RUSSIA: COMMERCE SECRETARY GUTIERREZ'S APRIL 4

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 001515

SIPDIS

SIPDIS

STATE FOR EUR/RUS - MWARLICK, AHOLMAN, SGUHA AND EB/TPP/BTA
STATE PASS USTR FOR SDONNELLY, LERRION, LMOLNAR
NSC FOR MKLECHESKI, TMCKIBBEN

USDOC FOR 1000/SEC/SECRETARY GUTIERREZ
USDOC FOR 4231/IEP/EUR/JBROUGHER
USDOC FOR 4231/IEP/EUR/MEDWARDS
USDA FOR U/S PENN, OA/ JAFLEMINGS
DOE FOR NE-1: SPURGEON/BROWN
DOE FOR NA-20: WTOBEY/KBAKER/SBLACK/TDETERS/JCONNERY

E.O. 12958: DECL: 03/30/2016
TAGS: ETRD ECON WTO KIPR KNNP RS
SUBJECT: RUSSIA: COMMERCE SECRETARY GUTIERREZ'S APRIL 4
MEETING WITH MINISTER GREF

REF: MOSCOW 1354

Classified By: Ambassador William Burns for Reasons 1.5 (b) and (d).


1. (C) SUMMARY: In an April 4 meeting with Commerce Secretary
Gutierrez, Minister of Economic Development and Trade (MEDT)
German Gref expressed support for conclusion of a
WTO-consistent bilateral uranium suspension agreement that
does not discriminate against Russian suppliers. While
skirting questions on Russia's bilateral WTO commitment to
revoke licenses for optical disk plants located on
government-controlled, military-industrial sites and to
protect pharmaceutical test data, Gref reported that draft
interim regulations for imported encryption technology could
be ready soon and that the GOR would definitively lift a
temporary tariff on agricultural harvesters by June 30 and
potentially a month earlier. Gref highlighted criminal cases
against management of pirate website www.AllofMP3.com and
administrative actions that have hindered the site's
operations, but repeated GOR claims that the registration of
the site's domain name in the U.S. prevented Russia from
shutting it down.


2. (C) Gref emphasized that the current political window for
Russia's WTO accession closes this year, and confirmed
President Putin's strong desire that Russia accede during
this political cycle. The Minister was optimistic about an
eventual Boeing 787 sale to Aeroflot, pledged support for Dow
Chemical's proposed investment and International Paper's
proposed joint venture with Ilim Pulp, offered to talk to
Russian Railways Chairman Yakunin about General Electric's
proposed locomotive sale, and confirmed his understanding
that Finance Minister Kudrin was following closely
developments in GOR legal action against
PriceWaterhouseCoopers. Secretary Gutierrez welcomed news
that Gref is considering a visit to the U.S. in the second
half of the year. End Summary

Uranium Suspension Agreement
--------------


3. (C) Secretary Gutierrez informed Minister Gref he would be
discussing the bilateral uranium suspension agreement with
Rosatom Director Kiriyenko later in the day, and requested
Gref's advice on how to conclude negotiations. Gref praised
Kiriyenko's role in reenergizing Rosatom, which plans to
spend $700 million this year and $2.5 billion next year to
build state of the art, safe nuclear power stations and
expand capacity. Gref reported that he spoke with Kiriyenko
April 3 about the bilateral uranium suspension agreement.
While he expressed support for concluding negotiations, he
conveyed two concerns reportedly shared by Kiriyenko: that
the agreement be fully WTO-compliant and that it not
discriminate against Russian suppliers. Assistant Secretary
Spooner confirmed the USG view that the agreement, as
currently drafted, is indeed WTO-compliant, and undertook to
discuss the issue further with Rosatom as well as MEDT
experts, who Gref suggested take a more active role in
negotiations.

WTO
---


4. (C) Reiterating USG support for Russia's accession to the
WTO as soon as possible, Secretary Gutierrez outlined several
ongoing concerns related to Russia's compliance with
commitments made in our bilateral market access agreement and
corresponding side letters. Namely, we are looking for
progress on Russia's pledges to issue interim regulations for
imported encryption technology; rescind the temporary tariff
on agricultural harvesters in advance of its July 1
expiration; terminate any existing leases for optical disk
facilities located on government-controlled,
military-industrial sites (RAREs); shut down the pirate
website www.AllofMP3.com; and legally establish protection of
pharmaceutical test data. The Secretary also reiterated the
USG's IPR side letter pledge to step up joint IPR training
programs.

MOSCOW 00001515 002 OF 003




5. (C) Responding to specific issues, Minister Gref reported
that the GOR has prepared draft interim regulations for
imported encryption technology. While reaching interagency
agreement has been challenging, Gref hoped to be able to
share the draft soon. Gref also reported that a draft GOR
resolution to lift the temporary tariff on agricultural
harvesters by May 31 was currently in the approval process,
but that in any event the tariff will definitively expire on
June 30 with no chance of extension. Neglecting to address
the termination of leases for optical disk facilities on
RAREs, Gref moved on to www.AllofMPp3.com. He said that
website management requested a meeting with Gref two weeks
ago to discuss their claims to have moved to legal operations
and "harassment" by law enforcement, including numerous
searches and seizure of website servers. Gref said he
planned to grant the meeting.


6. (C) While claiming that Russian law enforcement cannot
shut down AllofMP3.com because the site's domain name is
registered in the U.S., Gref did point out that several
criminal cases are ongoing against former and current website
management and that certain administrative measures had been
applied to stop the site's operations. He also reported that
in the past year GOR agencies had opened six criminal cases
against alleged pirate Internet sites and closed seven such
sites. Gref said that one of his aides has been working with
rightsholders and law enforcement agencies to draft
amendments to overarching IPR legislation that would tighten
enforcement of IPR in electronic media. Gref emphasized that
Russians themselves are increasingly pushing for stronger IP
protection, and specifically noted the dangers of counterfeit
pharmaceuticals. He neglected to respond on the issue of
data protection.


7. (C) Gref thanked the Secretary for his offer to work
closely with Russia to conclude multilateral WTO
negotiations. He emphasized that the Russian political
window for finalizing accession was closing this year in the
face of electoral campaigning and increasing protectionist
sentiment. If it does not happen in 2007, he predicted a
delay of at least a year. He relayed President Putin's
strong desire to complete the process in the current
political cycle, and expressed uncertainty about a future
administration's attitude toward accession.

ADVOCACY
--------------


8. (C) Secretary Gutierrez appealed for the Minister's
support for Boeing's potential sale to Aeroflot of twenty-two
787 planes; Dow Chemical's proposed investment; International
Paper's proposed 50/50 joint venture with Ilim Pulp; General
Electric's proposed sale of locomotives to Russia's rail
monopoly, RZD; and for fair resolution of legal claims
against PriceWaterhouseCoopers (reftel) Gref expressed
admiration for Boeing, and predicted that the company's
"wise, well-conceived, and well-articulated" strategy of
long-term, multifaceted engagement with Russia will bear
fruit. In his view, Boeing is winning the competition with
Airbus in Russia through work on the Russian Regional Jet,
Boeing's Moscow Design Center, and its titanium joint
venture. Gref appealed for more time, but predicted that the
Boeing sale could happen.


9. (C) Gref said he met with Dow's CEO last year, and while
he was unfamiliar with current Dow plans, he invited the
company to brief his ministry and pledged to be helpful. He
reported that he has talked in-depth with International Paper
executives about their planned joint venture with Ilim Pulp,
and confirmed his support. On GE, Gref said he was scheduled
to meet with RZD Chairman Yakunin next week, and would talk
with him about any potential problems, including reports that
RZD would only consider buying Russian-produced locomotives.
He also suggested that GE more actively pursue opportunities
in Russia's electric power generation sector, as was Siemens.
Finally, Gref confirmed he spoke with Kudrin about the legal
action against PriceWaterhouseCoopers, and Kudrin is

MOSCOW 00001515 003 OF 003


following developments closely.


10. (C) In closing, Gref made a pitch for attendance by
President Bush at the June 8-10 St. Petersburg Economic Forum
- the last one of President Putin's tenure - and highlighted
Russia's bid to host the 2014 Winter Olympic Games in Sochi.
He also mentioned that he may visit the U.S. in the second
half of the year, news the Secretary welcomed.
BURNS