A/S FRIED'S MEETING WITH U.S. NGOS

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 011994

SIPDIS

SIPDIS

DEPT FOR EUR/RUS

E.O. 12958: DECL: 10/21/2016
TAGS: PREL PGOV PHUM EINV KDEM RS
SUBJECT: A/S FRIED'S MEETING WITH U.S. NGOS

Classified By: POL M/C Alice G. Wells: 1.4 (b and d).


1. (C) SUMMARY: Representatives of four U.S-based NGOs told
EUR A/S Fried that they were trying to keep a low profile in
light of the NGO law, approaching elections, and increasing
GOR assertiveness, especially statist, in key economic
sectors. Although NGOs were under increasing scrutiny and
the GOR had shown its ability to use pressure when it
desired, NGO representatives said there were also some signs
of better cooperation in their own relations with the GOR and
in U.S.-Russian relations more broadly, but those would
likely be more apparent after the selection of Putin's
successor and the upcoming elections. End summary.


2. (C) A/S Fried and the Ambassador on October 21 met with
Carnegie Foundation Director Rose Goettemoeller, NDI Head of
Office Mary O'Hagan, IRI Head of Office Joe Johnson, and
AmCham Executive Director Andrew Somers. All of their
organizations have been re-registered by the GOR, with NDI
and IRI receiving word of their approvals on October 20.

Atmospherics
--------------


3. (C) A/S Fried began the meeting by noting that
U.S.-Russian relations were mix, including areas where we
cooperate well, where cooperation is mixed, and those where
cooperation is difficult. U.S. policy sought to strengthen
cooperation but also to raise U.S. concerns on issues, and
criticize the GOR when necessary, especially (e.g., on
Georgia) where the U.S. had marked differences with Russia.
The Ambassador said that we had welcomed the re-registration
of all four NGOs, and noted that DFM Yakovenko personally had
called October 20 with information that IRI and NDI had been
re-registered. He appreciated NGOs' patience and
collegiality in working with the Embassy during the onerous
registration process.


4. (C) Carnegie's Goettemoeller said that with elections
approaching in Russia and the U.S., the political rhetoric
would make it difficult to promote the positives in the
bilateral relationship, and that NGOs and the U.S. would have
to try to maintain a pragmatic relationship with the GOR
until after the elections. She hoped that the aftermath
would create opportunities to then strengthen the
relationship. Carnegie staff had purposefully avoided public
comments on the NGO law, she said, because it could have been
counterproductive for its own application, which was approved
earlier this month. Carnegie was also trying to reach out
more aggressively to high-level GOR officials and had some
success, such as support for Carnegie's work by Chief of
Defense General Baluyevskiy. Human Rights Ombudsman Lukin
had also been helpful.


5. (C) Carnegie's staff saw journalist Anna Politkovskaya's
murder, and many of them knew her well, as a sign of a
negative swing in the atmosphere in Russia, with the
potential for intimidation and threats against government
critics to become more prevalent, Goettemoeller said. NDI's
O'Hagan said that harassment of NDI and other NGOs showed
that elements within the GOR could use selective enforcement
of criminal and civil codes to threaten "unfriendly" or
"excessively independent" NGOs and others with direct
pressure sometimes placed on local staff by the Federal
Security Service.


6. (C) IRI's Johnson noted that IRI had had little trouble
in Russia, but of course it tried to keep a low profile,
while still implementing its programs. He suggested that IRI
potentially could have problems, however, if the Republicans
lost control of the Congress in the upcoming U.S. elections.
He explained that there was a trend in Russia that equated
power with protection. If the Republicans lost power, then
IRI might become targeted, while NDI in that case might
suddenly enjoy a more constructive relationship with the
authorities. In any case, Johnson said, with Russian
elections looming and no successor to Putin emerging, the
uncertainty of the transition was likely contributing to
increasingly sharp jockeying for power, both in Moscow and in
the regions. This could potentially lead to problems for
NGOs that were seen as working in conjunction with "the
opposition."

Economic and Business Climate
--------------


7. (C) AmCham's Somers said that U.S. businesses continued
to enjoy extraordinary annual growth in Russia and that this
was a positive for the bilateral relationship. There were
further positive signs, such as a growing middle class and

MOSCOW 00011994 002 OF 002


the expansion of U.S. businesses outside Moscow. There were
also concerns that stemmed from the strong development of the
Russian economy, such as a shrinking pool of talented
managers and increasing wages. AmCham had good relationships
with several ministries, such as the Ministry of Economic
Development and Trade, and the Ministry of Finance It had
even reached out to the FSB to discuss import controls, which
had been well received.


8. (C) However, the GOR was showing signs of increased
intervention in strategic sectors, and the consolidation of
power inside the GOR was making it more opaque. It was now
harder to determine why certain decisions were made or who
might be a helpful ally on business and investment issues.
He suggested that the use of Russia's strategic resources to
further the GOR's influence in foreign affairs was one factor
contributing to this interventionist approach, and another
could be that some within the GOR were pushing greater
government intervention and control for personal gain before
there was a change in power.


9. (C) A/S Fried asked if businesses were under increasing
scrutiny or pressure. Somers said that until two years ago,
none of AmCham's members had come to him about problems with
corrupt officials. Since then, there have been cases of
attempts to collect bribes, which the companies had managed
to resist. Companies, regardless of their nationality, were
also being subjected to tax audits following the Yukos
affair, and these audits created certain pressure. One of
AmCham's concerns was the potential for those audits to lead
to criminal cases, but overall, this had not been a problem.
Likewise, when audits led to some claim for back taxes,
companies were able to defend themselves as tax courts were
increasingly professional and there was little corruption
within them. But even the generally better functioning tax
courts were vulnerable to political pressure from GOR
officials.

Comment
--------------


10. (C) The NGO participants noted that the mixed (though
troubling) picture they described reflected the broader (and
mixed) character of Russia. They concurred that over the
short term, with elections approaching and uncertainty over
Putin's successor contributing to increased sensitivities
toward NGOs, that keeping a low profile, patience, caution,
and trying to build relationships with GOR interlocutors
during a difficult period would likely be the best way
forward.


11. (U) A/S Fried has cleared this cable.
BURNS