ISTC GOVERNING BOARD IN MOSCOW APPROVES STATEMENT ON

UNCLAS SECTION 01 OF 03 MOSCOW 003641

SIPDIS

DEPARTMENT FOR ISN/CTR

E.O. 12958: N/A
TAGS: KNNP PARM TSPL RS
SUBJECT: ISTC GOVERNING BOARD IN MOSCOW APPROVES STATEMENT ON
TRANSFORMATION, GETS VERBAL ASSURANCE ON TAXATION


1. SUMMARY: At the International Science and Technology Center
(ISTC) Coordinating Committee (CC),Roundtable, and Governing Board
(GB) meetings held December 9-11, 2008, the GB agreed on a Statement
of Principles on Transformation and called for Russia to confirm the
ISTC's tax-exempt status. The Russian Party orally reaffirmed that
status and said that MFA would take action in case of violations.
The GB also jointly funded three institute self-sustainability
plans, and added funds to one existing plan, at priority scientific
institutes. The U.S. Party encouraged expeditious approval of the
nominee for the position of U.S. Deputy Executive Director. The
U.S. Party also held bilateral meetings with senior officials from
the Russian Academy of Sciences, state nuclear power corporation
Rosatom, and state nanotechnology corporation Rosnano on the future
of the ISTC. The MFA representative at the GB said that the United
States and Russia would still need to discuss the details of ISTC
transformation in a bilateral forum. END SUMMARY.


2. A U.S. delegation led by ISN/CTR Director Matthias Mitman and
including Department, DOE, and Embassy officials attended the ISTC
Coordinating Committee, Roundtable, and Governing Board meetings in
Moscow December 9-11, 2008. U.S. GB member Victor Alessi and GB
Chairman Ronald Lehman participated in the meetings and some of the
U.S. delegation's bilateral meetings with Russian officials.


3. Transformation: At the roundtable, the U.S. Party proposed
language on the transformation of the ISTC for the GB Record of
Decisions. The Russian Party said that the original mission of
redirecting former weapons scientists had been accomplished, and a
consensus was reached on this point. The Japanese Party
successfully proposed a change in the text to delete the term
"counterterrorism," stating that the text's inclusion of "the area
of nonproliferation" covered such topics as engagement of WMD
experts to reduce the risk of onward proliferation to a terrorist
organization or proliferant state, while still permitting projects
on counterterrorism. The GB members agreed to the following
Statement on Transformation Principles to be included in the GB
Record of Decisions: "The ISTC Governing Board members recognized
the success of the ISTC's initial mission of providing economic
support for the scientific community during the transition from the
former Soviet Union. Further, the ISTC Governing Board members
decided to take measures through joint efforts to transform the ISTC
into a smaller, more efficient organization that achieves our shared
global goals of cooperation on science and technology, including in
the area of nonproliferation."


4. Taxation: The U.S. and other Parties noted the uncertainty
created by Russian Government Decree No. 485 about the tax-exempt
status of ISTC grants. The parties to the ISTC Agreement - Canada,
the United States, the European Union, and Japan - reiterated that
this decree does not apply to the ISTC because the Center is an
intergovernmental organization. The Governing Board requested
clarification in letters to Russian government officials of the
tax-exempt status of ISTC grants. The Russian Party (MFA) responded
that there had been no violations of the tax-exempt status of ISTC
grants, and that the MFA would take action if any violations
occurred in the future. The Russian Party encouraged the ISTC to
wait for a response from the Russian tax authorities.


5. Institute Self-Sustainability: The funding parties agreed to fund
institute self-sustainability plans at three priority institutes:
the Institute of Physics and Power Engineering (IPPE) in Obninsk,
the Institute of Nuclear Physics (INP) in the National Nuclear
Center in Kazakhstan, and the Research Institute of Pulse Technique
(NIIIT) in Moscow. The EU and Canadian Parties also decided to add
funds to an institute self-sustainability plan at the Khlopin Radium
Institute (KRI),which was funded at the previous GB meeting.


6. U.S. Deputy Executive Director Nomination Approval: The U.S.
Party urged the Russian Party at both a bilateral meeting with
Rosatom and at the GB meetings to approve the nomination of Michael
Einik to the U.S. Deputy Executive Director position at the ISTC.

MOSCOW 00003641 002 OF 003


The Russian Party said that it did not anticipate any problems with
the nomination, which should be approved by January 1, 2009.


7. Russian MFA Perspective on Transformation: On the margins of the
CC meeting, MFA representative Andrey Krutskikh explained that the
United States and Russia would still need to discuss the details of
transforming the ISTC in a bilateral forum. Separately, Russian GB
member Lev Ryabev of Rosatom encouraged the U.S. to present Russia
with a paper on its view of how the ISTC should be transformed, and
he agreed that Russia would do the same.


8. Next GB Meeting: The next GB meeting is planned for March 2009 in
Moscow, and all parties agreed that, per the tradition of holding
one GB per year in a CIS country, Belarus would host the summer GB
meeting in Minsk. A proposal by the Canadian Party to reduce GB
meetings from three to two times per year was deferred for decision
at a later date. In addition, the GB agreed that the Secretariat
would work with the GB members to determine the appropriate number
of GB and other meetings per year, as well as funding cycles, for
2010 and beyond.

Bilateral Meetings
--------------


9. Bilateral Meeting with the Russian Academy of Sciences (RAS): On
December 10, the U.S. delegation and the ISTC GB Chairman met with
Nikolay Laverov, Vice President of RAS, Boris Myasoyedov, Deputy
Secretary General for Science, and Yuri Shiyan, Head of the
International Relations Department. Laverov stressed the importance
of using the ISTC to preserve Russian science and technology.
Calling ISTC the best forum for international cooperation, bar none,
in his twenty years of leading RAS international relations, Laverov
stated that those who criticize ISTC have not been involved in
either science or ISTC. Although there should be no doubt about the
value of ISTC in the past, the issue is how to keep ISTC afloat.
RAS, Laverov continued, did not agree with the position of some
entities that ISTC should stop its work. Instead, the mission of
redirecting Russian weapons scientists should be taken out of the
charter and ISTC's future work should focus on using its substantial
experience to organize joint research on issues of global
significance. RAS has been allocated federal funding to work in
priority areas that would enable it to work on climate change,
energy, biomedicine, environment, and natural disasters.


10. On the issue of the Russian lead agency for the ISTC, Laverov
noted that while Rosatom has been designated as the interim lead of
the Russian Party, his personal opinion is that RAS and the state
corporation Rostekhnologii should jointly lead as the Russian Party.
He explained that Rostekhnologii had funding which he believed
could be used to fund projects at the ISTC. (Note: Rostekhnologii
was established in 2007 with the mission "to promote the
development, production, and export of high-technology products."
It is a conglomerate of more than 100 entities, most of them
military suppliers. It is headed by a close associate of Prime
Minister Putin, Sergei Chemezov, who formerly headed the weapons
export corporation Rosoboronexport. Rostekhnologii is not
associated with nuclear, chemical or biological nonproliferation
programs. End Note)


11. Bilateral Meeting with Rosatom: On December 10, Russian GB
member Lev Ryabev echoed RAS Vice President Laverov's comments.
Russian agencies are unanimous that ISTC has had a positive role in
fulfilling its mission. But they are also unanimous that some parts
of ISTC's charter are out of date. For example, there is no longer
a proliferation threat within Russia. Some political institutions,
he explained, have a negative reaction to this language in ISTC's
charter. Ryabev expressed concern that the ISTC continues to be
used to address funding parties' proliferation concerns in Russia.
The U.S. delegates acknowledged that the original mission of
redirecting Russian former weapons scientists largely has been
completed. Ryabev also explained that the Russian interagency is

MOSCOW 00003641 003 OF 003


still determining its position on the details of how it would like
to see the ISTC transformed, and that the process could take another
three months. He conceded that changes in ISTC's mission can be
made by amending the existing founding documents, rather than
reconstituting them. Ryabev suggested that the U.S. Party review
the ISTC Charter line-by-line and note which elements could remain,
and which should be changed. He urged that we find areas of mutual
interest so that the experience gained over the past 15 years is not
lost.


12. Bilateral Meeting with Rosnano: The U.S. delegation and the ISTC
Acting U.S. Deputy Executive Director Tim Murray met with Sergey
Mostinsky, Director for International Cooperation at state
nanotechnology corporation Rosnano, and with Rosnano Senior Advisor
Vladislav Chernov, to explore possible mechanisms for Rosnano to
fund commercialization of ISTC nanotechnology projects. Murray
noted that ISTC proposals are pre-approved by host states and
funding parties, and that the proposals receive multilateral
scientific reviews. Murray gave an overview of two proposals
already submitted to Rosnano for funding. Mostinsky suggested a
joint workshop with the ISTC to brief Rosnano officials about
potential opportunities for collaboration, as well as cooperating on
the planned visit of Rosnano Chairman Anatoliy Chubais to
Washington, DC, and Texas in May 2009.

BEYRLE