SPANISH PRESIDENT ZAPATERO'S VISIT TO FOCUS ON

C O N F I D E N T I A L MOSCOW 004625

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/11/2017
TAGS: PREL EINV ETRD SP RS
SUBJECT: SPANISH PRESIDENT ZAPATERO'S VISIT TO FOCUS ON
ECONOMIC INVESTMENT

REF: MOSCOW 4419

Classified By: Political M/C Alice G. Wells. Reasons 1.4 (b/d).


1. (C) Summary: Spanish President Zapatero's September 28
meeting with President Putin in Sochi will focus on economic
cooperation and trade, concentrating on a "big push" to
stimulate the interest of Spanish investors. The visit will
also reinforce traditionally strong Russian-Spanish relations
and highlight Spain's efforts to deepen ties between Russia
and the EU. The two presidents also hope to sign an
agreement on the status of the Spanish cultural center in
Moscow. End Summary.


2. (C) Spanish President Zapatero will meet with President
Putin in Sochi in his second official visit to Russia on
September 28, which is also the second high-level Spanish
visit in a month. Spanish Foreign Minister Moratinos visited
Moscow on August 30 to discuss bilateral relations in
preparation for Zapatero's visit as well as in his capacity
as OSCE CiO (reftel). Although Spanish diplomats noted that
some OSCE concerns may be raised, Zapatero's meetings will
focus primarily on bilateral issues.

Strong Economic Ties, But Not Yet At Full Potential
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3. (C) In a September 10 meeting, MFA First Secretary for
Spain Mikhail Rossiyskiy told us Zapatero's visit will focus
on economic cooperation and trade. Spanish trade with Russia
grew by over 20 percent to 4.2 billion dollars in 2006.
Exports to Spain mainly consist of Russian chemical goods;
Spanish imports to Russia are primarily composed of
machinery, consumer goods, and agricultural products. Both
Russian and Spanish diplomats agreed that Russian
hydrocarbons do not complicate the bilateral relationship, as
Spain imports no gas and only negligible amounts of oil from
Russia.


4. (C) Neither side feels trade and investment have reached
their full potential and both sides want to initiate a "big
push" to attract more Spanish investors to Russia.
Rossiyskiy cited as an example the possibility of Spanish
firms investing in the establishment of a high-speed train
network between Moscow and St. Petersburg. Russia will host
a seminar on investment in railways in September that several
Spanish companies have shown interest in attending.
Rossiyskiy also told us Spanish investors are interested in
electricity production in Siberia. He noted that lack of
technology and expertise in harsh weather conditions were a
problem and no investment has been made yet, but they were
working to develop new solutions.

Spain Pushes For Stronger EU-Russia Ties
--------------


5. (C) Agreeing with the MFA assessment that the bilateral
relationship was very strong, the Spanish EMBASSY told us
Zapatero will also discuss with senior GOR officials ways to
deepen ties between the EU and Russia. Noting the August 30
trip was Fm Moratinos's fourth visit to Moscow in three
years, Russian and Spanish diplomats stressed that Spain is
in favor of a deeper, more integrated role for Russia in
European affairs and generally supports the speedy conclusion
of PCA negotiations. Sell regarded the choice of Sochi as a
venue for the meeting as a positive signal from the GOR
because it was likely to allow more time for Zapatero and
Putin to meet.

Cultural Center Irritant Resolved
--------------


6. (C) During FM Moratinos's most recent visit, one
continuing irritant in the relationship, the tax status of
the Institute Cervantes (the Spanish cultural center in
Moscow),was addressed. The Center had been taxed as a
business due to "commercial" factors such as Spanish language
classes, and the Spanish had delayed the opening of the
Pushkin Institute, a Russian cultural center, in Madrid until
the issue was resolved. Rossiyskiy told us that a mutually
agreeable solution to the "technical" tax problems had been
found, and Putin and Zapatero may sign the agreement in
Sochi. The Institute Cervantes will continue to provide
language classes, cultural events, and resources for Russian
students wishing to study abroad.
Burns