U.S-RUSSIA STATE FLIGHTS DISPUTE: RUSSIA REMAINS

C O N F I D E N T I A L STATE 018214

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/19/2018
TAGS: ECON EAIR AMGT FAA RS
SUBJECT: U.S-RUSSIA STATE FLIGHTS DISPUTE: RUSSIA REMAINS
A NO-FLY ZONE

REF: 2007 MOSCOW 5311 AND PREVIOUS

Classified By: EUR DAS David J. Kramer for reasons 1.4 (b) and (d)


1. (C) Summary: On January 25, Russian and American
delegations, led by Alexander Neradko, Head of the Russian
Federal Air Navigation Authority (FANA),and PM Senior
Advisor Ambassador Jackson McDonald, respectively,
reviewed and reaffirmed their existing positions regarding
payment of air navigation and related fees to Russia for
U.S. state flights. The deadlock with Russia remains,
with the Russians seeking quantitative and qualitative
parity with the U.S. on the number and type of flights
that can be exempted from fees. The U.S. maintains its
position of unfettered freedom to designate state
flights. Neradko sought further negotiations, but refused
to allow U.S. state aircraft to fly to and over Russia
unrestricted while negotiations continue. Both sides
maintain their interest in continuing to try to find a
solution but, in light of the entrenched position of each
side, the utility of further consultations with FANA is
doubtful. For the time being, since diplomatic clearances
for state flights landing in Russia are conditioned on the
payment of air navigation fees, official travelers to
Russia will need to travel by commercial or charter
flights; MilAir will not be available.


2. (SBU) In a cordial, business-like discussion January
25, Alexander Neradko, Head of the Russian Federal Air
Navigation Authority (FANA),and Ambassador Jackson
McDonald, PM Senior Advisor for Security Negotiations and
Agreements, reviewed the U.S. and Russian positions
regarding payment of air navigation and related fees to
Russia for U.S. state flights. (NOTE: Since November 1,
2007, Russia has insisted on pre-payment of air navigation
fees before it will grant diplomatic clearance. As it is
longstanding U.S. policy neither to pay nor to charge
these fees on state flights, no U.S. state flights have
flown to or over Russia since November 1, 2007. END
NOTE). Neradko was accompanied by FANA, MFA, and Russian
Embassy staff. Ambassador McDonald was accompanied by
representatives from L/PM, PM/ISO, EUR/RUS and OSD.

Sovereign Principle
--------------


3. (C) Ambassador McDonald explained that the U.S. bases
its position on the principle of international law that
one sovereign does not tax another. By extension, this
exempts a sovereign's aircraft from payment of taxes and
fees, as these aircraft are a sovereign instrument
carrying out a non-commercial, government function. The
Russian system is fine for commercial activity, but state
flights are in a wholly different category. It is the
U.S. position that this issue must be handled on a
state-to-state basis; ICAO rules do not apply to these
aircraft. In response to Neradko's question, the U.S.
delegation reported that the U.S. does not have a law
prohibiting payment of air navigation fees on its state
flights. Since the United States subscribes to
international law as it is widely observed on this point,
a domestic law is not necessary.

Russia Abides By International Law...But the U.S. Must Pay
-------------- --------------


4. (C) Neradko stressed that the GOR fully abides by
international law, but he claimed that international law
does not apply to these exclusively economic
transactions. He argued that FANA seeks payment for
services rendered; these are not fees or taxes. Thus it
is the Russian Federation's position that the U.S.
argument that "sovereigns should not tax other sovereigns"
does not apply. These service charges cover operating
costs, including aviation security and maintenance of air
traffic control equipment, for State Company ORVD, the
service provider. Neradko maintained that this company
(despite its name) receives no budget from the GOR and
derives its income from the collection of charges for
services rendered. All aircraft make use of the services
and safety functions that ORVD supplies, so all aircraft
must compensate ORVD. By FANA's calculation, the current
U.S. "debt" to Russia for services rendered over
approximately the last 15 years is $2.3 million.

Political Fallout
--------------


5. (C) Neradko stressed repeatedly that the GOR is not
seeking this payment based on any political motivation.
The Russian goal is only to assist ORVD to recoup its
losses -- since changes to the Russian tax code in 2005,
ORVD must pay taxes on services charges, whether or not
payment is actually received. Russian law does not
currently provide for any exception to the charges,
Neradko said, but then reaffirmed that an international
agreement with the U.S. would trump existing Russian law.


6. (C) Ambassador McDonald welcomed Neradko's statement
that Russia's decision to charge fees is not politically
motivated. He noted, however, that there is already
political fallout from this economic decision: the United
States' inability to fly to and over Russia is interfering
with diplomatic work.

The Heart of the Matter: The U.S. Flies Too Many Flights
-------------- --------------


7. (C) Neradko said that the U.S. flies too many flights.
He singled out the U.S. Air Force (USAF) in particular as
having "far too many flights," adding that USAF flights
also make many technical landings in Petropavlovsk
Kamchatki en route to Korea. Only something much closer
to parity with the type and frequency of Russian flights
could be acceptable. Russia would like to meet soon at
the technical level to try and develop a way forward.
Ambassador McDonald agreed on the need to find some
mutually acceptable arrangement but noted that talks to
date had failed to reconcile our fundamentally opposed
approaches. These differences notwithstanding, the
Ambassador offered to meet again if the GOR would remove,
while negotiations are underway, the current demand for
pre-payment of air navigation fees that is effectively
blocking all U.S. state flights to Russia.


8. (C) Neradko politely refused, suggesting instead that
POTUS, the VP, and the Secretaries of State and Defense be
exempted from fees; all other flights would have to
pre-pay while negotiations continue.


9. (C) Reiterating U.S. policy that there be no
limitations on the U.S. sovereign right to designate and
fly state flights, and noting that this is the USG's
policy worldwide, Ambassador McDonald rejected the Russian
counter-offer. No date was agreed for further talks.


10. (C) Comment: The meeting was cordial, but the Russian
position remains firm: as a starting point for
negotiations the U.S. must first reduce the number and
type of state flights, and then all remaining flights must
pay. Our position against paying navigation and
overflight fees remains just as firm. The U.S. now needs
to communicate to the Russians whether we intend to pursue
negotiations and, if so, when and on the basis of what
text (both we and the Russians have tabled several drafts
in previous years). Given the diametrically opposed
starting points, however, there seems little more to
discuss with FANA. For the time being, since diplomatic
clearances are conditioned on the payment of air
navigation fees, official travelers to Russia will need to
travel by commercial or charter flights; MilAir will not
be available.
RICE