U/S HORMATS MEETINGS ON RUSSIAN BILATERAL ECONOMIC

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 003050

SIPDIS

WHITE HOUSE FOR USTR

E.O. 12958: DECL: 12/01/2019
TAGS: EAGR ECON EFIN RS
SUBJECT: U/S HORMATS MEETINGS ON RUSSIAN BILATERAL ECONOMIC
ISSUES AND THE BILATERAL PRESIDENTIAL COMMISSION

Classified By: AMBASSADOR JOHN BEYRLE, REASON 1.4 (B) AND (D)

Summary
--------------


1. (C) Under Secretary of State for Economic, Energy and
Agricultural Affairs Robert Hormats visited Moscow from 1-3
December, conducting meetings with a wide variety of
audiences, including the Russian Presidential Administration,
Russian Foreign Ministry and Economic Development Ministry
officials, Gazprom executives, and representatives of the
American and Russian business communities. This cable
reports on Under Secretary Hormats' meetings with Russian
government officials related to U.S.-Russia bilateral
economic issues and the Bilateral Presidential Commission.
Energy issues and multilateral economic issues are reported
septels. End summary.


2. (C) Under Secretary Hormats held extensive discussions
with a Russian Foreign Ministry team, led by Deputy Foreign
Minister Denisov and including Amb. Malayan, the point person
within the Russian Foreign Ministry on the Bilateral
Presidential Commission. Ministry of Economic Development
representative Yelana Danilova joined the group during a
working lunch and participated actively in the discussion,
particularly on issues related to the Bilateral Presidential
Commission. In a separate meeting with Russian Presidential
Economic Advisor Arkadiy Dvorkovich, the Under Secretary also
addressed these issues and exchanged views on key aspects of
the bilateral economic relationship.

Bilateral Economic Issues
--------------


3. (C) Denisov opened the discussion at the Foreign Ministry
by emphasizing that the relationship is more important than
figures indicate. Even with a 40% drop in Russian trade
turnover this year, U.S.-Russian bilateral trade is
substantial for Russia. Denisov would like to encourage and
enhance its development. He noted the importance of
publicizing success stories--U.S. companies are working not
only in the energy sector, but also in foodstuffs, financial
services, consulting. Denisov also brought up the Opel/Magna
deal. Denisov observed that, as a taxpayer, he could support
the Opel/Magna decision, but noted that it creates
"confusion" in the public. He stated that Putin had decided
"not to make an issue of it," but noted that it leaves a bad
aftertaste for the Russians. Denisov noted that there are
still some unwanted leftovers from the past, including
prejudices and suspicions. There are different views in
different communities within Russia. In his view, we need to
stay optimistic in order to overcome these moments. MFA
would like to reduce the negative impacts of trade
difficulties so that it can play a positive role in the
overall bilateral relationship.


4. (C) Under Secretary Hormats agreed with the need to have
trade play a positive role in the relationship. On the topic
of the Opel/Magna deal, Hormats stressed that the decision
was taken by GM, not by the USG, and that GM wanted to
continue to maintain its close relationship with its Russian
partners. Hormats also note that we want to increase trade
and investment that bring the two countries together and
which create jobs, such as the John Deere plant. Investment
is one of the areas we'd like to emphasize within the
Bilateral Presidential Commission discussions. While neither
country is ready to begin negotiations on a bilateral
investment treaty, we do want to discuss ways to improve
cooperation in investment. Denisov agreed with this
suggestion.


5. (C) Denisov also expressed a desire for increased
technological cooperation. He noted that the Working Group
on Science and Technology is looking at setting up a new
group to encourage cooperation.

Bilateral Presidential Commission
--------------


6. (C) Business Development and Economic Relations Working
Group: Russian Ministry of Economic Development
representative Yelana Danilova noted the complexity of the
issues under the rubric of this working group, and stated
that there is a need for a strategic approach to bring
together the various specific details. In her view, market
access issues will not be key for the group, although they
will be part of the on-going relations. Instead, the Russia
side would like to focus on modernization and technological

MOSCOW 00003050 002 OF 002


development.


7. (C) During a separate meeting with Presidential Advisor
Dvorkovich, Hormats commented positively on President
Medvedev's November 11 State of the Nation speech, with its
emphasis on modernizing the Russian economy through
innovation and diversification. Dvorkovich noted that since
the speech, many Russians had come forth with project
proposals, but that the guiding criteria for the GOR was
their international competitiveness. He said that the GOR
was eager to explore ways to expand cooperation with the US
on high-tech innovation and investment. Dvorkovich added
that he planned to visit MIT en route to Washington in
January. He also had received proposals from Microsoft and
Cisco on innovation and high-tech cooperation. Hormats
offered his support for those and other innovation projects.


8. (C) In Danilova's view, there is also a need to address
migration questions and to work on removing the
administrative procedures in order to assist companies which
would like to transfer and recruit key managerial personnel.
These issues were also raised by both Russian and U.S.
companies during separate meetings with business.


9. (C) According to Danilova, investment is another area
that this group should address. She noted that the Russians
are looking into modifications of the Foreign Investment
Advisory Committee (FIAC) to create a "window" for American
companies who are experiencing difficulties. Danilova
reported that Deputy Minister Slepnev is interested in this
approach and is soliciting the views of companies.
Presidential Advisor Dvorkovich also noted that, following
Slepnev's recent trip to Washington, he expressed concern
that several of the USG counterparts on the Business
Development and Economic Relations Working Group had not been
named.


10. (C) Danilova also noted that they support looking at a
business-to-business dialogue, but only as a supplement to
government-to-government discussions. The governments should
take up issues identified by businesses. Businesses, for
their part, emphasized their desire to participate actively
in the Commission process.


11. (C) Health Care: During the discussion at the MFA,
Under Secretary Hormats noted that we would like to have
productive discussion on health issues, because both
countries have significant challenges in this sector. He
noted that bringing in the private sector, NGOs, health
workers, as well as governments, would lead to better
discussions with real benefits for the average citizens in
bother countries. Danilova responded that they are ready to
engage in consultations.


12. (C) Agriculture: Hormats expressed the view that this
discussion should be government-only for now, as there are a
number of controversial bilateral issues where progress would
be helpful. He noted that this is another area where we
could look for cooperative actions. Ambassador Malayan noted
that the telcon scheduled for December 14 will be important
to establishing the agenda for this group.


13. (C) Energy: Denisov acknowledged that they are still
looking for the individuals to head up the Russia sub-groups,
particularly the group on energy security. During the
meeting with Presidential Advisor Dvorkovich, he assured
Hormats he would see that the Russian side identified a
co-chair for the Energy Security Sub-Group.


14. (U) This cable has been cleared by U/S Hormats'
delegation.


Beyrle