1. (SBU) Russia's recently arrived Consul General in Guangzhou,
Sergei Kotov, the son and grandson of Russian diplomats and
sinologists, has a big job ahead of him - renovating the old
Soviet-era consulate building abandoned these past 45 years, signing
contracts for a diplomatic office with an unhelpful foreign affairs
office offering "advice" about lease terms, getting enough
Chinese-language speakers from Moscow to staff a consular district
which covers the same provinces that the U.S. Congen does, and
providing services to a Russian population that is growing by leaps
and bounds in south China. Taking these concerns from the top:

-- The consulate building. The building on Shamian Island, nearby
the U.S. consulate, has been vacant for 45 years, since Russia
closed all of its consulates in China in 1962 during an era, Kotov
characterized as "full of misunderstandings and at times the
potential for violent clashes." The building itself, over 90 years
old, was originally purchased from a British trader in the 1920s,,
and had been used for 43 of the last 45 years as housing for FAO
staff. The FAO staff began lobbying 4-5 years ago for decent
housing and was moved into better quarters two years ago; the
staff's treatment of the building and the lack of any upkeep brought
about a deterioration that has left little more than a fagade. The
Russians are committed to returning the building to its prior glory,
at a cost of many millions of dollars, and their equivalent of OBO
and SOM will be arriving here in the next six months to look at what
can be done in the way of renovations. After that he said, it will
be time to do battle with the Urban Planning Office, which has
already indicated that it would "welcome" an opportunity to review
blueprints for the inside as well as for the outside.

-- Temporary diplomatic office. Kotov seems resigned to being in
temporary quarters for the next 18-24 months. The FAO has been less
than helpful in assisting him with setting up an office, noting that
Russia should consider signing a three-year lease for space rather
than the two years that Russia has in mind. When asked about
measures that Russia would take to protect the confidentiality of
information, he laughed and indicated that it was unlikely there
would be much of a confidential nature. As for equipment in the
"classified" area, he said that all materials would be purchased in
China and then "checked" prior to installation.

-- Chinese-language diplomats. Not many of them to go around, Kotov
opined. His staff, in the first six months, will consist of three
other officers, two of whom speak "decent' Chinese and the other who
will largely be an inside person working on consulate and temporary
office space.

-- Providing services to the Russian population. There are two
thousand Russians in Guangzhou and ten thousand in the consular
district, according to Kotov. This figure, he told us, is roughly
half of the total number of Russians in China. A number of them are
older, retired pensioners who have sold off their real estate and
other possessions in Russia and are now living pretty well in the
south. According to Kotov, many Russians are investing in
manufacturing in Guangdong, with the sole purpose of selling here.
He did acknowledge that the price of admission in terms of commerce
is usually a willingness to share high technology with Chinese
enterprises, but pointed out that this was a requirement levied on
most foreign companies.



2. (SBU) As for south China trade with Russia - which Kotov said
was far more important than the border trade to the north - Party
Secretary Zhang Dejiang is planning to lead a delegation to Russia

SIPDIS
in the early fall. Zhang's trip is a signal to "private"
entrepreneurs in Zhejiang and Jiangsu, who until now have controlled
commerce between China and Russia, that Guangdong intends to be a
"player" in the overall trade relationship.

3.(SBU) Kotov, who served in Beijing from 1994 through 1997 working
on bilateral relations, has been involved in working on Russia's
"return" to Guangzhou (agreed to originally in 1994) for the better
part of the past two years. He has traveled here five or six times
and met primarily with former FAO Deputy Director (and now Director)
Fu Lang, whom he characterized as well meaning but often unable to
bring closure on any issue. He asked about our experience here -
and about all we could do was commiserate. Closure on issues, the
CG noted, would be nice, but perhaps all we could ask for at times
was to move the FAO's default point from "no" to "maybe."

GOLDBERG