$4.5M U.S. Investment, Andy Warhol and American Corner

UNCLAS SECTION 01 OF 04 MOSCOW 004572 SIPDIS SENSITIVE SIPDIS USDOC for 4231/ITA/MACK/RISD/JBROUGHER/MEDWARDS E.O. 12958: N/A TAGS: ECON EINV PGOV SOCI PINR RS SUBJECT: $4.5M U.S. Investment, Andy Warhol and American Corner Reopening in Samara MOSCOW 00004572 001.2 OF 004 ¶1. (U) Sensitive But Unclassified - Not for Internet Distribution. ¶2. (SBU) SUMMARY: Ambassador Burns' visit to Samara April 17-18 revealed a city ripe for additional U.S. investment and eager for increased contacts and exchanges with American academic and business counterparts. The Ambassador participated in a ribbon- cutting ceremony for a new production line at the local Alcoa plant, reopened the American Center, and visited the Alcoa- sponsored Andy Warhol exhibition. Government, business, civil society representatives and students uniformly emphasized: -- The region's desire to attract more U.S. investment and partnerships with U.S. firms, as well as the difficulties faced by U.S. companies as they expand beyond Moscow; -- The economic and social benefits that various exchange programs and partnerships bring to Samara; and -- The need for greater access to information about studying in the United States and the student visa application process. END SUMMARY. -------------- U.S. BIGGEST FOREIGN INVESTOR -------------- ¶3. (SBU) Ambassador Burns, accompanied by Emboffs from the Foreign Commercial Service and Public Affairs section, visited Samara April 17-18. In Governor Titov's absence, the Ambassador met with acting Vice Governor and Minister of Economic Development, Trade and Investment Gabibullin Khasaev, and Minister of Education Valeriy Putko. (Khasaev is considered one of Governor Titov's closest confidants and a personal friend.) Khasaev emphasized the importance of U.S. investment, stating that U.S. companies were involved in both direct investment and joint ventures and represented the largest percentage of foreign investment in the region. Asked about plans to increase transparency within the taxation system and improve overall stability in the regional market place as a stimulus for further foreign investment, Khasaev replied that the regional government had established an office to provide advice and information on proposed legislation and how its implementation might affect business. ¶4. (SBU) Khasaev also discussed the creation of a special economic trade zone in nearby Togliatti. He hoped that the trade zone, along with its associated infrastructure development, including construction of a super highway, would bring more foreign investment to the region and enhance access to markets for regional agricultural goods and local small businesses. The Ambassador observed that such a wide range of projects would create many opportunities for our two countries and referred them to the Embassy's Commercial Section to further develop these opportunities. -------------- EXCHANGES WIN-WIN -------------- ¶5. (SBU) Commenting on the implementation of Putin's education initiative, one of the country's four national priority projects -- other areas include health care, affordable housing, and agriculture -- Khasaev said the goal was to improve access to higher education for future generations of Samara citizens. In this context Regional Minister of Education Valeriy Putko discussed the plan to create a national university in Samara that would have greater ties with U.S. universities. Putko mentioned that a meeting with representatives from the U.S. State of Georgia had led to a discussion about the possibility of an exchange program that would send Russian mathematics teachers to schools in that state. Speaking more broadly of the success of U.S.-Russian exchange programs; Khasaev commented that many residents in the region had received training through Open World and other programs focusing on political development. He said such programs were instrumental in developing the region's management capabilities, including governmental affairs. He and the Ambassador discussed other programs that have promoted bilateral cooperation, including the Ambassador's participation in an "Education for All" roundtable and a future program being created through Embassy Moscow and U.S. and Russian businesses to encourage and support young entrepreneurs. -------------- -------------- ALCOA OPENS NEW PRODUCTION LINE AND SPONSORS WARHOL EXHIBITION -------------- -------------- ¶6. (SBU) The centerpiece of the Ambassador's visit was his participation in the ribbon-cutting ceremony for a new production line at Alcoa's Samara facility. The USD 4.5 million slitting line is part of an overall USD 80 million commitment that Alcoa MOSCOW 00004572 002.2 OF 004 will invest in capital improvements and technology and environmental, health, and safety programs at its Samara and Belaya Kalitva (Rusal) plants. Alcoa purchased the two facilities last year and the USD 80 million will serve to strengthen the global competitiveness of both plants. It is estimated that new slitting line will pay for itself in two years due to a projected increase in demand in the can sheet market. The Ambassador, Alcoa Russia's President, Bill O'Rourke, Khasaev, and the Speaker of Samara's Regional Duma, Victor Sazonov, opened the new production line. ¶7. (U) Alcoa employs 5,751 people at its Samara facility and has a reputation for being socially responsible. Alcoa Russia has provided support to veterans of WWII in Samara, established charity and health funds, and recently collaborated with the Samara Museum of Art to host the city's first Andy Warhol exhibition. Alcoa's latest initiative is its Technical Education Support Program, which provides a number of scholarships for Russian students, including those studying at the Samara State Aerospace University (SSAU). The purpose of the program is to boost the prestige of technical education, which was undermined by dramatic changes in Russian society following the breakup of the Soviet Union. (The lack of sufficiently qualified workers in both vocational and technical fields was a concern also raised during the Ambassador's meeting with local representatives of U.S. firms.) ¶8. (U) At an evening reception in honor of the Warhol exhibition, the Ambassador commended officials from Alcoa, the Samara Museum of Art, and the Ministries of Culture and Education for working together to make the exhibition a reality. He called on other U.S. and Russian firms to join forces and resources with Samara's civil society and government entities to further cooperation on future public-private projects that would benefit the broader community. -------------- -------------- GOOD NEWS FOR BIG US FIRMS BUT CLIMATE STILL NOT PERFECT -------------- -------------- ¶9. (SBU) Ambassador Burns hosted a roundtable April 18 for U.S. companies in the Samara region. Representatives from GM AvtoVaz, Packard Electrical Systems (Delphi),Tenneco Automotive, Pepsi, Coca-Cola, CitiBank, ExpoPul (New Sensor),Marriott Renaissance Hotel, Samara Cable Company (Corning),and Amerada Hess attended. (Note: Amerada Hess is 80% owner of SamaraNafta, a small oil producer with a very promising production future - currently producing approximately 7,000-8,000 b/d and aiming for 50,000 b/d. Amerada Hess believes it is the largest American investor in the Samara region with around $500 million invested.) The majority of the companies reported growth in the region and said local officials seemed supportive of foreign investment. All were very interested in the latest status concerning Russia's WTO accession and how it might affect commercial relations between the U.S. and Russia. Several companies voiced concerns about the vagaries and inconsistencies of Russia's tax system. Other issues of concern included: lack of qualified workers with needed vocational, technical and analytical skills, unfair customs duties, high inflation, and lack of access to financing. The dean of the group, General Manager of GM/AvtoVAZ Richard Swando believes the next important step for development of their businesses would be availability of financing. The ExpoPul Director General, Vladimir Chinchikov, updated the Ambassador on the company's current business dispute with RBE Saratov, noting that ExpoPul continued to seek the support and assistance of the U.S. Embassy to resolve the situation. Overall, company representatives seemed pleased with how their businesses were growing/operating in the Samara region. -------------- AMERICAN CORNER REOPENING -------------- ¶10. (SBU) The Ambassador reopened the American Corner - now known as the American Language and Cultural Center - in its temporary location at the Regional Research Library. (Note: The previous Director of the Regional Research Library closed the Corner on January 1, 2006 when PAS refused to meet her rent demands.) Over 70 USG exchange program alumni, the Library Director, and other officials gathered for an informal reception celebrating the reopening of the Center and introducing the recently hired Director, Yelena Lugavaya. In FY05, prior to being closed, the Corner served about 185 visitors a month, the majority of whom were USG exchange program alumni. With over 1000 alumni, the Samara region has one of the largest concentrations of alumni outside Moscow and includes participants of Open World, FLEX and MOSCOW 00004572 003.2 OF 004 Business for Russia/Community Connections exchange programs. The club includes politicians, lawyers, accountants, business people, professors, and teachers. The Samara alumni are actively involved in community service projects, including the adoption of a city park on Earth Day and raising money and gathering supplies for children at a local orphanage. It was due in large part to alumni complaints about the unfair closing of the Corner that the new Regional Library Director, Tatyana Kolokolova, allowed the Center to reopen. (Note: An Open World alumna Kolokolova has been extremely positive in her dealings with PAS, and, in addition to reopening the Center in a temporary location, has agreed to help identify a more prominent, long-term space in the library's main building. The new Center will expand services by offering English language classes and educational consulting.) -------------- -------------- AEROSPACE UNIVERSITY STUDENTS KEEN TO STUDY IN US -------------- -------------- ¶11. (SBU) Ambassador Burns met with over 80 faculty and students at Samara State Aerospace University (SSAU) for a frank discussion on U.S.-Russia relations, U.S. foreign policy, and opportunities to study in the U.S. Students' questions focused mainly on the opportunities to study in the U.S. and comparisons between the education systems of the U.S. and Russia. They expressed interest in learning more about studying in the U.S. and changes to the student visa application process. The Ambassador provided students with information about a proposed exchange program that would allow young Russian and U.S. entrepreneurs to gain on-the-job experience by working for a set amount of time for American or Russian companies. He also suggested that students visit the reopened American Center to meet with the Center's Education Advisor. Students also asked pointed questions about U.S. policy, the U.S. invasion of Iraq and withdrawal of troops, U.S. interest in Russia and its neighbors, and Russia's current economic situation and future. SSAU is one Russia's leading academic institutions with 10,500 students studying at ten faculties in 27 specialty areas including: aircraft construction, aerospace engineering, radio engineering, information science and its newest faculty - economics and management. The university has more than 700 teachers and boasts 64 members of the Russian Academy of Sciences. -------------- -------------- MEDIA OUTREACH; PHOTO REPORT: DAY IN THE LIFE OF THE AMBASSADOR -------------- -------------- ¶12. (SBU) The Ambassador met with representatives from five local media outlets. In response to questions about the future of Russian accession to the WTO, the Ambassador said he expected Russia to be able to enter the WTO prior to the G-8 summit in July. (Note: Subsequently, his answer was run by Interfax throughout Russia and abroad.) Other issues discussed included the future of U.S. cooperation in the field of space exploration, exchange opportunities between the U.S. and Russia, the Alcoa investment, and the Warhol exhibition. Local media gave considerable play to the Ambassador's trip to the region and the Alcoa ribbon--cutting ceremony. A photojournalist from the Moscow-based "Ogonyok" weekly magazine accompanied the Ambassador throughout the trip. On April 24 "Ogonyok" published a photo report entitled, "A Day in the Life of the U.S. Ambassador to Russia." -------------- EQUAL ACCESS TO EDUCATION FOR ALL -------------- ¶13. (SBU) On April 17, the Ambassador spoke at an "Education for All" roundtable to raise awareness of the importance of equal access to educational opportunities for people with disabilities. "Association Desnitsa", the leading local NGO that defends the rights of children and adults with disabilities and which receives support from USAID-funded Perspektiva, organized the roundtable. Samara's Deputy Minister of Education, Yuriy Zalepukhin, representatives of Samara disability rights NGOs, parents' groups, and educational institutions, along with disabled adults and youth participated in the forum. All participants voiced their willingness and readiness to move forward to resolve issues relating to the integration of disabled children into mainstream schools and to open new opportunities for all disabled children in the Samara region. The event was well covered in the media, including TV news spots on April 17 and 18, which highlighted the Ambassador's participation, as well as interviews with some of the disabled persons in attendance. -------------- MOSCOW 00004572 004.2 OF 004 Comment -------------- ¶14. (SBU) During his visit, the Ambassador found that Samara is doing well in attracting substantial U.S. investment, including companies such as GM, Delphi, Alcoa, Amerada Hess, Pepsi, Coca- Cola, Citibank, Marriott Hotels, and Corning. Regional leaders recognize Samara's importance as one of Russia's top industrial regions and appear keen to take further steps to improve opportunities for foreign investment. Only time will tell whether the Special Economic Zone planned for Togliatti and other regional initiatives, including creation of a national university and construction of a super highway will be implemented in a way that brings greater transparency, stability and economic benefits to the region and its citizens. ADDITIONAL CLEARS: DOE: MWHITNEY, USAID: TMYERS BURNS