Identifier
Created
Classification
Origin
08MOSCOW2840
2008-09-23 12:54:00
CONFIDENTIAL
Embassy Moscow
Cable title:
SVERSTAL,S MORDASHOV OPTIMISTIC ON GEORGIA AND THE
how-toVZCZCXYZ0000 PP RUEHWEB DE RUEHMO #2840/01 2671254 ZNY CCCCC ZZH P 231254Z SEP 08 FM AMEMBASSY MOSCOW TO RUEHC/SECSTATE WASHDC PRIORITY 0083 INFO RUCNCIS/CIS COLLECTIVE PRIORITY RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY RHEHNSC/NSC WASHDC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
C O N F I D E N T I A L MOSCOW 002840
SIPDIS
STATE FOR EUR/RUS; NSC FOR JELLISON
E.O. 12958: DECL: 09/22/2018
TAGS: ECON EINV ETRD PREL PGOV RS
SUBJECT: SVERSTAL,S MORDASHOV OPTIMISTIC ON GEORGIA AND THE
ECONOMY; LESS SO ON WTO ACCESSION
Classified By: Ambassador John R. Beyrle for Reasons 1.5 (b) and (d).
-------
Summary
-------
C O N F I D E N T I A L MOSCOW 002840
SIPDIS
STATE FOR EUR/RUS; NSC FOR JELLISON
E.O. 12958: DECL: 09/22/2018
TAGS: ECON EINV ETRD PREL PGOV RS
SUBJECT: SVERSTAL,S MORDASHOV OPTIMISTIC ON GEORGIA AND THE
ECONOMY; LESS SO ON WTO ACCESSION
Classified By: Ambassador John R. Beyrle for Reasons 1.5 (b) and (d).
--------------
Summary
--------------
1. (C) Sverstal's CEO Alexander Mordashov told the Ambassador
September 18 that he was confident U.S.-Russia relations
would improve; the relationship was too strategically
important for tensions to persist and as tempers calmed, it
might be possible to find a compromise in the South Caucasus.
Mordashov also said he remained optimistic about the Russian
economy despite the financial crisis but admitted that he was
starting to see a fall off in steel orders from some sectors
of the economy. Mordashov said he was increasingly
pessimistic about Russia's WTO accession, which he said was
in everyone's best interests and which he claimed the GOR
still wanted. End Summary.
--------------
Georgia and U.S.-Russia Relations
--------------
2. (C) The Ambassador congratulated Mordashov on the success
of Sverstal and its investments in the U.S. Under Mordashov,
it had become a model Russian company. The Ambassador
stressed the importance of economic ties as a shock absorber
in the bilateral relationship but noted that recent political
decisions by Russia had posed a risk to those growing
business ties and produced a period of "cooler" relations.
3. (C) Mordashov responded that he was optimistic about
U.S.)Russia relations despite the current tensions.
U.S.-Russia relations were simply too important, and the
people had too much in common, including cultural
similarities, for relations to remain strained. He added
that as a major investor in the U.S., with billions of
dollars on the line, he had a stake in American success and
that American investors in Russia felt that same way toward
Russia's success.
4. (C) Mordashov said Russians and Americans were both
pragmatic peoples, though that was not always reflected in
their foreign policies. It was none of Russia's business,
for instance, who is the President of Georgia. However, at
the same time, the U.S. response also made no sense. Russian
peacekeepers had been attacked and killed; what would the
U.S. response have been if that had happened in Kosovo to
American peacekeepers?
5. (C) The Ambassador responded that we understood the
Russian position but that Russia had overreached by attacking
Georgia proper and recognizing South Ossetia and Abkhazia.
Russian withdrawal from Georgia proper was a necessary first
step in repairing the damage that had been done to Russia's
reputation and to its relations with the U.S. and Europe.
6. (C) Mordashov said he was not an expert in foreign policy
but that he had asked experts, including high-level GOR
officials, about Russia's goals in Georgia. They had all
assured him that Russia had no designs on Georgia proper and
was withdrawing its forces. Mordashov added that in his
view, South Ossetia and Abkhazia were not strategically
important. They had now acquired some symbolic value, but
that would fade over time and allow for a compromise on
status.
--------------
Russia's Financial Crisis
--------------
7. (C) Mordashov told the Ambassador that he also remained
optimistic about the Russian economy despite the recent
problems in the financial system. However, he admitted to
being more concerned now than a few weeks ago. He could talk
authoritatively about the demand for steel, which was a
useful measure of economic performance. Demand had risen 12
percent last year and there was a still healthy 8 percent
increase this year. However, in recent weeks he had seen for
the first time in several years customers, especially in the
construction industry, cutting back on orders. They were
having trouble getting the financing needed to finish
projects or start new ones.
8. (C) The Ambassador asked about Sverstal's stock buy-back
program. Mordashov said he had just started it that week.
He had devoted $400 million in cash to the program, which was
designed to support the company's share price.
--------------
WTO Accession
--------------
9. (C) Mordashov said he remained engaged with his U.S.
counterparts, including Chevron CEO O'Reilly, in pressing for
Russia's early WTO accession. Accession would be a huge
breakthrough for Russia and for its trade partners. There
had been a great deal of progress this year and accession was
very close. However, since the Georgian conflict it seemed
that momentum was now slowing. This was a great
disappointment. He said the U.S. should press Georgia to
accept accession; it was in their interest as well.
10. (C) The Ambassador responded that it was still our goal
to see Russia in the WTO but that the current situation in
Georgia made that difficult. However, resolving outstanding
issues required compromise and given the strains in the
relationship, compromise was harder to come by. In addition,
it was not clear to us that this was still a GOR goal.
Through its recent rhetoric and by seeking to reopen
bilateral trade agreements, the Russian Government appeared
to us to be signaling it was less interested in accession.
11. (C) Mordashov said Putin and Medvedev were
internationalists and still understood that accession was in
Russia's best long-term interests. However, they were
reacting emotionally to a real feeling of frustration and
disappointment. Russia's WTO negotiations had now been going
on even longer than had China's and there was a growing sense
in the GOR that the process was endless. Every time one
problem was solved, another one cropped up. It was human
nature to respond to disappointment in this manner: if you
don't want me, then I don't want you either.
12. (C) Mordashov added that if the U.S. was not pushing
accession it would not get done; it was in effect blocking
accession. Moreover, the continuing failure to accede was
playing into the hands of WTO opponents and anti-Western
elements within the government. These individuals were using
the failure to press for self-serving trade barriers and
unaffordable subsidies for agriculture and other industries
that would make accession even more difficult in the future.
What was needed was a high-level meeting between the EU, the
U.S. and Russia that would produce a grand compromise paving
the way for accession.
--------------
Comment
--------------
13. (C) Like other economic liberals, Mordashov appears to be
speaking out a bit more on the need for compromise in the
South Caucasus and for reduced tensions with the U.S. and the
West. Given his ties to Prime Minister Putin, if he is
indeed pushing this line, it is good news.
BEYRLE
SIPDIS
STATE FOR EUR/RUS; NSC FOR JELLISON
E.O. 12958: DECL: 09/22/2018
TAGS: ECON EINV ETRD PREL PGOV RS
SUBJECT: SVERSTAL,S MORDASHOV OPTIMISTIC ON GEORGIA AND THE
ECONOMY; LESS SO ON WTO ACCESSION
Classified By: Ambassador John R. Beyrle for Reasons 1.5 (b) and (d).
--------------
Summary
--------------
1. (C) Sverstal's CEO Alexander Mordashov told the Ambassador
September 18 that he was confident U.S.-Russia relations
would improve; the relationship was too strategically
important for tensions to persist and as tempers calmed, it
might be possible to find a compromise in the South Caucasus.
Mordashov also said he remained optimistic about the Russian
economy despite the financial crisis but admitted that he was
starting to see a fall off in steel orders from some sectors
of the economy. Mordashov said he was increasingly
pessimistic about Russia's WTO accession, which he said was
in everyone's best interests and which he claimed the GOR
still wanted. End Summary.
--------------
Georgia and U.S.-Russia Relations
--------------
2. (C) The Ambassador congratulated Mordashov on the success
of Sverstal and its investments in the U.S. Under Mordashov,
it had become a model Russian company. The Ambassador
stressed the importance of economic ties as a shock absorber
in the bilateral relationship but noted that recent political
decisions by Russia had posed a risk to those growing
business ties and produced a period of "cooler" relations.
3. (C) Mordashov responded that he was optimistic about
U.S.)Russia relations despite the current tensions.
U.S.-Russia relations were simply too important, and the
people had too much in common, including cultural
similarities, for relations to remain strained. He added
that as a major investor in the U.S., with billions of
dollars on the line, he had a stake in American success and
that American investors in Russia felt that same way toward
Russia's success.
4. (C) Mordashov said Russians and Americans were both
pragmatic peoples, though that was not always reflected in
their foreign policies. It was none of Russia's business,
for instance, who is the President of Georgia. However, at
the same time, the U.S. response also made no sense. Russian
peacekeepers had been attacked and killed; what would the
U.S. response have been if that had happened in Kosovo to
American peacekeepers?
5. (C) The Ambassador responded that we understood the
Russian position but that Russia had overreached by attacking
Georgia proper and recognizing South Ossetia and Abkhazia.
Russian withdrawal from Georgia proper was a necessary first
step in repairing the damage that had been done to Russia's
reputation and to its relations with the U.S. and Europe.
6. (C) Mordashov said he was not an expert in foreign policy
but that he had asked experts, including high-level GOR
officials, about Russia's goals in Georgia. They had all
assured him that Russia had no designs on Georgia proper and
was withdrawing its forces. Mordashov added that in his
view, South Ossetia and Abkhazia were not strategically
important. They had now acquired some symbolic value, but
that would fade over time and allow for a compromise on
status.
--------------
Russia's Financial Crisis
--------------
7. (C) Mordashov told the Ambassador that he also remained
optimistic about the Russian economy despite the recent
problems in the financial system. However, he admitted to
being more concerned now than a few weeks ago. He could talk
authoritatively about the demand for steel, which was a
useful measure of economic performance. Demand had risen 12
percent last year and there was a still healthy 8 percent
increase this year. However, in recent weeks he had seen for
the first time in several years customers, especially in the
construction industry, cutting back on orders. They were
having trouble getting the financing needed to finish
projects or start new ones.
8. (C) The Ambassador asked about Sverstal's stock buy-back
program. Mordashov said he had just started it that week.
He had devoted $400 million in cash to the program, which was
designed to support the company's share price.
--------------
WTO Accession
--------------
9. (C) Mordashov said he remained engaged with his U.S.
counterparts, including Chevron CEO O'Reilly, in pressing for
Russia's early WTO accession. Accession would be a huge
breakthrough for Russia and for its trade partners. There
had been a great deal of progress this year and accession was
very close. However, since the Georgian conflict it seemed
that momentum was now slowing. This was a great
disappointment. He said the U.S. should press Georgia to
accept accession; it was in their interest as well.
10. (C) The Ambassador responded that it was still our goal
to see Russia in the WTO but that the current situation in
Georgia made that difficult. However, resolving outstanding
issues required compromise and given the strains in the
relationship, compromise was harder to come by. In addition,
it was not clear to us that this was still a GOR goal.
Through its recent rhetoric and by seeking to reopen
bilateral trade agreements, the Russian Government appeared
to us to be signaling it was less interested in accession.
11. (C) Mordashov said Putin and Medvedev were
internationalists and still understood that accession was in
Russia's best long-term interests. However, they were
reacting emotionally to a real feeling of frustration and
disappointment. Russia's WTO negotiations had now been going
on even longer than had China's and there was a growing sense
in the GOR that the process was endless. Every time one
problem was solved, another one cropped up. It was human
nature to respond to disappointment in this manner: if you
don't want me, then I don't want you either.
12. (C) Mordashov added that if the U.S. was not pushing
accession it would not get done; it was in effect blocking
accession. Moreover, the continuing failure to accede was
playing into the hands of WTO opponents and anti-Western
elements within the government. These individuals were using
the failure to press for self-serving trade barriers and
unaffordable subsidies for agriculture and other industries
that would make accession even more difficult in the future.
What was needed was a high-level meeting between the EU, the
U.S. and Russia that would produce a grand compromise paving
the way for accession.
--------------
Comment
--------------
13. (C) Like other economic liberals, Mordashov appears to be
speaking out a bit more on the need for compromise in the
South Caucasus and for reduced tensions with the U.S. and the
West. Given his ties to Prime Minister Putin, if he is
indeed pushing this line, it is good news.
BEYRLE