MOROCCO-RUSSIA ECONOMIC RELATIONS: ENERGY,

C O N F I D E N T I A L CASABLANCA 000026

SIPDIS

STATE FOR NEA/MAG
STATE PLS PASS TO COMMERCE FOR NATHANIEL MASON

E.O. 12958: DECL: 02/11/2019
TAGS: AG ECON EIND ETRD MO PGOV PREL RS
SUBJECT: MOROCCO-RUSSIA ECONOMIC RELATIONS: ENERGY,
CLEMENTINES, AND EVERYTHING IN BETWEEN

REF: CASABLANCA 10

Classified By: CG Elisabeth Millard for reasons 1.4 (b),(d).

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


1. (SBU) Morocco's economic relationship with Russia,
initially concentrated almost exclusively in the energy
sector, has widened dramatically in recent years. Bilateral
trade is flourishing in the agriculture and phosphate
sectors, joining longstanding Moroccan reliance on Russia for
petroleum imports. This expanded trade has opened the doors
for other areas of collaboration including Russian investment
in Morocco,s real estate and tourism sector. In fact, recent
business surveys show that Moroccan companies increasingly
look to Russia as one of their most promising foreign
markets. End Summary.

--------------
Russia's Interest in Morocco,s Energy Sector
--------------


2. (C) Energy is an important subtext in Morocco-Russia
relations. Russia's ROSATOM is lobbying hard to build
Morocco,s first nuclear energy plant. Noureddine Sefiani,
the former Moroccan Ambassador to Russia, told Econoff that
ROSATOM visited the Moroccan Embassy in Moscow over half a
dozen times, most recently in November 2008, to make its case
to the government of Morocco. He also said that senior
representatives from the National Electricity Office (ONE)
visited Russia at the request of ROSATOM in late 2008 to
discuss further areas of energy cooperation. Nonetheless,
Sefiani hinted that France would likely be awarded the tender
to build Morocco,s nuclear energy plant. (Note: ONE has also
approached at least one U.S. Company to ask it to submit a
pre-tender submission, and appears committed to a public
tender for this still long-range project. End note.)


3. (SBU) In addition, Russian companies have developed three
of Morocco's thermal energy facilities. Such cooperation
continues: Russia,s Integrated Energy Systems (IES) Holding
will begin to rebuild Morocco's thermal energy plant in
Jerada this year. Industrial cooperation is moving beyond
the energy sector, however. Russia's IFC Metropol has a
joint venture with the National Phosphate Office (OCP) in the
highly coveted Jorf Lasfer phosphate processing facility. OCP
recently started to supply Russia with large quantities of
mineral phosphates in exchange for ammonium- a byproduct of
gas that, when combined with phosphates, makes fertilizer.
OCP is increasingly seeking such foreign partnerships to
transform phosphates into finished products and thereby
retain more of the value-added from its production than it
can do when it simply exports the raw material.

--------------
Energy creates Synergy
--------------


4. (C) Bilateral energy relations have also opened the door
for Russian investment in Morocco's real estate market.
Hassan Sentisi, the President of the Morocco-Russia Business
Council in Casablanca, suggests that the saturation of the
European real estate market has led to a dramatic expansion
in Russian investment in the Kingdom. He points to the USD
1.2 billion contract Russian developer INTECO signed in 2007,
which will build a number of residential properties and
tourist resorts on Morocco's northern coast. (Note: INTECO,
owned by the wife of Moscow's mayor, is a real estate
subsidiary of Russia's GAZPROM. End Note.) To further
solidify its investment in Morocco, INTECO set up a local
subsidiary, KUDLA Group, which will oversee the development.
Nevertheless, the project may be tainted by rumors that
Russian investors have resorted to bribery in order to move
the INTECO project forward, says former Moroccan Ambassador
to Russia Sefiani.


5. (SBU) Morocco hopes to capitalize on such investments to
bolster the number of Russian tourists visiting the Kingdom.
Morocco's Ministry of Tourism entered into a partnership with
ten of Russia,s largest travel agencies in an effort to
quadruple the number of Russian tourists to 40,000 in the
upcoming year. There now is a biweekly charted flight between
Moscow and Agadir.


--------------
Russia-Morocco Trade
--------------


6. (SBU) Morocco is one of Russia's largest trade partners
in Africa and the Arab world. In recent years, Russian
exports to Morocco have tripled from USD 500 million in 2001
to USD 1.5 billion in 2007. The growth is largely
attributable to increases in commodity prices, which
constitute a large percentage of both imports and exports.
Russia is one of Morocco's leading sources for petroleum
products, providing about 25 percent of its supply.
Conversely, Moroccan exports to Russia totaled USD 200
million in 2007, representing an estimated four percent of
its exports. According to Sentisi, a major export item is
Morocco's citrus products, particularly clementines and
oranges, which are in high demand in Russia. (Note: Morocco
is the second largest citrus exporter in the world and Russia
is its largest consumer. End Note.)


7. (SBU) This bilateral trade relationship was further
strengthened in 2007 with the signature of a trade
partnership agreement between PATRONAT, Russia's business
council, and its Moroccan counterpart, the Moroccan
Confederation of Business (CGEM). As a result of this
collaboration, a Moroccan delegation of over 100 businesses
participated in a trade fair in Moscow in November 2008 in
order to bolster trade between the two countries. The
participants included OCP, Maghreb Steel, the real estate
conglomerate Group Addoha, and the Casablanca Regional
Investment Center. In return, Morocco received a Russian
delegation representing 120 Russian businesses in February

2009. During the latter visit, Morocco's Minister of
Commerce, Industry, and New Technologies encouraged Russian
investment in Morocco's social housing projects and in its
hydrocarbon energy sector.


8. (SBU) If the overall trend is positive, new challenges
have emerged in recent months as a result of the slide in the
value of the Russian ruble. Moroccan exporters have
historically done little to hedge their foreign exchange
exposure, and a number have complained of hardship as the
dirham value of existing contracts has eroded, says Sentisi.


9. (SBU) Nonetheless, recent surveys of Morocco's business
community show that they are increasingly focused on the
Russian market. In a 2009 survey conducted by Morocco,s
Center for Export (Maroc Export),Russia was identified as
the most promising export market by 100 local companies. This
confidence does not appear misplaced. Russia's demand for
agricultural produce is growing 20 percent per year at the
same time that Morocco's agriculture growth is expected to
more than double to 22 percent this year. According to former
Ambassador Sefiani, the confluence of these two trends will
result in a lucrative 2009 for Morocco given that Russia will
likely double its Moroccan agricultural imports in the
upcoming year. For his part, Sentisi shares the survey's
conclusion and agrees that "Russia is indeed Morocco,s most
promising export market."

--------------
Comment
--------------


10. (SBU) Russia's emergence as a leading trade and
investment partner reflects the increased importance such
"emerging" markets play in its integration into the global
economy (reftel). Morocco is increasingly focused on the BRIC
(Brazil, India, China, and Russia),all four of which now
rank among its top trading partners.
MILLARD