GOR AIMS TO CUT U.S. MEAT IMPORTS IN

UNCLAS MOSCOW 002769

SENSITIVE
SIPDIS

USDA FAS FOR OCRA/CURTIS, FLEMINGS, KUYPERS;
- OSTA/HAMILTON, BEAN; ONA/SALLYARDS, MURPHY
PASS FSIS/HARRIES, DUTROW
PASS APHIS MITCHELL
STATE FOR EUR/RUS
STATE PASS USTR FOR PORTER, HAFNER, KLEIN
BRUSSELS PASS APHIS/FERNANDEZ
VIENNA PASS APHIS/TANAKA

E.O. 12958: N/A
TAGS: EAGR ETRD ECON WTO RS
SUBJECT: GOR AIMS TO CUT U.S. MEAT IMPORTS IN
2009

REF: A) MOSCOW 2740, B) MOSCOW 2620, C) MOSCOW
2579, D) MOSCOW 2204

SENSITIVE BUT UNCLASSIFIED


1. (SBU) SUMMARY: On September 11, Russian
Economic Development Minister Nabiullina sent a
letter to U.S. Trade Representative Schwab
requesting expert level consultations on the Meat
Agreement signed between Russia and the United
States in 2005 as part of Russia's bid to join
the WTO (REF A). Russia's chief WTO negotiator,
Maxim Medvedkov, informed AgMinCouns on September
12 that the GOR's position had not yet been
finalized as to what specific components of the
Meat Agreement the GOR would like to modify. He
did state, however, that GOR plans to make
amendments for poultry and pork that would take
effect in 2009. In recent weeks, several
government officials have stated they want to
substantially lower the quota for U.S. poultry in
2009 (Refs B, C),and raise over-quota duties on
poultry and pork, even though recent statistics
show that inflation during the first 8 months of
2008 has already reached 9.8 percent. END
SUMMARY.

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REQUEST FOR CONSULTATIONS ON MEAT AGREEMENT
--------------


2. (SBU) In a letter on September 11 to U.S.
Trade Representative Schwab, Economic Development
Minister Nabiullina requested consultations to
discuss issues of concern with the 2005 Meat
Agreement (Ref A). Although the letter did not
specify what issues the GOR would like to
discuss, several government officials have stated
to the press recently that they want to
substantially lower the tariff rate quota (TRQ)
for U.S. poultry in 2009 and raise over-quota
duties on poultry and pork.


3. (U) Article 3 of the Meat Agreement states
that the agreement shall be subject to review
upon request of either Party and that either
Party may request consultations regarding the
implementation of the agreement or its
termination. The Agreements states that "such
consultations shall be held within 30 days after
receipt of a written request, or at such other
time as the Parties agree."

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RUSSIA FOCUSED ON POULTRY AND PORK
--------------


4. (SBU) Russia's chief WTO negotiator, Maxim
Medvedkov, advised AgMinCouns on September 12
that GOR had yet to finalize its position for the
upcoming consultations. According to Medvedkov,
representatives from several Russian government
bodies will hold internal meetings in the coming
days to finalize their position. It is clear,
however, that GOR does anticipate making
amendments to the Meat Agreement that focus on
poultry and pork in 2009. Medvedkov stated that
the most sensitive issue was poultry and added
that he did not foresee a need for any amendments
on beef.


5. (SBU) Medvedkov observed that the U.S. and
Russian poultry industries signed a "milestone"
memorandum of understanding (MOU) in July that
"made conclusions about U.S. poultry exports in
2009" (REF D). AgMinCouns stated that the USG
was aware of the industry agreement, but added
that it was a private matter that did not involve
any agreements between our two governments.



6. (SBU) Observing that "We cannot wait until
Christmas Eve to announce any 2009 amendments to
the Meat Agreement," Medvedkov stated that the
consultations should happen sooner rather than
later, so that the Russian and U.S. industries
would have time to make adjustments in production
and shipping arrangements. Medvedkov also said
that the GOR was flexible on the scheduling and
venue for consultations, as well as on the
composition of negotiating teams.


7. (SBU) In recent weeks, post has heard from
several government and industry contacts that the
GOR wants to lower the U.S. quota of poultry to
750,000 metric tons (mt) in 2009, down from
931,000 mt. (NOTE: That is the level stated in
the industry MOU that Medvedkov cited.) In
addition, it is widely believed that the GOR
plans to raise over-quota duties on both poultry
and pork from 40 percent to 90 percent,
effectively pricing out U.S. supply of over-quota
pork and poultry to the Russian market.


8. (SBU) Representatives from "SoyuzKontrakt"
advised the Agriculture Section on September 10
that government contacts told them that the GOR
wants to cut the U.S. poultry TRQ allocation down
to 750,000 mt and that the Ministry of
Agriculture was also pushing hard for a hefty
hike in over-quota duties on poultry and possibly
pork. (SoyuzKontrakt is the largest importer of
U.S. poultry in Russia and holds 70 percent of
the total poultry TRQ.) The well-connected
SoyuzKontrakt representatives also stated that
the GOR has yet to agree on the level of new
tariff rates, but they were expecting that the
over-quota duty rate would be high enough to make
it unprofitable for importers to bring in over-
quota poultry and pork.

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COMMENT
--------------


9. (SBU) Medvedkov's comments on the likely GOR
issues for consultations on the Meat Agreement
are consistent with PM Putin's and First Deputy
PM Shuvalov's August 25 statements about the need
to reopen some commitments made during the WTO
accession process, particularly in the area of
agriculture (Refs B, C). Likewise, Agriculture
Minister Gordeyev announced on August 27 that his
ministry would seek broad cuts in poultry, pork
and dairy imports, given that "agreements signed
more than three years ago as part of the
negotiations on WTO accession are unfortunately
no longer in Russia's interests." In their
public statements about the need to reduce meat
imports, the GOR has not mentioned any concern
about the potential inflationary pressures on
food prices. Meat prices continue to trend
upward and jumped 2.2 percent in August on a
month-to-month basis, according to the Russian
State Statistics Service. Inflation during the
first 8 months of 2008 has already reached 9.8
percent, and the Ministry of Economic Development
recently forecast that inflation would reach 12.5
percent by the end of the year.
BEYRLE