C O N F I D E N T I A L SECTION 01 OF 02 HELSINKI 000402

SIPDIS

NSC FOR J.HOVENIER

E.O. 12958: DECL: 10/28/2019
TAGS: FI PREL EPET ETRD WTO RS
SUBJECT: FINLAND: PUTIN WARMS UP IN LATEST MEETING WITH
VANHANEN

REF: 09 HELSINKI 211

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Classified By: DCM Michael A. Butler for reasons 1.4(b) and (d)


1. (C) SUMMARY. In a dramatic departure from their meeting
last June, on October 25 Russian Prime Minister Putin warmly
greeted Finnish Prime Minister Vanhanen in St. Petersburg.
Describing Finland as a good partner, a smiling Putin put a
positive face on Finnish-Russian relations. Putin pointed to
progress on several bilateral matters, and announced the
extension of Russia's suspension of an export duty on
roundwood, important to Finland's paper industry. Putin
thanked Vanhanen for its decision regarding the Nord Stream
project even though the Finnish government has not completed
its environmental review. Putin also raised some topics on
his own, unusual for his meetings with Vanhanen, including
Russia's WTO membership and the environmental health of the
Baltic Sea. He spoke positively about the South Stream
pipeline project, and about decreased demand for natural gas
possibly impacting Russian plans related to liquified natural
gas. The Finns found few concrete matters issuing from the
meeting, but they welcomed the change in tone. END SUMMARY.


2. (C) In an October 28 meeting with Pol/Econ chief, Prime
Minister Vanhanen's Senior Advisor Esko Hamilo described a
much warmer meeting between PM Vanhanen and Russian PM Putin
in St. Petersburg on October 25 than occurred last June
(reftel). Hamilo spoke of an "excellent" atmosphere, a
distinct departure from the "bitter and unpleasant"
atmosphere in the June meeting; a "smiling Mr. Putin" was
very "forthcoming and understanding" and raised some
unexpected topics on his own, like Baltic Sea and
environmental issues (see below). As an example of Putin's
changed attitude, Hamilo noted that a cross-border child
custody case proved to be a source of obvious irritation for
Putin last June, but when a Finnish journalist raised it on
October 25 Putin dismissed the case as having no impact on

bilateral relations. (NOTE: Hamilo said Finnish officials
have observed a similar warming in meetings with other
Russian officials, in particular on the topic of energy. He
speculated that the global downturn has forced a lighter and
less high-handed approach. END NOTE.)


3. (C) At the start of the meeting Putin praised Finland as a
good partner of - and good investor in - Russia before
launching into an extended monologue that addressed several
matters:

- NORD STREAM: As with the last 3-4 bilateral meetings, Nord
Stream started the discussion though this time Putin only
devoted approximately five minutes to the pipeline project.
Oddly, Putin thanked Vanhanen for the government's (GOF)
decision, even though the GOF has not completed its
environmental review. Putin clearly had the impression that
the GOF would render a positive decision. (NOTE: Vanhanen
has stated publicly that the GOF likely would conclude its
environmental review in October. END NOTE.) Putin then
spoke briefly about the South Stream pipeline and
negotiations with the government of Turkey. Hamilo took this
reference as a signal that as the South Stream project was
progressing, Nord Stream was becoming less important.

- BILATERAL PROGRESS: Putin highlighted progress on smaller
bilateral matters like a fast train connection. He also said
that Russia would extend for another year its 2008 decision
to suspend its roundwood export duty, and indicated that
another extension would follow for 2011. According to
Hamilo, the Finns feel the Russian government realized its
mistake in raising the duty, as Finnish companies froze plans
to invest in the Russian forestry industry and the industry
has collapsed in the Karelia region of western Russia; the
Russians might be looking for a way to climb down from their
position.

- BALTIC ENVIRONMENT: Putin expressed interest in the
Helsinki Commission's (HELCOM) Baltic Sea Action Summit in

2010. He promised to look into problems surrounding plans to
construct a water treatment plant in Kaliningrad (a concern
to the Finns due untreated sewage entering the Baltic).

- WTO: Putin was very forceful in stating Russia's intention
to join the WTO. This surprised Hamilo, as he has found
other Russian officials to be more dismissive of Russia's
membership. Putin said Russia could not neglect its customs
union with Belarus and Kazakhstan, but said that the union
should not pose an insurmountable obstacle under WTO rules
(Hamilo described this as a "where there's a will there's a

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way" argument).

- CLIMATE CHANGE: Putin assured Vanhanen of Russia's
intention to attend and to play a constructive role at the
Copenhagen Summit, and afterwards. He spoke broadly of the
need for "balance" between developing and developed
countries, and said that "greater polluters bear greater
responsibility." He also asserted that Russia has done more
than would be required under Kyoto.


4. (C) Following Putin's monologue, Vanhanen ran through his
points. He explained - again - the GOF's ongoing
environmental review of the Nord Stream project. He voiced
his satisfaction that Russia would extend the wood duty and
that it would participate in the Copenhagen Summit. He also
expressed Finland's hope that Russia would join the WTO.


5. (C) Vanhanen asked about Russia's intentions regarding the
Shtokman gas field in the Barents Sea. Putin said Russia had
not changed plans regarding the field, then quickly turned to
the status of South Stream again. He later commented on how
overall demand for natural gas had decreased, which might
impact Russian plans related to liquified natural gas. (LNG).
Hamilo speculated to Pol/Econ chief that Putin actually
might have been signaling a re-thinking of their plans for
Shtokman: to the extent the Russians considered the field as
a source of LNG for the US market, their interest might be
waning following identification of gas fields in the US
(though Hamilo also thought the Russians currently are more
interested in the Yamal fields).


6. (C) Hamilo concluded that other than the rollover of the
suspension of the roundwood duty the Vanhanen-Putin meeting
offered nothing concrete. He stressed that the change in
tone was a huge advance over the prior meeting. Between now
and the next bilateral meeting - tentatively scheduled for
May 2010 - the Finns will see whether a warmer atmosphere
translates into positive action.

ORECK