RUSSIA: DEPUTY TREASURY SECRETARY KIMMITT'S

UNCLAS SECTION 01 OF 02 MOSCOW 003162

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SENSITIVE
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DEPT FOR EUR/RUS
TREASURY FOR WILKINSON, LEVEY, GLASER
DEPT PASS USTR FOR DONNELLY
DOE FOR HARBERT/EKIMOFF/PISCITELLI
DOC FOR 4231/IEP/EUR/JBROUGHER
NSC FOR MCKIBBEN

E.O. 12958: N/A
TAGS: ECON EFIN ENRG EIND PREL PINR IZ KN IR RS
SUBJECT: RUSSIA: DEPUTY TREASURY SECRETARY KIMMITT'S
MEETING WITH DFM DENISOV



1. (U) SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET
DISTRIBUTION.


2. (SBU) SUMMARY: In a June 22 meeting with Deputy Treasury
Secretary Kimmitt, Russian Deputy FM Denisov expressed

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interest in cooperating with Iraq for the long term ("we are
optimists") but indicated that debt relief is currently tied
up with other bilateral and economic considerations. On
bilateral foreign investment, Denisov suggested the U.S.
climate might be too restrictive (referring to CFIUS) and
that Russia was on the right path in terms of establishing
legal clarity for its own investment regime, even if the pace
is not as quick as investors would like. On North Korea,
Denisov agreed that it was Pyongyang's turn to take "concrete
steps." Finally, Denisov expressed some concern over the
growing mandate of FATF. End Summary.


3. (SBU) During their June 22 meeting, Deputy Treasury
Secretary Kimmitt, discussing the role of Treasury, mentioned

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progress in our economic relationship with China and
suggested the need for patience and principle. In response,
DFM Denisov suggested that if the word "China" was replaced
with "Russia," the situation would be similar. He explained
that the U.S. and Russia have similar strategic goals but
differ on the pace of actions. He quoted Mao, saying "the
prospects are bright, but the road is winding." He accused
the U.S. of "turning the key too tightly" with regard to
restrictions on foreign investment (a claim the Deputy
Secretary successfully refuted with statistics),and hoped

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that regulations would be made "clearer and more acceptable."


4. (SBU) Appreciating the "imperfections" of the foreign
investment situation in Russia, Denisov said that the system
still needs time to mature. He said that sometimes the
government takes actions that "are not comfortable for us or
our partners," but noted the trend is positive. He stressed,
however, that Russia welcomes U.S. investment and suggested
that recent large inflows of U.S. and other foreign
investment into Russia are "just the beginning." He said
Russia would continue working to make its actions more
comprehensible. He agreed with Deputy Secretary Kimmitt's
suggestion that Russia include both the security and economic
communities in the regulatory review process on foreign
investment. He also viewed positively the suggestion that
Russian and American companies gather at some agreed upon
forum to discuss our respective foreign investment regimes,
once both countries had approved updated laws.


5. (SBU) On Iraqi and Afghan debt relief, Denisov started by
saying the Russian Finance Ministry has the lead, while the
Foreign Ministry is more involved with the political aspects
of the issue. He said he believes a decision on Afghan debt
relief is "very close," with about $12 billion of debt to be
given very favorable HIPC terms. He said debt relief for
Iraq is still in process, and is part of a larger set of
bilateral agenda items and of Russia's broader economic
goals. He referred to pressure from the business community,
especially from Lukoil, which has a pending claim on a field
from pre-war days. He said many do not want to see Russia
"give away" something without protecting its commercial
interests in Iraq. He suggested that Russia is dealing with
the debt issue bilaterally because the U.S. has told Russia
on other issues that Russia needs to deal with Iraq directly
as a sovereign nation. He stressed that Russia "is an
optimist" on Iraq and wants to protect its long-term
interests there.


6. (SBU) Deputy Secretary Kimmitt pointed to China's recent
approval of debt relief as a model of disconnecting the debt
forgiveness issue from other considerations, and suggested
that conversations on other issues will likely progress more
quickly once the debt situation is set aside. He added that
Moscow, the only Paris Club member yet to approve debt
relief, needs to show commitment to this issue in order to
widen its participation in multilateral fora. Deputy
Secretary Kimmitt and the Ambassador both stressed the U.S.

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stands ready to help Russia make necessary contacts with
Iraqi officials and offered to help secure the attendance of

MOSCOW 00003162 002 OF 002


Iraqi Ministers at proposed Intergovernmental Commission
meetings.


7. (SBU) Again expressing optimism about the future of Iraq
and the availability of opportunities, Denisov reiterated
Russia's interest in debt forgiveness, but clung to the need
for some assurances regarding the future of Russia's
commercial interests in Iraq. Denisov then spoke for several
minutes about the historical importance of Iraq to Russia,
citing the fact that Russian-Arabic dictionaries are actually
specific to the Iraqi dialect (he knows first hand from his
stint as Ambassador to Egypt).


8. (SBU) In response to Deputy Secretary Kimmitt's expression
of thanks regarding the transfer of funds to North Korea,
Denisov praised the U.S. effort as "bold." He said the ball
is now in North Korea's court and they must allow full access
for IAEA inspectors.


9. (SBU) On Iran, Denisov lamented the lack of "finality"
related to decisions made at the UNSC, saying the situation
is too ambiguous. He agreed with Deputy Secretary's "hopeful
but skeptical" assessment of the forthcoming meeting between
EU Foreign Policy Chief Javier Solana and Iranian nuclear
negotiator Larijani.


10. (SBU) Denisov also brought up Russia's concern with the
widening scope of FATF, referring to the latest efforts to
extend FATF control to WMD proliferators. He accepted Deputy
Secretary Kimmitt's assertion that all illicit financial

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transactions are a form of money laundering (the original
purview of FATF). He also agreed that FATF has a role to
play in building up countries' capabilities to take financial
actions against entities, if the political decision is made
to do so. He cautioned however, that new approaches and
rules need to be carefully constructed.


11. (SBU) Denisov also expressed deep concern about the
"grave situation" in Gaza and the West Bank, saying "no one
seems to be able to find the exit."


12. (SBU) Referring to President Putin's upcoming trip to the
U.S., Denisov also put in a plug for Russia's bid to host the
2012 Winter Olympic games in Sochi. He said Putin was going
from the U.S. to Guatemala to ask for support. He added
that regardless of the outcome, the government was prepared
to invest $12 billion in the Sochi region to turn it into a
world-class resort destination.


13. (U) This cable has been cleared by Deputy Secretary
Kimmitt.
BURNS