A/S LOWENKRON DISCUSSES NGO LAW WITH STATE DUMA

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 000802

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/24/2016
TAGS: PGOV PREL KDEM RS
SUBJECT: A/S LOWENKRON DISCUSSES NGO LAW WITH STATE DUMA
DEPUTY ANDREY MAKAROV

Classified By: Minister-Counselor for Political Affairs Kirk
Augustine. Reasons: 1.4 (b/d).


1. (C) SUMMARY. On January 18 DRL A/S Barry Lowenkron and EUR
DAS David Kramer met with State Duma Deputy Andrey Makarov.
Makarov vigorously )- and at times heatedly )- defended the
new NGO legislation, insisting that the text met
international legal standards, but he conceded there could be
problems with its implementation. Makarov explained the
reasoning behind the various objectives of the law and
described the evolution of changes dealing with taxation,
registration, and termination of NGOs. END SUMMARY.
.
Basis for New NGO Law
--------------


2. (C) During a January 18 meeting with State Duma Deputy
Andrey Makarov, A/S Lowenkron said he understood Makarov was
one of the architects of the NGO bill and that he would like
to learn about plans for its implementation. Lowenkron
commented that the law troubled NGOs because the climate in
which they were working had become more difficult in the past
several years, and many activists were afraid it might become
even worse following the adoption of the legislation.


3. (C) Quoting the famous 19th century Russian writer
Saltykov-Shchedrin's comment that the cruelty of Russian laws
was compensated for by their loose administration, Makarov
said that one of the reasons for his involvement was to make
the law less cruel while strengthening its administration.
He said he was greatly concerned when he saw the first draft
proposed by the Ministry of Justice (MOJ). He stressed that
the heads of several Duma committees, many from the liberal
wing of United Russia, had joined him in reworking the MOJ
draft; in other words, he said, the law had not been crafted
only by hardliners.


4. (C) Makarov said he had also become involved because he
wanted to amend the original law to prevent it from becoming
an additional "bludgeon" in the hands of law enforcement
agencies. Makarov said he gave four major interviews last
year in his capacity as Deputy Chairman of the Duma's Budget
and Taxation Committee ) long before the bill was adopted )
in which he expressed fears that law enforcement agencies
were trying to gain power in Russia. He thought they were a
major force in the Russian economy and were trying to become
a political force as well. Makarov explained that an NGO law
with explicitly stringent parameters would actually protect
NGOs from overreaching law enforcement agencies.


5. (C) Citing his experience during the anti-Yeltsin coup in
1993, Makarov mentioned that he had been fifth on the list of
coup opponents marked for termination if it had succeeded.
Insisting that he believed strongly that the democratic path
was the only option for him, he saw the new NGO law as
another step along that path.


6. (C) Makarov stressed that he could not see any grounds for
concern with the final, amended law. He had heard only two
specific complaints during his meetings with foreign and
Russian NGOs, as well as with the American Chamber of
Commerce. The first was that much of the language for
closing an NGO had been taken verbatim from a UN resolution
ensuring state sovereignty. He explained that NGOs had
requested changes in terminology to better reflect NGO
experiences, rather than to focus on state sovereignty. The
second concern was about implementation. Makarov
emphatically insisted that the new legislation was a marked
improvement over the previous law, and that the real issue
was not its text but subsequent GOR actions.
.
Taxation and Accounting Issues under New NGO Law
-------------- ---


7. (C) Makarov noted that tax laws dealing with NGOs were
amended six months ago. Previously, NGOs were exempt from
taxes only if their financial sources of income were included
on a list approved by the government. Under the new law,
NGOs are exempt if their financing is derived from charitable
sources that conform with the law. Both foreign and Russian
NGOs had to pay income taxes on their employees' salaries, as
well as social security payroll taxes. If an NGO is involved
in revenue-generating activities in Russia, it had to report
such income based on standard tax procedures.


8. (C) Makarov explained that under the old law, tax
authorities were responsible for registering and monitoring
NGOs, but they were now only responsible for tax issues. In
addition, previously, tax authorities could monitor funding
only from Russian sources; they had no power to regulate
funding derived from foreign sources. Under the new law, an

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NGO has to declare the amount, purpose, and end recipients of
foreign financial support.


9. (C) Under the new legislation, Makarov noted, NGOs could
be audited only once a year, and the only focus of the audit
was to determine whether the funds were actually spent on the
organization's stated purposes. In this respect, he argued
that Moscow was mainly interested in the transparency of
financial flows, in particular to Islamic officials and NGOs
in the North Caucasus and Southern Russia. Many radical
organizations were registered as NGOs, but there had been no
provision in the old law allowing authorities to close an
organization for laundering money or financing terrorism. It
was possible to jail individual offenders but not close the
organization, he noted. Lowenkron underscored that there
were possibly better, more efficient means to close down
sources of extremist financing, such as through the work of
law enforcement and intelligence agencies. Makarov replied
that each country dealt with extremists as it determined
appropriate, while observing treaties and agreements.


10. (C) Makarov said only 110,000 of the 160,000 NGOs in
Russia were registered with tax authorities, since the rest
did not pay salary taxes. Hence, one-third of NGOs were off
the state revenue radar. He asked rhetorically whether the
U.S. would tolerate such a situation and explained that the
new law would help tax collection in addition to monitoring
NGOs.
.
Registration and Termination of NGO Activity
--------------


11. (C) Makarov explained that a provision removed from the
first draft would have allowed the Federal Registration
Service (FRS) to deny registration if an NGO's leader was
involved in "improper activities"; under the final version,
all such decisions had to be referred to a court for final
determination. In addition, the law did not allow the FRS to
deny registration on the basis of "expediency"; the FRS was
not allowed to evaluate an NGO's usefulness based on its
activities. In this sense, Makarov argued, the new law
limited the ability of bureaucrats to act in an arbitrary
manner.


12. (C) Also, under the new legislation, NGOs will be
required to submit registration documents according to a
comprehensive, finite list outlined in the law. The old
practice of bureaucrats indefinitely stalling registration by
demanding more and more documents would be eliminated.
Documents would be filed only with the FRS, whereas
previously, at least four other agencies (e.g., tax
authorities, FSB, MVD, and the MOJ) might have been involved
in registration. If the FRS had any questions about
documents, he said it was allowed to ask an NGO to clarify
them. Denials of registration could be appealed in court.


13. (C) Makarov asserted that the original law contained no
provision for closing down an NGO if it was involved in money
laundering or extremist financing, but the new legislation
included such a provision. Any other grounds to close an NGO
had Qbe determined by a court. Makarov added that only a
court ruling enabled an NGO to be shut down based on
activities deemed "counter to the interests of Russia."
.
Concerns over Implementation
--------------


14. (C) Lowenkron pressed Makarov on such issues as the
vagueness of the guidelines, burdensome reporting
requirements, and potential for abuse. Makarov conceded that
problems could arise with implementation, but he argued that
any new or significantly amended law faced similar
challenges. He said the previous law, which was adopted
twelve years ago, was seriously outdated and had to be
amended to reflect changes in civil society. For example,
Makarov explained that the laws regulating political parties
and trade unions (passed several years later than the NGO
law) gave detailed procedures for creating such
organizations, but there was no legislative basis for
registering or terminating an NGO until the current law was
passed.


15. (C) Insisting that he respected human rights activists'
opinions, Makarov stated that their "hysterical appeals" to
the rest of the world and the world's excessive reaction
would only provoke a negative reaction from Russia and a
further tightening of the screws. Makarov insisted that
Moscow was doing its best to maintain a democratic climate to
the extent possible, but it was not an easy task. Any
attempt to pressure the country, including in the area of
NGOs, would likely backfire. He said Russia still suffered

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from "great power syndrome" ) it liked to learn new things
but hated to be told what to do or how to do it.


16. (C) Makarov concluded by observing that NGOs had become a
political card in the hands of players who could use it for
purposes that were "somewhat murky." He maintained that he
was prepared to discuss the law line by line and compare it
with the original version in order to prove that it was much
more democratic. He emphasized that any biased or unfair
criticism only served to divert attention from other
important issues, adding that some forces in the country
found it convenient to divert our attention from these
important issues.


17. (U) A/S Lowenkron has cleared this message.
BURNS