
 The movement must focus in regions where it is strongest. 
In support of this end, FAR is creating a management team 
composed of political strategists, accountants, PR advisors 
and lawyers.  This team, financed through membership dues, 
will have no executive authority, and will work to support 
FAR representatives and their regional offices when needed. 
 
FAR as a Model for Social Government 
------------------------------------ 
 
4. (C) Kanaev also serves as Chairman for the Society for the 
Protection of Automobilists' Rights, though he said it is 
only to pay the bills.  For members of the organization, FAR 
is an opportunity to change Russia for the better by 
empowering ordinary citizens to influence the policies of 
their government at the grassroots level.  This social 
control is indispensible in attempting to combat, for 
 
MOSCOW 00002905  002 OF 002 
 
 
example, the corruption of traffic police.  Kanaev blames 
those who pay bribes as much as the police who demand them. 
In his view, corrupt law enforcement cannot be expected to 
police itself -- and he views FAR's tactics of grassroots 
social organization as a model for addressing corruption 
throughout the Russian government.  Convincing individuals 
that the regular solicitation of bribe
s by the traffic police 
should not be common place in Russia is a noble goal. 
Empowering individual drivers to refuse a bribe when a 
traffic cop is standing at their window, however, may prove 
to be a Herculean feat. 
 
Partners 
-------- 
 
5. (C) Kanaev identified four organizations with similar 
goals and strong connections to FAR: 
 
-- The Comradeship of Active Citizens of Russia (known by 
their Russian acronym TIGR) emerged from protests in the 
Russian Far East against governmental order #943 on December 
10, 2008, increasing taxes on foreign used cars imported into 
Russia.  Riot police were flown in from Moscow to disperse 
large crowds of protestors, attracting international media 
attention (Ref B).  Representatives from TIGR attended FAR's 
November 14 national meeting in Novosibirsk. 
 
-- The Committee for the Protection of Automobilists' Rights 
(KZPA) is an inter-regional public movement defending the 
legal rights of automobilists and pedestrians registered in 
2006. 
 
-- Svoboda Vybora (Freedom of Choice) was created following 
protests held on May 19, 2005 against government regulations 
preventing the import of right-hand drive Japanese cars. 
Officially registered in 2006, the organization is actively 
involved in negotiations with regional leaders on social and 
legislative issues related to automobilists' rights.  In 2008 
Svoboda Vybora became a member of an Expert Council of the 
State Duma Committee on Transportation. 
 
-- The Society for the Protection of Automobilists' Rights 
(OZPA), of which Sergey Kanaev is chairman.  Registered in 
2001, the organization publishes the newspaper "Avtopravo," 
and works closely with FAR on legislative goals. 
 
Comment 
------- 
 
(C)  In the last year, government legislation aimed at 
raising the cost of car ownership has met with active and 
organized protest from a significant constituency in the 
population.  FAR has emerged, along with TIGR, as a leading 
conduit for car owners to express their views to the 
government.  According to Kanaev, FAR intends to foster 
social control of government by empowering individual car 
owners to make their position known to the government. 
Kanaev envisions an organization respected by the government 
as a source of pragmatic analysis, and a representation of 
popular feeling, which can work as a partner in creating 
better legislation.  Opposition political movements in Russia 
have struggled to mobilize popular support for 
democratization. FAR's drive toward social control may 
provide a new model for overcoming the general political 
apathy of Russian voters by focusing on common sense 
solutions to "meat and potatoes" issues.  While previous 
automobilists' associations have floated similar plans and 
failed to deliver, the recent successes of FAR may earn them 
the credibility with the government, political parties and 
individual drivers they need to get their nose over the line. 
Beyrle

Wikileaks

09MOSCOW2904, FULL GAS PRICE LIBERALIZATION UNLIKELY ANYTIME

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Reference ID Created Released Classification Origin
09MOSCOW2904 2009-11-30 10:51 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO2614
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHMO #2904/01 3341051
ZNY CCCCC ZZH
P 301051Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 5537
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 002904 
 
SIPDIS 
 
DEPT FOR EUR/RUS, EEB/ESC/IEC GALLOGLY AND GREENSTEIN, 
S/EEE MORNINGSTAR 
DOE FOR HEGBURG, EKIMOFF 
DOC FOR JBROUGHER 
NSC FOR MMCFAUL 
 
E.O. 12958: DECL: 11/29/2019 
TAGS: EPET ENRG ECON PREL RS
SUBJECT: FULL GAS PRICE LIBERALIZATION UNLIKELY ANYTIME 
SOON IN RUSSIA 
 
Classified By: A/ECON Lynette J. Poulton, Reasons 1.4 (b,d) 
 
------- 
SUMMARY 
------- 
 
1. (C) In 2006, the GOR planned a series of tariff increases 
to raise domestic natural gas prices for industrial consumers 
to "market levels" -- that is, European prices minus taxes 
and transport -- by 2011.  However, full liberalization by 
2011 appears to be off the table, with the Ministry of 
Economic Development suggesting a new target of 2012, and 
independent experts expecting delays until 2017.  The GOR's 
decision to delay gas price reform will likely hinder plans 
to foster a more efficient economy and prevent more rational 
gas consumption.  End Summary. 
 
---------------------------------- 
GOR PLANS GAS PRICE LIBERALIZATION 
---------------------------------- 
 
2. (SBU) In 2006, the Ministries of Industry and Energy, 
Economic Development and Trade, and Finance, as well as the 
Federal Antimonopoly and Tariff Services approved a program 
to increase domestic natural gas prices for industrial 
consumers to market levels, i.e. netback parity (market price 
minus taxes and transport) with European prices, by 2011. 
Regarding non-industrial customers, gas prices for household 
consumption will reach netback parity by 2015-17 according to 
the 2008 version of the Ministry of Economic Development's 
(MED) 2020 Concept for its Socioeconomic Program.  (Note: The 
GOR has heavily subsidized gas prices for both household and 
industrial consumers since the Soviet era.  Industrial 
consumption represents the vast majority of Gazprom's 
domestic sales, with household consumption comprising only 28 
percent of sales in 2008.  End Note.)  The GOR decision on 
raising gas tariffs had been seen as a way to improve 
economic efficiency and promote more economically rational 
energy use in Russia, where energy consumption per unit of 
GDP is among the highest in the world. 
 
3. (SBU) The 2006 industrial program envisaged tariff hikes 
of 15 percent in January 2007, 17 percent in January 2008, 
four increases of 13 percent each in January and July of 2009 
and 2010, and the remainder to reach netback parity in 
January 2011.  However, with European prices variably three 
to six times higher than domestic prices, many analysts have 
always been skeptical of the program's feasibility given the 
obvious political costs. 
 
------------------------------ 
MARKET PRICING DELAYED TO 2017 
------------------------------ 
 
4. (SBU) In July 2009, MED made it clear that the 2011 target 
date would not be reached when it announced its intention to 
raise the domestic natural gas tariff for industrial 
consumers by 15 percent on January 1, 2010 and to limit 
annual tariff growth in 2011 and 2012 to 15 percent, well 
below what would be required to reach netback parity.  In 
October 2009, MED released plans to increase household gas 
prices by five percent in January and 15 percent in April 
from 2010-2011 and by 15 percent in 2012.  (Note: Household 
tariff increases are larger than those for industrial 
consumers because household gas prices are currently 
significantly lower.  End Note.)  Deutsche Bank experts 
contend that achieving European netback parity levels for 
industrial consumers would require not a 15 percent increase 
but a 115 percent increase in 2011. 
 
5. (SBU) In October 2009, the Ministry of Energy (MOE) 
proposed to delay a final decision on natural gas price 
liberalization until July 2010, claiming it would not be 
ready to equalize European and domestic, industrial prices 
completely until at least 2012.  MOE officials cited concerns 
over the potential for Gazprom to abuse its dominant market 
position to benefit at the expense of consumers.  Although 
Gazprom's Board of Directors instructed company management to 
continue working with the federal government on the 
transition to market principles for gas pricing by 2011, 
 
MOSCOW 00002904  002 OF 002 
 
 
Valery Golubev, Gazprom Deputy CEO in charge of the Russian 
market, told the press in October that his company did not 
expect to receive netback parity prices from domestic 
customers for at least five years.  Elena Karpel, Head of 
Gazprom's Economic Expertise and Pricing Department, 
subsequently elaborated on this statement, proposing the use 
of European netback prices from 2011, but with discounts that 
would gradually disappear by 2014.  Deutsche Bank experts 
assert that even 2014 is not an attainable target and do not 
expect full-scale liberalization of domestic industrial gas 
tariffs until 2017, with full liberalization of household 
prices following sometime later. 
 
---------------------------
---------------- 
DELAY WILL ALSO HIT PROJECTED GAZPROM GAINS 
------------------------------------------- 
 
6. (SBU) Gazprom has long contended that rising prices in the 
domestic market -- to which it sells 51 percent of its gas by 
volume but from which it receives only 21 percent of its 
revenues -- would help propel its future earnings.  The GOR's 
decision to reduce gas tariff increases in 2010 and delay 
complete liberalization will thus lower Gazprom's projected 
gains, at a time when it is already reeling from declining 
demand and low prices in its major export markets.  (Note: 
Even in an environment of rising domestic gas prices, the 
effect on Gazprom's bottom line is debatable.  Some analysts, 
citing examples from other countries, predict a strong 
contraction in demand in response to price hikes.  A recent 
report by Credit Suisse cited the case of Ukraine, where, 
according to their analysis, demand fell 50% in response to 
rising prices throughout the 1990s.  End note.) 
 
------- 
COMMENT 
------- 
 
7. (C) Although politically convenient given the current 
economic situation, the GOR's decision to delay gas price 
liberalization will contribute to continued inefficiencies 
across the economy.  As long as Russian enterprises do not 
bear the full cost of their use of outdated processes and 
equipment, they will remain unlikely to invest in the modern 
technology and production methods necessary for future 
economic growth.  End Comment. 
Beyrle

Wikileaks

09MOSCOW2903, SCENESETTER FOR VISIT OF UNDER SECRETARY ROBERT

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Reference ID Created Released Classification Origin
09MOSCOW2903 2009-11-27 14:59 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMO #2903/01 3311459
ZNY CCCCC ZZH
R 271459Z NOV 09
FM AMEMBASSY MOSCOW
TO SECSTATE WASHDC 5534

C O N F I D E N T I A L MOSCOW 002903 

SIPDIS 

DEPARTMENT FOR UNDER SECRETARY HORMATS 

E.O. 12958: DECL: 11/27/2019 
TAGS: ECON ETRD EAGR PREL PGOV RS
SUBJECT: SCENESETTER FOR VISIT OF UNDER SECRETARY ROBERT 
HORMATS 

Classified By: Ambassador John Beyrle, Reason 1.4 (b) and (d) 

Summary 
------- 

1. (C) Your visit to Moscow provides an opportunity to 
strengthen bilateral economic relations at a time when both 
our economies are beginning to show signs of recovery 
following an extremely difficult year. Because our economic 
relations with Russia were relatively stable even prior to 
the political "reset" we've seen this year, we are 
well-positioned to press for progress on a few key issues, 
including Russia's WTO accession, agricultural trade and 
intellectual property rights, where more work is needed. End 
Summary. 

U.S.-Russian Relations 
---------------------- 

2. (C) Four meetings this year between Presidents Obama and 
Medvedev, including the President's July visit to Moscow, and 
Secretary Clinton's numerous discussions with Foreign 
Minister Lavrov have given impetus to real change in our 
bilateral relations. Addressing the ruling United Russia 
party congress November 21, President Medvedev even used the 
phrase "reset" - heretofore reserved for issues involving the 
U.S. and Russia - and called for an "economic reset" as well. 
We want to see this will applied not just to the 
modernization that Medvedev is advocating for Russia itself, 
but to its interaction with foreign investors and integration 
into global financial institutions, all of which force 
reforms deeper into the system. The challenge, as always, is 
to translate rhetoric into specific decisions and joint 
actions. 

3. (C) For the first time in years, we have structure in the 
relationship to do this. The Obama-Medvedev Commission has 
four working groups--business development and economic 
relations, energy, nuclear energy, and agriculture--with a 
remit to broaden the economic base of interaction between us. 
The Commission will give us regular, focused interaction 
with influential centers of Russia's business and economic 
decision-making. In early contacts, some Russian 
participants in the working groups have shown a preference 
fro form over substance, though. We need to continue to set a 
higher standard. The Commission needs to produce results, 
not reports, and decisions, not dialogue. 

Global Economic Crisis And Russia's Response 
-------------------------------------------- 

4. (C) The global economic crisis hit Russia particularly 
hard, as the economy remains heavily dependent on commodities 
exports (primarily oil and gas) for growth, and on foreign 
capital for investment. The abrupt drop in the price of oil 
combined with a decline in foreign investment strained the 
Russian economy, beginning in mid-2008. Throughout the 
following twelve-month period, Russian industrial production 
plummeted, with double-digit declines in month-on-month 
production occurring on a regular basis. Key sectors such as 
steel and automobiles were hit particularly hard, with 
Russian domestic automobile production declining by over 50% 
in the first half of 2009. The industrial sector, 
particularly the single-company towns, was hard hit, with 
unemployment remaining at an unprecedented high. Predictions 
for 2009 GDP decline grew from 3% early in the year, to the 
current estimates of 7.5%. 

5. (C) At the beginning of the crisis, the Russian government 
held the third largest quantity of reserves internationally 
and relatively little sovereign debt. Thus, the GOR was much 
better positioned to react than many other countries. The 
GOR burned through a third of these reserves (an estimated 
$200 billion) to slow the decline of the ruble. The GOR also 
provided large infusions of capital into the domestic 
financial sector in an effort to keep stressed banks afloat. 
In addition, the Russian government instituted a series of 
"temporary crisis measures," including tariff increases and 
other import restrictions, in an effort to protect domestic 
production in key sectors and increase demand. 

6. (C) While these measures were successful in staving off a 
complete collapse of the financial sector a la 1998, they 
have come at a price. Official Russian reserves are 
significantly lower than at the start of the crisis and we 
expect the GOR will be required to borrow, including on 
international markets, in order to cover its expected federal 
budget deficit in 2010. Also, while the infusions of cash 
into the financial system prevented a total meltdown, banks 
used much of the funding to make provisions for 
non-performing loans and other distressed assets. The 
infusions of cash did not result in a resumption of lending, 
and domestic financing remains hard to come by, constraining 
efforts to stimulate the real economy. 

7. (C) The tariff and other trade barriers did slow imports 
during the first half of 2009, but the reduced competition 
did not appear to do much to help domestic producers. 
Domestic demand, particularly in the automotive and real 
estate sectors, remains extremely weak. The GOR has pushed 
companies to retain
workers during the economic downturn, in 
an effort to slow unemployment growth and avoid potential 
social difficulties. As a result, many companies have used 
their limited reserves to continue paying workers and are not 
well placed to take advantage of an economic up-turn when it 
arrives. That said, Russia appears to have muddled through 
the worst of the crisis and, aided by higher oil prices and a 
strengthening ruble, GOR officials are now considering how to 
encourage a return to strong economic growth. 

Key Challenges To Russian Economic Growth 
----------------------------------------- 

8. (C) Dmitriy Medvedev has made a central theme of his 
presidency Russia's need to diversify its economy, develop an 
innovation economy based on its strong intellectual 
resources, integrate itself into the global economy and deal 
with the problems created by corruption. While we support 
these objectives, we are concerned that progress has been 
limited, at best. The recent economic crisis dealt yet 
another blow to Russia's limited industrial base. The lack 
of domestic financing limits entrepreneurs' efforts to move 
into new sectors. Weak enforcement of intellectual property 
laws and gaps in key areas, such as protections on encryption 
technologies, restrict growth in IT and other innovative 
sectors. Russia's on-again, off-again approach to WTO 
accession has not only slowed down Russia's own accession 
process, but has also made it difficult for others, such as 
the U.S. and EU, who are interested in supporting Russia's 
accession. Russia's continued tariff and non-tariff 
restrictions on agricultural trade also present challenges to 
increasing bilateral U.S.-Russia trade, as many U.S. 
producers are simply not able to export their products to 
Russia. Finally, corruption and "legal nihilism" continue to 
plague the Russian governance system; the death in custody of 
Russian lawyer Sergey Magnitskiy is only the latest example. 


Domestic Political Context 
-------------------------- 

9. (C) After a year and a half of tandem leadership of 
Russia, Medvedev and Putin continue to function based on a 
division of labor. The President plays to his strengths of 
clear public presentation and a long-range focus on a modern 
economy, and underscores his constitutional responsibilities 
for foreign policy. His November 12 annual address to the 
nation again highlighted and expanded on the theme of 
economic modernization, and to a lesser extent political 
reform as well. Putin, meanwhile, has built on his image of 
a domestic problem solver, employing his trademark 
street-wise rhetoric in dressing down oligarchs or critics. 
His November 21 address to the annual congress of the United 
Russia party (which he heads) reaffirmed public perceptions 
of him as the man who is making sure government pays pensions 
and salaries. A just-published poll supports this: though 
their ratings had been declining, they shot up to 74 and 79 
percent, respectively, after their strong performances. 

10. (C) Although there is evidence that their closest 
advisors spar over specific policies and personnel matters, 
the two leaders themselves share state-run national media 
coverage (to the near-exclusion of other political figures) 
and project an aura of ease with one another in public. 
Medvedev has yet to make major changes to the senior staff he 
inherited from Putin. Putin's prominence in tackling crises 
- whether conflict with Georgia, gas supply negotiations with 
Ukraine, or localized unrest or frustration due to the 
economic crisis - earns him higher public opinion ratings and 
elite group allegiance than Medvedev. This, combined with 
his suggestions that he might stand for a third presidential 
term, all ensure that major decisions are not made without 
Putin's approval. The complete national dominance of the 
ruling United Russia party under the leadership of Putin, 
reinforced through the party's overwhelming, yet tainted 
victory in October 11 regional elections, has made it 
difficult for opposition parties to function, let alone 
capitalize on economic discontent. 

Conclusion 
---------- 

11. (C) In sum, your visit comes at a promising moment--both 
our bilateral relations and our economies are beginning to 
move in a more positive direction, but challenges remain. We 
encourage you to use your meetings with key Russian 
governmental and private interlocutors, as well as with the 
American business community, to push for continued dialogue 
leading to concrete positive action. We want Russia to 
integrate into the global economy, to join the WTO, to 
diversify its productive base and to move forward in the 
fight against corruption and we stand ready to work with 
Russia on these issues. Your meetings with Medvedev's top 
economic adviser Dvorkovich and First Deputy Foreign Minister 
Denisov, in particular, are a chance to move beyond improved 
atmospherics and examine in greater depth how we can support 
the best of Medvedev's modernization goals--e.g., greater 
energy efficiency--in ways that pay dividends to both 
economies and broaden the economic base of the relationship. 

Beyrle

Wikileaks

09MOSCOW2902, DEMARCHE DELIVERED ON DETENTION OF GEORGIAN

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Reference ID Created Released Classification Origin
09MOSCOW2902 2009-11-27 14:58 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO1666
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHMO #2902 3311458
ZNY CCCCC ZZH
P 271458Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 5533
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY

C O N F I D E N T I A L MOSCOW 002902 
 
SIPDIS 
 
E.O. 12958: DECL: 11/26/2019 
TAGS: PREL PGOV PHUM RS GG
SUBJECT: DEMARCHE DELIVERED ON DETENTION OF GEORGIAN 
TEENAGERS 
 
REF: STATE 121252 
 
Classified By: Ambassador John R. Beyrle for reasons 1.4 (b), (d) 
 
1.  (C) Summary.  In response to reftel demarche, the MFA 
told us that Russia was pressing for the release of the four 
Georgian minors in South Ossetian custody.  Russia expects 
them to be released within the next few days.  The GOR 
supports a South Ossetian proposal to exchange all detainees, 
noting pressure to keep the Georgian teenagers in custody 
unless a group of South Ossetian teenagers is simultaneously 
released.  End Summary 
 
2.  (SBU) Ambassador Beyrle pressed for the minors' release 
with DFM Grigoriy Karasin on November 26; in addition, we 
raised the points with MFA 4th CIS Director Andrey Kelin 
November 25. 
 
3.  (C) In his meeting with the Ambassador, DFM Karasin 
lamented that hostage-taking is an age-old tradition in the 
Caucasus, but said we must all battle against it.  He said he 
had discussed the issue of the four teenagers on November 25 
with Morel and that "we're doing what we can to get them 
released."  He noted that there are a total of five groups of 
detainees being held by either the Georgians or South 
Ossetians, and that Russia is working on an 
"everyone-for-everyone" exchange of them.  He urged the U.S. 
to support this concept and encourage the GOG to accept it as 
well. 
 
4.  (C) Kelin told us that Russia was pressing South Ossetia 
to release the teenagers, and expected South Ossetian 
authorities to release the four minor Georgian detainees 
within the next few days.  Kelin added that Council of Europe 
Human Rights Commissioner Thomas Hammarberg was involved in 
the issue, as was head of the EU observer mission Hans-Joerg 
Haber. 
 
5.  (C) Kelin said that prior to the detention of the 
Georgian minors, both sides were regularly releasing 
detainees.  He also raised the idea of a comprehensive 
exchange of detainees, saying it was a South Ossetian 
proposal and would affect 85 South Ossetians and 25 Georgians 
currently being held (according to South Ossetian statistics). 
 
6.  (C) Kelin noted that South Ossetia claimed Georgian 
authorities were holding five South Ossetian minors since 
August 2008 (after releasing a sixth).  The Russian 
"ambassador" to South Ossetia had just received the mothers 
of the minors, who had demanded that South Ossetia only 
release the Georgian minors if their own children were 
simultaneously released. 
Beyrle

Wikileaks

09MOSCOW2900, GOR OPEN TO NRC STRUCTURAL REFORM, BUT NOT NOW

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Reference ID Created Released Classification Origin
09MOSCOW2900 2009-11-27 14:43 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO1648
RR RUEHDBU RUEHSL
DE RUEHMO #2900 3311443
ZNY CCCCC ZZH
R 271443Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 5527
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC
RUEKDIA/DIA WASHDC

C O N F I D E N T I A L MOSCOW 002900 
 
SIPDIS 
 
STATE FOR EUR/RPM 
 
E.O. 12958: DECL: 11/26/2019 
TAGS: PREL PGOV PINR MARR NATO RS
SUBJECT: GOR OPEN TO NRC STRUCTURAL REFORM, BUT NOT NOW 
 
REF: A. STATE 118921 
     B. NATO 526 
     C. MOSCOW 2878 
 
Classified By: Ambassador John Beyrle for reasons 1.4 (b) and (d). 
 
SUMMARY AND COMMENT 
------------------- 
 
1. (C) DFM Grushko confirmed Russia sees no urgency in 
completing the NRC "Way Forward" document prior to the NATO 
ministerial.  He claimed this move should not be interpreted 
as a lack of interest in the NRC, but reflective of Russia's 
desire to "put substance first" before taking decisions on 
structural reforms of the NRC.  Grushko also referred 
obliquely to internal bureaucratic reasons the MFA is 
reluctant to alter the NRC structure.  The middle levels of 
the GOR's foreign policy apparatus are focused on advancing 
Medvedev's "European Security Treaty," which is intended, 
inter alia, to limit further NATO expansion.  Until the GOR 
can assess the prospects for achieving this goal, NRC reform 
is likely to remain on the back burner.  End summary and 
comment. 
 
"WAY FORWARD" TO THE BACK BURNER 
-------------------------------- 
 
2. (C) Ambassador raised reftel points with Deputy Foreign 
Minister Aleksandr Grushko during a meeting on November 26, 
noting that Russia's decision to withdraw from work on the 
"Way Forward" document raises questions about Russia's 
interest in advancing the work of the NRC.  Grushko confirmed 
that Russia is not interested in completing the NRC "Way 
Forward" document prior to the ministerial, though he 
professed Russia's continued commitment to the NRC and 
openness to structural reform in the future.  For the 
ministerial, Grushko said Russia favors completing the 2010 
NRC Work Plan and affirming the NRC's determination to 
fulfill the tasking on Joint Security Challenges for the 21st 
Century. 
 
3. (C) Grushko floated a variety of arguments for shelving 
the "Way Forward," noting the document was conceived as a 
"bridge" to overcome the August 2008 crisis.  Since the NRC 
has been renewed, he offered, there is less need for this 
document.  Grushko repeatedly stressed the GOR's strong 
opposition to jettisoning existing committees from the NRC; 
even if some groups are currently dormant, there is no harm 
leaving them in existence and reviving them at a later stage. 
 He also alluded to internal GOR bureaucratic regulations, 
implying that the Finance Ministry links its budgetary 
allocations for the NRC to the number of committees, hence 
the MFA would be disadvantaged by the proposed changes (later 
in the conversation, he deemphasized this line of argument). 
 
SUBSTANCE BEFORE STRUCTURE 
-------------------------- 
 
4. (C) Asked whether Russia favored structural reform of the 
NRC, Grushko said Russia supports making changes using the 
"Way Forward" document, but "we're not in a rush to finish it 
before the ministerial."  He said Russia is puzzled that this 
subject has become so sensitive since it is really a 
technical document that does not add real substance to the 
2010 Work Plan.  He mused that he would have difficulty 
explaining the significance of this document to his minister. 
 The Ambassador said the Allies were disturbed by this abrupt 
change in attitude because the NRC had been working on the 
document for six months and it was seen as part of the 
process of restoring mutual trust and renewing cooperation 
that had been suspended in 2008. 
 
5. (C) Grushko reiterated Russia's interest in enhancing 
cooperation through the NRC, such as transit support for 
operations in Afghanistan, including reviewing the 
possibility of using Russian military assets.  But, he said, 
"we want substance first" so it is better to focus on the 
work plan and on the tasking to study 21st century security 
challenges. 
 
Beyrle

Wikileaks

09MOSCOW2890, RECIPROCAL REPULSION: MOSCOW MAYOR LUZHKOV VERSUS

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Reference ID Created Released Classification Origin
09MOSCOW2890 2009-11-27 11:29 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO1477
RR RUEHDBU
DE RUEHMO #2890/01 3311129
ZNY CCCCC ZZH
R 271129Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 5514
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002890 
 
SIPDIS 
 
E.O. 12958: DECL: 11/26/2019 
TAGS: PGOV PREL PHUM PINR ECON KCOR RS
SUBJECT: RECIPROCAL REPULSION:  MOSCOW MAYOR LUZHKOV VERSUS 
GOVERNOR GROMOV 
 
REF: MOSCOW 2450 
 
Classified By: Political Minister Counselor Susan Elliott.  Reason:  1. 
4 (b), (d). 
 
 
1. (SBU)  Summary:  Moscow Mayor Yuriy Luzhkov and Moscow 
Oblast Governor Boris Gromov are both from the ruling United 
Russia party.  Initially close allies, hostility developed 
between them as they rose to power and competed for 
influence, attention, and resources.  The two leaders not 
only have personality clashes, but they have had 
long-standing disputes over taxes, housing, and land in their 
respective spheres of influence.  Pundits agree that Luzhkov 
is the stronger leader, but there is speculation that 
President Medvedev could remove both of them.  Critics say 
that sacking them would be a precursor to a merger between 
the Moscow city and oblast.  On October 28, LDPR's 
ultra-nationalist leader Vladimir Zhirinovskiy formally 
proposed to unite the two entities into one "subject."  Given 
the complexity of the leadership in Moscow city and oblast, 
such a radical move seems unlikely in the near future.  End 
Summary. 
 
Personality Clashes 
------------------- 
 
2. (C)  It is well-known that Luzhkov and Gromov do not get 
along.  Georgiy Prokopov, an expert on regional studies, told 
us that Luzhkov is more of a politician than Gromov, a 
retired general who commanded the Soviet troops in 
Afghanistan.  Some allege Gromov is an oligarch, but his 
money and businesses are hidden from public scrutiny. 
Regional Expert Aleksey Titkov told us that Gromov is 
authoritarian, corrupt, and does not govern in a transparent 
matter.  According to independent regional analyst Aleksandr 
Kynev, Gromov created a criminal structure around him with 
veterans of the Afghan War.  Kynev told us that Gromov and 
Luzhkov are like "two boots," both involved in criminal 
businesses with land and real estate, the most important 
businesses for both Moscow city and Moscow oblast.  Kynev 
said that it is impossible to get rich in Moscow city or 
oblast without criminal activity and that within each area 
there are different factions. 
 
Conflict Between the Moscow City and Moscow Oblast 
--------------------------------------------- ----- 
 
3. (C)  Part of the tension between Luzhkov and Gromov 
relates to taxes.  People who work in the city of Moscow, but 
live in Moscow Oblast pay Moscow city taxes.  Regional Expert 
Aleksey Titkov told us that Luzhkov and Gromov want to 
control the tax revenues from the airports and mega malls 
located in the Moscow oblast.  The city of Moscow does not 
receive tax revenues from the mega malls located on Moscow 
region territory.  Luzhkov maintains that most of the mall 
shoppers are from the Moscow city, therefore tax revenues 
should be shared.  The airports, Sheremetyevo, Domodedovo, 
and Vnukovo, were all registered in Moscow region until 2003 
when Putin signed a decree transferring 60.88 shares of the 
Vnukovo airport to the Moscow city government.  Vnukovo is 
now considered property of the city of Moscow even though it 
is located in the oblast.  In 1995, Luzhkov tried 
unsuccessfully to make Sheremetyevo airport a Moscow city 
property.  It is clear that Luzhkov would like to benefit 
from the large tax revenues generated by the airports and 
malls located in the oblast. 
 
4. (C)  Another point of contention between Luzhkov and 
Gromov is their direct competition over land.  They are each 
linked to construction companies.  Luzhkov's source of 
revenue is his billionaire wife Yelena Baturina's company, 
Inteko.  He is also connected to the SU-155 construction 
company, which is a conglomerate of many smaller companies. 
SU-155 has been expanding rapidly all over Moscow and in 
other regions of Russia.  It has 28 plants producing 
construction materials in 17 Russian cities.  There is no 
official information about Gromov's companies, but it is 
widely rumored that he controls or has significant personal 
financial interest in some construction companies.  He 
initiated an association called "War Fraternity" or "Combat 
Brotherhood," depending on the translation, with his cronies 
who served in Afghanistan.  This group is firmly established 
in business and politics and it is assumed that he funnels 
his money through this channel to invest in construction. 
 
Proposal to Merge the City and Region 
------------------------------------- 
 
 
MOSCOW 00002890  002 OF 002 
 
 
5. (C)  When Zhirinovskiy proposed to unite Moscow city and 
Moscow oblast into one "subject," he argued that the city and 
region used to be one before Stalin divided them into two. 
He tried to make the case that a merger would cut the 
bureaucratic staff and help fight corruption, while saving 
budgetary money.  Zhirinovskiy called for a "Minister for the 
Federal Center" appointed by the President to lead Moscow. 
Luzhkov has been supportive of the idea to unite the city and 
region i
nto an area of 20 million people, but Gromov does not 
agree.  On October 30 Gromov made a statement against the 
merger, saying that he saw no point in such a union. 
Prokopov told us that this project may go forward in five to 
ten years, but there are no immediate plans.  In a 
Nezavisimaya Gazeta article, State Duma Deputy Gennady Gudkov 
said, "no one will rehash the map of Russia.  This is all 
just talk."  Mariya-Luiza Tirmaste, a journalist at 
Kommersant, told us that neither Luzhkov nor Gromov wants to 
merge the Moscow city and region.  She claimed that 
Vyacheslav Surkov in the Kremlin is pushing this agenda as a 
way to resolve traffic jams, fix roads, and cooperate in 
other ways.  Tirmaste told us that a leader for such a region 
would have to be an incredibly strong person and she doubted 
that such a merger would happen anytime soon. 
 
Comment 
------- 
 
6. (SBU)  Luzhkov and Gromov initially were bedfellows, but 
financial issues drove a wedge between them.  Both are 
resisting any suggestions, let alone potential attempts, to 
ease them from power; we do not see them being ousted in the 
immediate future.  It is unlikely that the Moscow city and 
region will merge in the near future, but later the Kremlin 
could appoint a governor to replace both Luzhkov and Gromov. 
There are rumors that First Deputy-Prime Minister Sergey 
Sobyanin, First Deputy Igor Shuvalov, Deputy-Prime Minister 
Zhukov or Kozak would accept the job.  While these officials 
might be competent to manage the huge challenge, none of them 
brings the political clout that Luzhkov and Gromov combined 
now exert. 
Beyrle

Wikileaks

09MOSCOW2888, PUTIN’S OFFER TO HELP GEORGIA: LESS THAN MEETS THE

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Reference ID Created Released Classification Origin
09MOSCOW2888 2009-11-27 10:08 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO1424
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHMO #2888 3311008
ZNY CCCCC ZZH
P 271008Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 5510
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY

C O N F I D E N T I A L MOSCOW 002888 
 
SIPDIS 
 
E.O. 12958: DECL: 11/27/2019 
TAGS: PREL PGOV RS GG
SUBJECT: PUTIN'S OFFER TO HELP GEORGIA: LESS THAN MEETS THE 
EYE 
 
REF: GEHRENBECK-WOLF E-MAIL 11/19/09 
 
Classified By: A/Pol M/C David Kostelancik for reasons 1.4 (b), (d). 
 
1.  (C) Summary: In contrast to some media reports about a 
statement from Prime Minister Putin that Russia would be 
willing to help Georgia out of its "dead end," we consider 
the comments to be merely a gesture to try to turn Georgian 
elites away from Saakashvili and that they do not represent a 
change in Russian policy.  End Summary. 
 
2.  (C) According to press reports, during an event in honor 
of former Russian FM and PM Yevgeniy Primakov's 80th 
birthday, Prime Minister Putin pledged Russia would help 
Georgia to restore its territorial integrity.  Some, like 
Georgian "Fair Georgia" opposition leader Zurab Noghaideli, 
suggested that Putin has appointed Primakov as chief mediator 
between Russia and Georgia, while others speculated that 
Putin offered to absorb Georgia into a new Soviet Union-like 
entity (Ref).  Georgia's Moscow-based Charge Givi Shugarov 
attended the October 31 reception for Primakov, and told us 
he took near-verbatim notes on Putin's toast.  Unless 
otherwise noted, the following information is derived from 
Shugarov and should be treated accordingly as second-hand 
information. 
 
3.  (C) Shugarov attended the reception for 500 people that 
included Russia's political elite and prominent Georgians in 
Moscow, as well as famous artists and other popular figures 
from Tbilisi. 
 
4.  (C) In his toast in honor of Primakov, Putin noted the 
presence of many members of Georgia's elite, based both in 
Moscow and Tbilisi.  He acknowledged that what he would say 
would not stay in the room.  Russia understood Georgia's 
tragedy and its wish to restore its territorial integrity. 
Putin said that, before the August 2008 Russia-Georgia war, 
he had spoken about this with "Mikhail Nikolayevich."  (Note: 
Shugarov stressed that referring to Georgian President 
Saakashvili by his patronymic was unexpectedly amicable and 
well-mannered.  End note.) 
 
5.  (C) Putin said Saakashvili had asked him to help.  Putin 
replied that Russia was willing to help, but that Georgia 
needed to start speaking directly with Abkhazia and South 
Ossetia first.  If Georgia would not agree to be Russia's 
strategic partner, why should Russia help? 
 
6.  (C) Putin then asked Saakashvili where Georgia was 
heading, saying "they" (Note: Shugarov took this to imply the 
U.S.  End Note) would station missiles in Georgia without 
asking, which would be "more than a mistake." 
 
7.  (C) Turning to the present, Putin said that Georgia was 
in a dead end now, but that there was a way out.  He said 
Russia would help Georgia, especially as long as there were 
people like Georgia-friendly Primakov.  In contrast to media 
reports, Shugarov did not take that statement to mean that 
Putin was appointing Primakov to handle the issue.  His 
assessment was that Putin's comments come nowhere close to 
the meaning or implications that the media are now assigning 
to them. 
 
8.  (C) Comment: Putin's address appears to have been a 
carefully choreographed event, given that the audience was 
carefully chosen to include Georgian society leaders, 
including from Tbilisi, and that Putin stressed he expected 
his comments to be leaked.  As Putin's offer contained no 
specifics, it is possible Putin wanted to influence Tbilisi 
political and societal circles' views of Moscow and weaken 
domestic support for Saakashvili.  Putin's derogatory remarks 
about the November 19 Saakashvili-Yushchenko meeting in Yalta 
suggest that, at least officially, Putin remains abrasive 
toward the Georgian political leadership.  End Comment. 
Beyrle

Wikileaks

09MOSCOW2886, BELYKH WANTS TO REFORM KIROV

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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. #09MOSCOW2886.
Reference ID Created Released Classification Origin
09MOSCOW2886 2009-11-27 08:23 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO1346
RR RUEHDBU
DE RUEHMO #2886/01 3310823
ZNY CCCCC ZZH
R 270823Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 5507
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002886 
 
SIPDIS 
 
E.O. 12958: DECL: 11/25/2019 
TAGS: PGOV PINR KDEM EAID ECON EFIN EMIN RS
SUBJECT: BELYKH WANTS TO REFORM KIROV 
 
REF: A. MOSCOW 2417 
     B. MOSCOW 2542 
     C. MOSCOW 2512 
 
Classified By: Ambassador John R. Beyrle; reasons 1.4 (b, d). 
 
1. (C) Summary: Kirov Oblast Governor Nikita Belykh met with 
Ambassador Beyrle November 18 to provide a review of his 
first year in office and discuss the road ahead.  A former 
member of the opposition, Belykh declared, "I did not want 
power, and still do not want power, but power must be made to 
work for the people."  Belykh has committed himself to reform 
not only the oblast's economy, but also the way that its 
people view their government, by expanding civil liberties 
and promoting initiative on the part of individual citizens. 
The region's size (slightly larger than England) and sparse 
population (1,400,000) contribute to a small tax base to fund 
public infrastructure, especially roads and gas pipelines. 
This difficulty is exacerbated by a corrupt and inefficient 
local bureaucracy, which Belykh has made a priority of 
challenging.  Ambassador Beyrle plans to visit Kirov in the 
Spring.  End Summary. 
 
Political Situation 
------------------- 
 
2. (C) Kirov Oblast Governor Belykh met Ambassador November 
18.  He began by acknowledging that citizens in Kirov are not 
genuinely interested in governmental reform.  Most governors 
serve in their home regions and are well connected to local 
social and political networks.  Settling into Kirov has been 
an uphill battle, he said.  Belykh is not a member of United 
Russia, the dominant political party regionally, but he does 
represent President Medvedev, with whom he has only indirect 
contact.  He has no contact with PM Putin, whom he had 
criticized extensively when he was an active opposition 
politician and Putin was Russian President.  Belykh reported 
that relations with PolPred Grigoriy Rapota are strong. 
(Note: This statement is in contrast to comments made to the 
Ambassador by Rapota during a September meeting in Nizhniy 
Novgorod (Ref A), where Rapota described the Belykh/Kirov 
arrangement as an "experiment," requiring a lot of his time 
and oversight. End Note). 
 
3. (C) Belykh's experience working with Western officials, as 
well as his strong connections abroad, have made the security 
services uneasy.  He must pre-clear foreign visitors through 
the Ministry of Foreign Affairs, and requests are heavily 
scrutinized by the Federal Security Service (FSB).  Even 
visiting foreign investors are considered to be a threat and 
closely monitored.  While Belykh is certainly thinking about 
local elections in 2011, they are not his priority. 
Medvedev's poslaniye referred to instituting federal 
regulations for the size of regional legislatures (based on 
population), meaning a possible reduction in the size of 
Kirov's Duma.  That fact is weighing much more heavily on the 
Governor.  Belykh's statement that it was too early to talk 
about elections is not in keeping with the message we 
received from his advisors while visiting Kirov in October 
(Ref B). 
 
Initiative and Efficiency 
------------------------- 
 
4. (C)  In a November 18 article on Belykh in "Russia Behind 
the Headlines," the Governor is quoted as saying, "I am not 
going to order changes, as some might expect.  I am trying to 
inspire local initiatives so that people can make changes 
independently of me."  He reiterated this point to the 
Ambassador, referring to collaboration with the U.S. 
Export-Import Bank and World Bank, which are both actively 
seeking projects in the area.  World Bank programs not only 
provide funds, but also allow individual communities to 
decide on projects for which to apply for funding.  Belykh 
lamented the fact that most bureaucrats still passively wait 
for his command instead of taking the initiative.  Asked by 
the Ambassador how long it would take for initiative to be 
rewarded with completed projects, the governor admitted most 
had a planning horizon of one to two years. 
 
Economic Prospects 
------------------ 
 
5. (C) Kirov is not a center for trade with any of its 
neighbors.  The Oblast contains, however, an important 
junction between the Trans-Siberian rail line and a major 
North-South rail line.  Belykh argued that construction and 
administrative costs are between 25 and 50 percent lower than 
in neighboring oblasts.  Defense production, which dominated 
Kirov's economy before the fall of the Soviet Union, has 
 
MOSCOW 00002886  002 OF 002 
 
 
almost entirely dried up.  The local economy is now dominated 
by a chemical works, cement production, smelting, raw lumber, 
agriculture and dairy production (Reftel C).  Nevertheless 
the region is struggling.  Belykh predicted that 60 percent 
of the oblast's budget in the coming year would be supplied 
by the Federal Government. &#x00
0A; 
6. (C) Belykh also pointed to success the region has had 
attracting foreign investment, and laid out further 
opportunities.  Italian and Spanish companies have 
established manufacturing plants.  Belykh said large National 
Project funding from the Russia government to stimulate 
scientific research would help to establish Kirov as a center 
for innovation.  Kirov has enormous forests, which at the 
moment are inefficiently exploited. Lumber is exported to 
other cities (mainly Perm and Arkhangelsk) for processing. 
Belykh said that with significant foreign investment, Kirov 
has the potential to be come a major supplier of furniture 
and finished lumber. 
 
Cooperation with USAID 
---------------------- 
 
7. (C) While there are myriad opportunities for US-Russia 
cooperation in development in Kirov, Belykh has been working 
to overcome security service concerns as well as the general 
unease of the population with foreigners.  Prior to the 
meeting with the Ambassador, Belykh discussed with USAID 
Moscow deputy director the potential for expanded USAID work 
in Kirov. In the wake of protests last month against US 
involvement in the region (on the margins of a 
USAID-supported conference on economic growth), Belykh 
expressed caution about the idea of expanding work with USAID 
too quickly.  He specifically suggested that a visit by the 
USAID Mission Director on her own would not be a good idea at 
this time.  Rather, he proposed that she come with a large 
delegation, or with the Ambassador, in order to stress the 
official nature of the visit and forestall rumors of "foreign 
influence."  Belykh later, however, did express support for 
the idea of looking at safe areas for potential collaboration 
with USAID and its partners, specifically public health and 
economic development. 
 
Comment 
------- 
 
8. (C)  Belykh has continued to tread water in Kirov but 
appears comfortable discussing challenges he still needs to 
address.  He remains popular with oblast residents, and his 
steady performance over the last year in the face of the 
local bureaucracy, corruption and the financial crisis 
demonstrates determination to try to carry through on 
Medvedev's proposals to fight corruption and bureaucratic 
inertia.  Whether he relishes his status as a former 
opposition politician no in a position or authority, his 
success - or failure - will influence whether others like him 
are invited to work for Medvedev, and if so, whether they see 
any reason to accept.  Ambassador Beyrle accepted Belykh's 
invitation to visit Kirov, and will plan a visit to the 
Oblast in the spring. 
Beyrle

Wikileaks