SPECIAL REPRESENTATIVE MERMOUD'S JULY 21 VISIT TO

UNCLAS MOSCOW 002269 SIPDIS SENSITIVE STATE FOR EUR/RUS, EEB/CBA DOC FOR 4231/IEP/EUR/JBROUGHER NSC FOR WARLICK E.O. 12958: N/A TAGS: ECON ETTC ENRG RS SUBJECT: SPECIAL REPRESENTATIVE MERMOUD'S JULY 21 VISIT TO MOSCOW -------------- Summary -------------- ¶1. (SBU) The main themes of Special Representative for Commercial and Business Affairs J. Frank Mermoud's visit to Moscow on July 21 were development of Russia's high-tech sectors and opportunities for official as well as informal exchanges. Chairman of the Onexim Group investment fund Mikhail Prokhorov offered a frank assessment of the country's prospects for becoming a global leader in technological innovation. He also outlined his own vision for regaining the country's competitive edge. Presidential Administration Advisor Arkadiy Dvorkovich presented an overview of the government's plans for making nanotechnology-related investments domestically and abroad. Speaking of the administration's broader goals, Dvorkovich suggested that a wider array of business and educational exchanges could multiply Russia's judicial and economic reform efforts. He also acknowledged Russia's delayed response to the U.S. proposal on the business-to-business dialogue. Rosatom Deputy Director-General Nikolai Spasskiy expressed his support for close cooperation with the U.S. on nuclear energy issues. He recommended a bold approach in bilateral cooperation, suggesting that capturing each government's imagination would be the key to sustaining a mutually beneficial partnership. End Summary. -------------- Prokhorov on High-Tech -------------- ¶2. (SBU) Special Representative Mermoud met with former Norilsk Nickel CEO Mikhail Prokhorov to discuss his support for the development of high technologies, particularly nanotechnology, in Russia. Forbes ranks Prokhorov the world's 24th richest person. In 2007, he launched the private investment fund Onexim Group with USD 25 billion in assets, focusing on high-tech investments. He is also a member of the Government Council for Nanotechnologies. Despite Onexim's focus on high-tech, Prokhorov is cynical about Russia's chances to become a world leader. He reported that during his tenure at Norilsk Nickel, he conducted a thorough inventory of the scientists working at Russia's far-flung science institutes, and found only about 300 capable of working on new, marketable technologies. He said most Russian inventors are very old or very young and have little or no idea how to bring a product to market, especially the older inventors. His goal over the next 2-3 years is to bring the 300 scientists he has identified together in Moscow to work on marketable projects. Prokhorov warned, however, that Russia has no national market for new technologies, so innovations must be geared for the world market. ¶3. (SBU) Prokhorov was particularly skeptical about the GOR's plans for Rosnanotech, the state corporation that received $5 billion to serve as a venture capital fund for Russian nano companies. Prokhorov said that the GOR "doesn't get it," and that their goals for Rosnanotech are "patriotic, not realistic." He thinks it would be necessary for Russia to capture 5-10 percent of the world market in nanotech to be competitive, and that this would cost USD 30 billion, six times what the GOR has invested. He also noted that he had "heard rumors" that Rosnanotech Director General Leonid Melamed, who just returned from an official visit to the U.S., will soon be replaced. ¶4. (SBU) Prokhorov reported that in 3-4 months he will talk to Prime Minister Putin to ask about his high tech development strategy. If the Prime Minister does not have one, Prokhorov will "create his own." He said the focus of that strategy will depend on whether the Prime Minister plans to develop a Russian market, or produce for the world market. He noted that he considers Russia to have a competitive advantage vis-a-vis the world market in only a few areas, such as fuel cells. He added that ecology could be another area, if Russia's laws weren't so poor in this area. Regarding U.S.-Russia cooperation in the sector, Prokhorov's view is Russia "isn't ready." He said that Russia lacks infrastructure, and is still too closed and concerned about revealing secrets. He advised that cooperative ventures should start small, and completely avoid any sensitive sectors. -------------- Dvorkovich on Investments, Exchanges -------------- ¶5. (SBU) Presidential Administration Advisor Arkadiy Dvorkovich said the nano-technology fund was starting operations and looking for places to invest not just in Russia but globally, including in the United States. He noted that more broadly, Russian companies were looking to invest in the U.S. and other countries and that one of the new governments principal economic tasks was to support these companies overseas. He also highlighted the GOR's interest in making Moscow an international financial center. ¶6. (SBU) Dvorkovich explained that the new government's principal economic reform focus was on judicial reform and fighting corruption. The GOR would release its plan in the fall and introduce needed legislation in the Duma. Mermoud responded that we would look for ways to be helpful. Dvorkovich said Russia no longer needed financial or even technical assistance but was interested in the two governments' facilitating greater private sector Russian and American interaction, for example, company-to-company or university-to-university. He was personally involved in setting up a university partnership between Duke's Fuqua Business School, of which he was an alumnus, and a business school in Russia. ¶7. (SBU) On the U.S-Russia business-to-business dialogue, Dvorkovich acknowledged that the ball was in Russia's court but said that the government reorganization was slowing a response to the U.S. proposal as was the GOR's unfamiliarity with the proposed format. Russia preferred Intergovernmental Commissions (IGCs),which it had with many other countries. Mermoud noted that Commerce had the lead in the USG on this issue and expressed hope that Dvorkovich would find time to visit the U.S. in the fall. -------------- Rosatom's Spasskiy on Cooperation -------------- ¶8. (SBU) Rosatom Deputy Director General Nikolai Spasskiy spoke at length on his priorities and his vision for future cooperation between the U.S. and Russia. He said that there was "no alternative to working together" and that Russia had a genuine interest in working with the U.S. nuclear industry, while maintaining both nonproliferation and security goals. Spasskiy visualized three bases for cooperation. The first was a "political dovetailing" based on the St. Petersburg, Kennebunkport and Sochi meetings between Presidents Bush and Putin. The second, a "proper legal foundation," which he defined as the finalizing and approval of the 123 agreement between the US and Russia. The third was a "business component," which Spasskiy adamantly declared must be based on a full-fledged bilateral arrangement between the U.S. and Russia. ¶9. (SBU) Spasskiy said that Russia could be of assistance if the nuclear renaissance actually takes off because, as he described it, the US would have a deficit in enrichment capacity to support the new reactors. He also allowed that Russia could provide new designs for reactors and turbines and peripheral equipment. But to do this, the 123 agreement was required. He then made a short statement on the Rosatom reorganization, basically saying that it was not a finished product and much remained to be worked out in terms of how the organization will manage its assets. ¶10. (SBU) Spasskiy then broached a completely new line of thought. He said that the key to the future cooperation between the U.S. and Russia was to start with a "big project," something that would catch the attention of the public in both nations as well as their respective governments. Spasskiy said that it had to be something "big, attractive economically and feasible." He was quite clear that "starting small is not the way." He suggested to Special Representative Mermoud that it might be useful to compare our visions on what this big project might be at a meeting in the late summer or fall. ¶11. (U) This message has been cleared by Special Representative Mermoud's office. RUBIN