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)

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SUMMARY
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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.

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"SOME DOCUMENT MUST BE ADOPTED"
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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.

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INTEREST IN INCREASED ECONOMIC TIES
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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.

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NO "GAS OPEC"
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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

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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."

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COMMENT
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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