AMBASSADOR GOLDBERG DELEGATION MEETINGS IN MOSCOW

S E C R E T SECTION 01 OF 05 MOSCOW 002053

SIPDIS

E.O. 12958: DECL: 08/11/2019
TAGS: PREL PARM PGOV ECON MNUC EFIN KNNP UNSC RU KN
SUBJECT: AMBASSADOR GOLDBERG DELEGATION MEETINGS IN MOSCOW
ON IMPLEMENTATION OF UNSCR 1874

Classified By: CDA Eric Rubin for reasons 1.4 (b) and (d)


1. (C) Summary: Russian Foreign Ministry and financial
officials, including Deputy Foreign Minister Alexei
Borodavkin, assured Ambassador Philip Goldberg and his
delegation that Russia fully supports United Nations Security
Council Resolution (UNSCR) 1874 and was already taking
measures regarding its implementation. Six-Party Ambassador
Logvinov said that the MFA was consulting with ministries in
order to get approval for a Presidential decree supporting
its implementation. Ambassador Goldberg and the delegation
underlined to their GOR interlocutors the importance of fully
implementing the new resolution, stressed the need to cease
doing business with UN-designated North Korean individuals
and entities, urged strict vigilance and transparency in
conducting financial transactions with North Korean financial
institutions, and shared cleared intelligence on specific
entities thought to be facilitating transactions related to
North Korea's weapons programs and luxury goods procurement
in violation of UN sanctions in Russia or via Russian banks.


2. (SBU) Ambassador Philip Goldberg, U.S. Coordinator for
Implementation of UNSCR 1874, led an interagency team,
including Treasury Deputy Assistant
Secretary Daniel Glaser, on a visit to Moscow from August
3-5, where the delegation met with senior GOR officials from
the Ministry of Foreign Affairs (MFA),the Ministry of
Finance (MinFin),the Central Bank of the Russian Federation,
and the Russian financial intelligence unit
(Rosfinmonitoring) to consult on the implementation of UN
Security Council Resolution 1874 regarding North Korea.
Glaser also met separately with the head of Rosfinmonitoring,
the heads of two Russian banking associations, and a private
bank (Sberbank).


3. (SBU) Participants:

UNITED STATES
AMB Philip S. Goldberg, U.S. Coordinator for Implementation
of UNSCR 1874
Daniel Glaser, DAS, Department of the Treasury
Charles D. Lutes, Director for Nonproliferation, NSC
Mauricio de la Cruz, DNI, Office of the North Korea Mission
Manager
Jennifer Fowler, Department of the Treasury
Richard Johnson, EAP/K
Mike Carver, Embassy Officer
Inna Bashina, Interpreter

RUSSIA
DFM Alexei Borodavkin, MFA
AMB Grigory Logvinov, Ambassador-at-Large and Deputy Head of
Delegation for the Six-Party Talks, MFA
Oleg Davydov, Deputy Director, First Department of Asia, MFA
Alexander Deineko, Desk Director, Department of
Nonproliferation MFA
Alexander Shilin, Counselor, Department of Nonproliferation,
MFA
Anna Evstigneeva, Second Secretary, Dept. of International
Organizations, MFA
Alexander Korshunov, Adviser to First Deputy Chairman,
Central Bank of Russia
Anatoly Primakov, Federal Financial Monitoring Service
(Rosfinmonitoring)
Pavel Chernysev, Deputy Head of International Cooperation
Division, Ministry of Finance
Elena Ischchenko, Financial Monitoring and Currency Control
Department Director, Central Bank
Garegin A. Tosunyan, President of the Association of Russian
Banks
Anatoly G. Aksakov, Association of Regional Banks

End Summary.

DFM Borodavkin Says Implementation "Absolutely Essential"
-------------- --------------


4. (C) During a small meeting with Ambassador Goldberg,
Deputy Foreign Minister for Asia Alexei Borodavkin said that
he was both satisfied with the cooperation between the GOR
and USG during the negotiation of UNSCR 1874 and on the
agreement to designate goods, entities, and individuals
subject to sanctions under UNSCR 1718, adding that Russia was
ready to cooperate on implementation. He stressed that
implementation in Russia was "absolutely essential" and would
be "consistent and transparent," as agreed in the recent G-8

MOSCOW 00002053 002 OF 005


statement. Pyongyang had felt the impact of the sanctions
already, Borodavkin remarked, pointing to the case of the
North Korean vessel Kang Nam 1 as a "trial of our commitment
to the resolution." Even though he thought the ship was a
decoy, the vessel,s inability to find a friendly port and
subsequent return to the DPRK showed that the international
community would do "what it required." Burma reacted
"rapidly and constructively" following U.S., Russian, and
other diplomatic outreach to ensure that the ship would not
escape inspection there. Goldberg put across the message that
the UN resolutions, tools were "a means to an end" - with
the ongoing goal of the complete and verifiable
denuclearization of the Korean Peninsula. A heightened
awareness of transactions with North Korea was absolutely
called for, he said. Borodavkin agreed and stated that the
relevant government agencies had been informed about their
obligations and that now the MFA was working on a piece of
legislation, in the form of a presidential decree, for this.
Asking about the ultimate resolution of the situation,
Borodavkin expressed support for the Six-Party Talks and
asked whether the USG would eventually accept North Korea,s
offer of bilateral talks. Goldberg emphasized that the USG
wanted a return to the Six-Party Talks, but that the United
States could hold bilateral discussion with the DPRK within
the context of the Six-Party Talks.


5. (C) Borodavkin expressed no disagreements with anything
Goldberg said, but he had a few points to stress as well. He
stressed Russia,s view that unilateral sanctions would not
be conducive to persuading North Korea to resume negotiations
and could even undermine the image and authority of the
Security Council itself. Borodavkin made clear that there
should be no attempts to go beyond the sanctions described in
the resolutions. He recommended that all sides stress to
North Korea that these sanctions are not "eternal" and could
be removed when North Korea complied with the resolution,
adding that sanctions should not damage the humanitarian
situation in North Korea. Finally, he highlighted that UNSCR
1874 implementation should avoid any possibility of conflict
or use of force, mentioning inspections on the high seas as
particular cause for concern and concluding that each side
must exercise restraint. He also said Russia remained
interested in hearing U.S. views on "terms of engagement" for
dealing with inspections at sea. As a side note, Borodavkin
opined that he thought Japan sometimes overreacted to DPRK
actions and he hoped that Japan would not introduce any
unilateral sanctions beyond those agreed in the UNSC.

MFA Actively Engaged in Implementation
--------------


6. (C) Ambassador Goldberg and the full delegation had a
fruitful discussion about UNSCR 1874 implementation with a
group from the MFA headed by Ambassador-at-Large for
Six-Party Talks Grigory Logvinov. Logvinov opened the meeting
by stating that the North Korea nuclear situation was one of
the most acute international issues, which would help
determine the future of the nonproliferation regime and would
have an impact on the UN Security Council. Calling the
resolution "one of the strongest, if not the strongest, in
history," Logvinov stressed that Russia had worked very
closely on drafting UNSCR 1874 and was now eager to implement
it "from A to Z." He stated that Russia had already provided
to the UN Security Council an interim report on its
implementation of the resolution. Russia was now in the
process of developing a presidential decree to enshrine the
resolution,s measures into Russian law, though this would
take some time, probably "more than a few weeks."


7. (C) Logvinov said that the most important measures of the
resolution were the financial measures, given that North
Korea,s largest source of income is from the arms trade. He
noted that North Korea,s arms trade was now absolutely
prohibited and that Russia never sold and would not in the
future sell arms to the DPRK. Logvinov said that while the
situation was "quite fragile" on the Peninsula, China had
told Russia it perceived tensions to be dissipating. He
added that the Chinese position on implementation was
"reasonable," articulating it by saying that member states
should fulfill parts of the resolution where there was "clear
direction," but that in areas where the resolution was
unclear or allowed for flexibility, member states should
"abide by the situation and look at the circumstances" before
implementing measures.


8. (C) Goldberg stressed at all of his meetings that the USG

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viewed the UNSCR 1874 implementation process as "integrated,"
explaining that sanctions were being used as leverage to
demonstrate to North Korea in a unified way that the only
viable path forwards was a return to Six-Party Talks along
with compliance with all UNSC resolutions and meaningful and
irreversible steps towards abandoning its nuclear weapon
program. Logvinov agreed, stating that the "key goal (was)
the denuclearization of the peninsula."


9. (C) Noting that the stick was quite clear and would
inevitably have an impact, Logvinov said that the carrot was
another issue; he suggested putting less emphasis on economic
assistance and shifting more towards providing security
assurances in the Asia-Pacific region. Logvinov worried that
a focus on economic assistance could "commercialize"
membership to the Nonproliferation Treaty. He also came back
to DFM Borodavkin,s concerns about inspections on the high
seas and their potential to cause conflict, but Goldberg
reiterated that the UNSCR did not authorize force and
explained that the focus was on inspecting ships at port
rather than at sea.


10. (C) Echoing previously stated concerns about the
possibility of additional sanctions, Logvinov opened a second
day of meetings, which included representatives from
Rosfinmonitoring, the Central Bank and Finance Ministry, by
asking for clarification of an unknown, web-based news
article he had just read claiming that the USG supported more
sanctions on North Korea. Goldberg replied that the source
was in error. He explained that journalists sometimes
confused designations with sanctions. UNSCR 1874 allows for
additional designations of people and entities, he said, and
some journalists did not differentiate between additional
designations and additional sanctions. Logvinov was
satisfied with that answer.

Economic and Financial Sanctions
--------------


11. (S) Goldberg and the delegation stressed the importance
of "heightened scrutiny" in economic transactions with North
Korea with both the MFA panel mentioned above and with the
expanded panel of officials from the Central Bank of Russia,
the Ministry of Finance, and the financial intelligence unit,
given the difficulty in distinguishing between licit and
illicit transactions when they involve North Korea. Deputy
Assistant Secretary of the Treasury Glaser presented the U.S.
perspective on implementation of specific financial
provisions of UNSCR 1874, explaining that these provisions
built upon existing international anti-money laundering
standards, the financial provisions contained in earlier
North Korea-related resolutions, and longstanding concerns
about the illicit finance risks posed by North Korean
individuals and entities. He highlighted language in the
document that called for enhanced monitoring of all financial
transactions with North Korean entities and stressed that
UNSCR 1718 required freezing assets not only of the named
entities but also of any entity owned or controlled, directly
or indirectly, or acting on behalf of or at the direction of
the named sanctioned entities. He shared the names of some
persons/entities suspected of operating in Russia, sometimes
working through Russian financial institutions (see para 12),
to facilitate North Korean proliferation activities or luxury
goods procurement, in violation of UNSCRs 1718 and 1874.
Glaser also described deceptive practices that North Korean
entities have used to evade sanctions, including stripping
names off bank transactions, frequently changing the names
and/or locations of front companies, and not disclosing
adequate information about business transactions.


Rossfinmonitoring
--------------


12. (S) Prior to meetings with the MFA panel and broader
Russian interagency, Glaser met separately with the head of
Rosfinmonitoring, Yuri Chicanchin, for a detailed discussion
on implementation of the resolution,s financial measures.
Glaser presented the U.S. perspective on implementation of
the financial measures, including reviewing the June 18 U.S.
advisory to financial institutions on the issue. Glaser also
passed specific information regarding entities conducting
activities in Russia that potentially violate UNSCRs 1718 and

1874. This included information regarding Russian financial
institutions Sberbank, Primotsbank, Far Eastern Bank and Far
East Commercial Bank, as well as Russia-based entities

MOSCOW 00002053 004 OF 005


providing reinsurance to the Korea National Insurance
Corporation (KNIC),which has been linked to luxury good
procurement. Chicanchin responded that he agreed that it was
important for the UNSCRs to have a practical implementation,
and committed to pass the U.S. advisory to Russian financial
institutions and to work with Russian financial institutions
on enhancing their internal controls and procedures with
respect to transactions involving North Korea. Chicanchin
also committed to follow up with the specific Russian
financial institutions included in the information Glaser
passed to him, saying that he had already made contact with
Far Eastern Bank and the FIU had done a check of the bank,s
transactions involving North Korea and would take similar
steps with the three other banks. Chicanchin emphasized that
Russia was in a difficult position with respect to North
Korea-related transactions because of the large Korean
community in Russia, the large number of cash transactions in
Russia and because Russia was often a "transit point" for
North Korea-related transactions. As a result, it was
difficult for banks to know the entities or persons involved,
and the transactions, "routes" were often convoluted (e.g.
they originate in Africa or the Middle East and transit third
countries before ending in North Korea). Chicanchin
emphasized, however, that the Rosfinmonitoring would be
closely monitoring North Korea-related transactions where
they are able to detect them.

Sberbank, Banking Associations
--------------


13. (S) Glaser also met separately with Sberbank Deputy
Chairman of the Board Alexander Govorunov. Glaser explained
guidance that the United States has given its financial
institutions regarding implementation of UNSCRs 1718 and 1874
and urged Govorunov to ensure that Sberbank takes steps to
subject any North Korea-related transactions to enhanced
scrutiny to avoid violations of the resolutions. Glaser also
shared declassified information regarding possible luxury
goods procurement-related transactions involving Sberbank.
Govorunov said that, prior to the meeting with Glaser, he
investigated whether Sberbank has North Korean customers or
transactions and determined that the Sberbank,s central head
office has no relations with North Korean companies, other
than two dormant accounts. He said he hoped to receive
additional guidance from Russian authorities, which he would
implement and that he shared U.S. concerns about the dangers
of North Korea-related financial activity and welcomed any
additional information that could be provided to help
identify that activity. In addition to the meeting with
Govorunov, Glaser met with the Chairman of the
Association of Russian Banks Tosunyan and Association of
Regional Banks President Aksakov. Glaser shared with them
Treasury,s guidance about dealing with North Korean
entities, and both said they would share the information with
their membership, with Aksakov indicating that he planned to
have it translated into Russian so that it could be posted to
his association,s website in both Russian and English.

Inspections
--------------


14. (C) MFA Nonproliferation Desk Director Alexander Deineko
explained that inspections would be an "issue" for Russia,
since its participation in the Proliferation Security
Initiative (PSI) was quite limited. Deineko said that there
was no "definitive source" in international law about written
procedures for inspections on the high seas on the basis of
suspicion of carrying WMD. NSC Director Lutes responded that
"transparency" was the key aspect to any inspections regime,
adding that inspections can occur not only of maritime
shipments, but with air and land shipments as well. Lutes
agreed that the high sea was not the best place to inspect
cargo, due to the dangers of two ships being in proximity, as
well as the lack of authority to use force in UNSCR 1874.
There were certain procedures, however, that could take
place, including a "hail and query" to try obtain information
or a consensual boarding granted by the ship,s master or the
flag state. If the master or flag state refused, the ship
could be directed to a nearby port for inspection pursuant to
the resolution. Lutes added that the UN Panel of Experts
created by UNSCR 1874 could investigate and recommend better
protocols on inspections, particularly in port.


15. (C) Logvinov asked about the difficult case of a
DPRK-flagged vessel that refused inspection or diversion to
port. Lutes said that, at the very least, the refusal would

MOSCOW 00002053 005 OF 005


be reported to the UNSC. Goldberg added that the case of the
Kang Nam 1 proved that diplomatic outreach could help avoid
this situation by making sure the ship had no friendly port.
On that note, Logvinov stated, based on FM Lavrov,s meetings
with the Burmese, his view was that Burma was now committed
to implement the resolution and that it "did not want to get
dragged into DPRK issues." Logvinov reiterated Borodavkin,s
view that the Kang Nam 1 was likely a decoy to test how the
international community would react and to provoke the United
States to act and possibly discredit it.


16. (C) At one point in the dialogue, Logvinov pointed out
that the GOR estimates North Korea,s rice crop this year to
be four million tons or so. Since North Korea,s "survival
level" for grains is about five million tons, he fully
expected North Korea to need to import hundreds of thousands
of tons of rice.


17. (U) This cable was cleared by the members of the Goldberg
delegation.
RUBIN