Identifier
Created
Classification
Origin
08MOSCOW3519
2008-12-05 13:36:00
CONFIDENTIAL
Embassy Moscow
Cable title:  

(C) OLIGARCH VEKSELBERG TELLS AMBASSADOR RUSSIAN

Tags:  EPET ENRG ECON PREL RS 
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VZCZCXRO9585
PP RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
DE RUEHMO #3519/01 3401336
ZNY CCCCC ZZH
P 051336Z DEC 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 0997
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/DEPT OF ENERGY WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 003519 

SIPDIS

DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT
EUR/CARC, SCA (GALLAGHER, SUMAR)
DOE FOR HEGBURG, EKIMOFF

E.O. 12958: DECL: 11/21/2018
TAGS: EPET ENRG ECON PREL RS
SUBJECT: (C) OLIGARCH VEKSELBERG TELLS AMBASSADOR RUSSIAN
ECONOMY TO GET WORSE BEFORE IT GETS BETTER

REF: A. MOSCOW 3322

B. MOSCOW 1295

Classified By: Ambassador John R. Beyrle for Reasons 1.4 (b/d)

-------
SUMMARY
-------

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 003519

SIPDIS

DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT
EUR/CARC, SCA (GALLAGHER, SUMAR)
DOE FOR HEGBURG, EKIMOFF

E.O. 12958: DECL: 11/21/2018
TAGS: EPET ENRG ECON PREL RS
SUBJECT: (C) OLIGARCH VEKSELBERG TELLS AMBASSADOR RUSSIAN
ECONOMY TO GET WORSE BEFORE IT GETS BETTER

REF: A. MOSCOW 3322

B. MOSCOW 1295

Classified By: Ambassador John R. Beyrle for Reasons 1.4 (b/d)

--------------
SUMMARY
--------------


1. (C) In a December 3 meeting with the Ambassador, Viktor
Vekselberg, billionaire Chairman of Renova Group and major
partner in TNK-BP, said the worst is yet to come for the
Russian economy. He suggested needed economic reforms,
including for the oil sector, would have to wait as the
government focuses on relieving the immediate effects of the
economic crisis. He did not rule out the possibility that
the crisis could lead to street demonstrations as
unemployment rises. The GOR, he said, is looking for someone
to blame and he predicted the blame would fall on oligarchs
like himself. Vekselberg told the Ambassador he hopes U.S.
businesses and Russian businesses can work together in
lobbying the GOR on economic issues. He concluded with a
plea for continued open dialogue with us despite the TNK-BP
investor dispute, noting that he is "half-American," given
that his children and wife are U.S. citizens.

-------------- -
"I HAVE GREAT RESPECT FOR OUR LEADERS, BUT..."
-------------- -


2. (C) Leading Russian businessman and billionaire, Viktor
Vekselberg, chairman of Renova Group, a major partner in
TNK-BP, told the Ambassador in a December 4 meeting that his
businesses, "as all businesses," are seeing very hard times.
He predicted the economic situation would get worse before it
got better, expecting more pain in the first quarter of 2009
as the ripple effects of the economic crisis continued to
spread. He said Russian leaders had been slow to appreciate
the scale of the crisis, which has hit Russia particularly
hard given its dependence on raw material exports.


3. (C) Prefacing his comments by saying, "I have great
respect for our leaders, but..." Vekselberg criticized the
GOR's response to the crisis, including some of its latest
tactics and statements. He described as "stupid" the central

bank's half-hearted defense of the ruble, advising that the
bank should either pick a target and defend it or let the
ruble float. Otherwise, he said, it is just inviting
speculators to attack the currency. He dismissed Russia's
hopes to become a major financial center as "not possible,"
and laughed off the idea, floated by Putin and Medvedev
recently, of the ruble as a reserve currency (ref A).


4. (C) A major shortcoming of the government, according to
Vekselberg, is that power is concentrated in the hands of
very few leaders. He bemoaned that bureaucrats and
ministries can't make decisions without permission from
above. He suggested the economic crisis has put economic
reform on the backburner, as the GOR focuses on alleviating
the short-term effects of the crisis, including addressing
consequent social problems that may emerge. He did not rule
out street demonstrations as unemployment rises and the
standard of living, which people have come to expect to rise
rapidly, declines.


5. (C) Vekselberg said the GOR is looking for someone to
blame for the effects of the economic crisis and lamented
that the blame is likely to fall "on us, the oligarchs."

--------------
TNK-BP AND THE OIL SECTOR
--------------


6. (C) With regard to the oil and gas sector, Vekselberg
complained about the onerous tax structure on oil (ref B),
which he said the industry has long tried to change from
being based on production and exports to being based on
profits. However, he did not see the government
restructuring the oil tax regime in the near term, as the
state continues to squeeze the sector to meet short-term
needs. Vekselberg also protested the government's support of
Gazprom, Transneft, and Russian Railways, which he described
as monopolies that burden the energy sector with artificially
high tariffs that are designed to support government budgets.

MOSCOW 00003519 002 OF 002




7. (C) Vekselberg said TNK-BP is stable for now, but that the
longer-term picture is less certain. Financing costs and oil
price uncertainty are delaying some projects. He said TNK-BP
had been using $60 per barrel oil in its forecasts for 2009,
but that price now looks in doubt. He said the government's
offers of credit to restructure foreign-currency debt are not
very useful for TNK-BP, which has little such debt. He
explained that credit is still available to the oil sector,
at a price -- "it's expensive, but it's there." However, he
added that the metals sector, in which Renova is also a major
investor, is "in worse shape" as the businesses are very
leveraged and their financial structures very vulnerable to
prices, which have plummeted.

--------------
A PLEA FOR UNDERSTANDING
--------------


8. (C) Vekselberg ended the meeting with a plea for continued
open communication with the U.S. and other Western observers
in Russia. He said he felt he and his partners had sometimes
been unfairly criticized during the TNK-BP investor dispute
and asked the Ambassador to "at least understand our various
interests." The Ambassador agreed that open communication
was desirable, but added that Vekselberg could not be unaware
of the damage the dispute had caused.


9. (C) Referring to his U.S. citizen wife and children (and
new grandson),he noted that he is, after all,
"half-American," and said as chair of the international
affairs committee of the Union of Russian Industrialists and
Entrepreneurs (RSPP),he has tried to forge closer ties with
western businesses. In that regard, Vekselberg said the RSPP
plans to send a big delegation of businessmen to Washington
in February to meet with new USG leaders.
BEYRLE