MFA IRAN DESK ON CASPIAN SUMMIT, ECONOMIC

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 005218 SIPDIS SIPDIS DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT DOE FOR HARBERT, HEGBORG, EKIMOFF DOC FOR 4231/IEP/EUR/JBROUGHER NSC FOR MCKIBBEN E.O. 12958: DECL: 10/30/2017 TAGS: EPET ENRG ECON PREL PINR RS IR SUBJECT: MFA IRAN DESK ON CASPIAN SUMMIT, ECONOMIC COOPERATION Classified By: Econ MC Eric Schultz for Reasons 1.4 (b/d) -------------- SUMMARY -------------- ¶1. (C) In an October 30 meeting, MFA Iran Desk Head Maxim Baranov indicated the Caspian Summit and bilateral meetings in Tehran resulted only in generic progress on economic cooperation. He described active engagement with Iran, however, including an upcoming 7th session of the "Joint Commission on Economic Cooperation," for which Iranian Foreign Minister Motaki will come to Moscow. He admitted it is "difficult" to do business with Iran, and said Russia had no interest in joining with Iran in a gas OPEC. End summary. -------------- "SOME DOCUMENT MUST BE ADOPTED" -------------- ¶2. (C) Describing the recent Caspian Summit and bilateral meetings Tehran, MFA Iran Desk Head Maxim Baranov said there had been progress in cooperating with Iran on economic issues. However, he could not identify substantive specific advances on the economic front, and only cited agreements to continue dialogue and negotiation in future meetings. He said the first summit of the five Caspian States, more than five years ago in Ashgabat, produced no overall agreement, prompting all parties to insist that "some document" be adopted at this Summit. ¶3. (C) Baranov said the Tehran declaration is a guideline as to how the nations will proceed on issues surrounding the legal status of the Caspian. He said a convention on the legal status of the Caspian is still many years away. The parties agreed to put negotiations "on the presidential level," and to hold summits more regularly, with Azerbaijan agreeing to host next year. Baranov dismissed as "only an idea" a proposal for an "Organization for Economic Cooperation of Littoral States," but added that Russia proposed hosting a multilateral economic cooperation conference in Astrakhan at the Ministerial level next year. -------------- INTEREST IN INCREASED ECONOMIC TIES -------------- ¶4. (C) According to Baranov, the bilateral meetings in Tehran focused on expanding economic relations and the nuclear issue. He said both sides are interested in increasing trade, which at just $2 billion last year, substantially lagged behind Russia-Turkey trade of $17 billion. In the first half of 2007, two-way trade was $1.8 billion. Russian exports to Iran, mainly machinery, account for some 90% of total trade, giving Russia a relatively large trade surplus. ¶5. (C) Iranian Foreign Minister Motaki will come to Moscow at the end of this year to participate in the 7th session of the "Joint Commission on Economic Cooperation." At the meeting, Baranov expects, Russia and Iran will sign various documents to "clarify the legal basis of economic interactions -- investments, standards, etc." ¶6. (C) Baranov said both Russia and Iran are interested in developing the rail and road networks necessary to complete a true North-South transportation corridor between South Asia and Russia, through Iran. He said there is currently no rail connection with Iran. -------------- NO "GAS OPEC" -------------- ¶7. (C) Baranov said that despite repeated Iranian suggestions that major gas producers create a "Gas OPEC," Russia does not see such an entity as needed or viable, given the structure of the gas trade. President Putin favors "cooperation and information sharing" on gas, but has, for now, ruled out participation in such a cartel. He said Russia and Iran have MOSCOW 00005218 002 OF 002 agreed to cooperate in the energy sector, but that there are few current specific projects involving both countries. According to Baranov, Gazprom is negotiating with France's Total and Malaysia's Petronas to participate in development of the South Pars gas field in Iran, but that doing business with Iran is "difficult." ¶8. (C) When we asked Baranov if Iran is a reliable partner, the best he could do was dance around the question. The feeling seems mutual. When discussing Iran with Japanese First Secretary Ito Toshia, he said that an Iranian diplomat in Moscow told him that "Iran does not fully trust Russia." -------------- COMMENT -------------- ¶9. (C) Russia and Iran have mutual trade interests. But they are also natural economic and geopolitical competitors in a complex region. Neither can afford to ignore the other and both appear willing to keep meeting, but it is not yet clear that, in the energy sector, that amounts to much. End comment. Burns