FORMER RUSSIAN PRIME MINISTER SAYS "CORPORATION"

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 002927

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/23/2016
TAGS: PGOV PHUM ECON PINR RS
SUBJECT: FORMER RUSSIAN PRIME MINISTER SAYS "CORPORATION"
FEARS LOSS OF CONTROL AFTER PUTIN'S DEPARTURE

REF: 05 MOSCOW 15735

Classified By: Ambassador William J. Burns. Reasons 1.4 (B/D).


1. (C) In a March 21 meeting with the Ambassador, former
Prime Minister Mikhail Kasyanov:

-- Claimed current GOR and Kremlin officials were mainly
interested in preserving their interests within the status
quo, which affected policy decisions and the competition to
succeed President Putin in 2008;

-- Said meaningful structural reform was unlikely over the
next two years in order to avoid undermining Putin's strong
popular support, but the government would continue to
consolidate industries;

-- Thought there was no need to pursue unification of
democratic opposition parties since most had limited
political objectives and did not believe in the centrist
strategy that Kasyanov envisioned;

-- Predicted that the 2007-08 elections would not be free or
fair but that most of the violations would occur beforehand
due to lack of equal media access and problems with
registration of parties and candidates; and

-- Cautioned the West against "giving up on Russia" and said
it should continue to stay engaged and speak out against
undemocratic practices. END SUMMARY.


2. (U) The Ambassador met March 21 with former Prime
Minister Mikhail Kasyanov. Also present were Oleg
Buklemishev, Kasyanov's chief analyst and foreign policy
advisor, and Konstantin Merzlikin, former Chief of Staff in
Kasyanov's cabinet. Both Buklemishev and Merzlikin are
employees of MK Analytika, Kasyanov's consulting firm.
Kasyanov said the firm was not doing well but offered him a
mechanism for keeping a short list of prospective staff and
advisors on the payroll.
.
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ECONOMIC AND SOCIAL REFORM STALLED
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3. (C) Kasyanov asserted at the outset that the current
situation in the country was not good despite the semblance
of economic normalcy and stability (except for some concern
over inflation). In particular, Kasyanov said most senior
GOR officials and Kremlin advisors, sometimes in association
with leading businessmen -- the "corporation" -- were mainly
interested in preserving the status quo and maintaining
control over important economic sectors. In addition, many
were blatantly corrupt and had lost all understanding of
morality or sense of the common good. Their actions and
competition for influence often negatively affected policy
decisions, as had become increasingly apparent in the
arguments used by supporters of the two front-runners seeking
to succeed Putin. In Kasyanov's view, First Deputy PM
Dmitriy Medvedev and Deputy PM (and Defense Minister) Sergey
Ivanov were the only candidates at the moment. He explained
that it was too soon (and the situation too complicated) to
speculate about these or other possible candidates,
especially since Putin himself had not expressed a clear
preference.


4. (C) The former PM distinguished between senior officials
who were not sufficiently versed in running a modern
government and those who were competent and understood the
need to address Western concerns. Kasyanov said many top
officials genuinely wished to earn the respect of the West
and to avoid the "totalitarian isolation" that would await
Russia if they pressed too far in exerting control. These
latter officials recognized that there should be more
balance, as well as a more horizontal sharing of power, if
the country hoped to maintain positive relations with the
West. In this context, Kasyanov avowed that the U.S. role
was crucial. He suggested, as an example, that the auction
of one or more state-controlled TV channels to private
investors might allay foreign perceptions of dictatorship.


5. (C) As part of the need to maintain control, particularly
in the run-up to the next election cycle, Kasyanov predicted
there would be no meaningful structural reform for fear that
it would undermine Putin's popularity and, implicitly,
support for current senior officials. He dismissed the
national priority projects, emphasizing that there was no
apparent accountability for the implementation costs involved
or any real effort to explain the program to citizens. In
the meantime, Kasyanov added, the government would continue
to consolidate industries over the next two years, and some

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former oligarchs and current top officials could become the
new "industrialists." He noted that a new president in 2008
would thus preside over a completely changed environment than
the one inherited by Putin. Kasyanov also suggested that
Putin would return in some position of influence in the
future. He described Putin as a person who "did not like
wielding power, preferring instead to operate in the gray
areas."
.
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G-8 TURNING POINT FOR NGOs
--------------


6. (C) Many NGOs are looking toward the G-8 summit as a
potential "turning point," in Kasyanov's opinion. Some are
angry about the government's campaign to proscribe their
activities and believe that they can no longer ignore
politics because "there was nobody left to defend them."
Some groups fear repression of their activities will get
underway in earnest after the July summit, but Kasyanov did
not agree with this view entirely. He said the most
aggressive NGOs would probably lose much of their current
influence, but he was not convinced there would be a
wholesale crackdown in the future.


7. (C) Nonetheless, Kasyanov said there was real pressure on
the business community, as well as on the burgeoning middle
class, to avoid political activities. The strategy was
effective, and many members of these societal segments heeded
government -- and presidential -- warnings. But Kasyanov
also noted that some businessmen had confided to him that
they personally supported the democratic opposition,
including himself, but believed they could not do so openly
for fear of official sanctions. In spite of such obstacles,
Kasyanov said he would continue to press his political
campaign. There should be no "revolution in the streets,"
but he thought people should have the opportunity to exercise
their rights.
.
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NO NEED FOR UNITING DEMOCRATIC OPPOSITION PARTIES
-------------- --------------


8. (C) Kasyanov said he wanted to stake out a centrist
position as part of his campaign. Alluding to the
government's strategy when he was Prime Minister, Kasyanov
thought his electoral platform could be structured along the
same lines -- laying down a solid macroeconomic foundation,
followed by genuine economic and social reform. Asked about
prospects for democratic opposition unity, Kasyanov replied
that his analysis, including via discussions with NGOs,
indicated that many people had lost faith in the leaders of
the traditional parties. In his view, some of these leaders
had limited political objectives and were content merely to
cross the seven percent barrier to enter the Duma; they had
no burning desire to seek executive power before 2012.


9. (C) Thus, Kasyanov saw no need to pursue unification with
other democratic forces. Kasyanov preferred a new party or
mechanism that would, among other things, devote more
attention to regional issues. He said his soundings in the
provinces suggested that people wanted a less
confrontational, more centrist position, as well as new
leaders to replace those who had lost the confidence of
voters.


10. (C) Kasyanov said there was "absolutely no" chance for a
merger between Yabloko and the Union of Right Forces (SPS).
He mentioned that supporters from both parties, along with
some "social democrats" from among Rodina's ranks, had
gravitated toward his organization. Kasyanov implied that he
would continue to try to pick up the remnants of these
parties as he pursued an electoral strategy, particularly
regarding SPS members, who seemed to be more in tune with
Kasyanov's views than were the "intelligentsia" of Yabloko.


11. (C) Looking ahead to the next national election cycle,
Kasyanov did not believe that the elections would be free or
fair. Actual voting will appear to occur normally; any fraud
will be more "high tech." He added, however, that the
government really did not need to manipulate voting machines
or vote counts since the real violations will occur
beforehand in the form of unequal media access during the
campaign and difficulties in registering parties or
candidates.
.
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DON'T GIVE UP ON RUSSIA
--------------


12. (C) At the end of the meeting, Kasyanov referred to the

MOSCOW 00002927 003 OF 003


report by the Council on Foreign Relations, characterizing it
as a "good analysis of the situation" in Russia. However,
there was a danger that both Westerners and Russians might
use such reports to bolster arguments to undermine engagement
between our two societies and create an even more divisive
atmosphere. In this vein, Kasyanov cautioned that the West
should not give up on Russia; it should stay engaged and
speak out against undemocratic practices here.
.
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COMMENT
--------------


13. (C) As we have noted in previous reporting, Kasyanov can
be impressively persuasive, and even his critics acknowledge
that as Prime Minister he was an effective administrator with
a defined program of goals and objectives. However, he will
face a very (perhaps impossibly) steep road back to political
power. Apart from persistent allegations that "Two Percent
Misha" often had his hand in the official cookie jar and that
he retains close ties to unpopular "oligarchic" interests,
his centrist, virtually go-it-alone approach will not
engender the widespread support that he needs to mount a
credible campaign for the presidency. Kasyanov's own
acknowledgement of formidable official pressure on the
business community and the middle class -- the two sectors
most likely to support his program -- implies that he himself
recognizes the shortcomings of his strategy. To the extent
that Kasyanov hopes that a sudden collapse of trust in Putin
might lead the bureaucracy to shift its support to him, the
Kremlin's current strategy of hounding him (reftel),while
improving short-term economic prospects for most of the
population, also limits Kasyanov's prospects.
BURNS