CASTRO VISITS MOSCOW TO REJUVENATE RELATIONS

UNCLAS SECTION 01 OF 02 MOSCOW 000397

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SUBJECT: CASTRO VISITS MOSCOW TO REJUVENATE RELATIONS

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1. (SBU) Summary: Cuban President Raul Castro visited Moscow from
January 28 to February 4 in an effort to boost trade ties and
rejuvenate relations with Russia. Despite some exercises in
Communist-era nostalgia, experts were quick to downplay any
anti-U.S. angle to the trip. Medvedev and Castro signed a number of
agreements to establish joint ventures in various areas of economic
activity, including automobile manufacturing and energy cooperation,
although energy experts were quick to discount the oil agreements.
Additionally, Cuba will receive over USD 350 million in loans and
aid, which are contingent on purchasing Russian goods and services.
Prior to Castro's visit, DPM Sechin negotiated a number of economic
agreements with the Cuban government, continuing his role as the
frontman for this vanity foreign policy. End summary.

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Despite Communist-Era Nostalgia, Visit Not Anti-U.S.
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2. (SBU) On a January 28 to February 4 visit to Moscow, Raul Castro
and Dmitriy Medvedev signed at least 24 documents on mutual
cooperation, capping recent Russian efforts to revitalize its
relationship with Cuba. This was the first high-level Cuban visit
to Russia since 1985. Despite some exercises in nostalgia, such as
when Castro ate "salo" (bacon lard: a delicacy) at the former
Politburo hunting lodge in Zavidovo, a place he last visited in
1984, analysts were quick to discount any anti-U.S. angle to the
trip. They instead focused on practical steps taken by both sides
to boost economic cooperation. They pointed out that, despite FM
Lavrov's statements made in Prensa Latina ahead of Castro's visit
that Russia would press for the lifting of U.S. sanctions against
Cuba, no new Russian initiatives toward this end have been
undertaken.


3. (SBU) Director of the Latin America Institute Vladimir Davydov
said that any gestures of support for Cuba against the United States
have always been merely symbolic. This trip, he said, "should
dispel concerns that Russia was reviving ties with Cuba to spite the
United States."

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Increased Trade Sought
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4. (U) In a January 30 press conference, Medvedev said that
Russian-Cuban bilateral trade stood at USD 239 million, with Cuba
representing 0.05 percent of Russia's foreign trade, while Russia
accounted for 2.2 percent of Cuba's. Medvedev claimed this level of
trade was "absolutely not the kind of level that can satisfy our
countries," and said steps must be made to implement agreements the
two countries signed.

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Joint Ventures Announced
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5. (U) Medvedev and Castro signed documents establishing numerous
joint business ventures. After several months of negotiations,
Russia's largest truck producer, KamAZ, will not only sell its
trucks to Cuba, but also establish an assembly plant with Cuba's
Tradex. Aeroflot and Cubana de Aviacion will also establish a joint
venture. The United Shipping Company and Sovcomflot, Russia's
largest shipping company, are also considering joint projects with
Cuba.

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Energy Cooperation
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6. (U) According to press reports, Russian power producer Inter RAO
UES reached an agreement with Cuba's Union Electrica to set up a
joint venture for thermal and hydropower generation, and to build a
600 megawatt thermal power plant in Cuba. (Note: Hurricanes in the
fall of 2008 badly damaged Cuba's power grid, and the joint ventures
with Russia will help Cuba meet some of the continuing electricity
generation shortfall.) The press speculated that, because most
Cuban power plants use oil, Russian oil producers may soon get a
foothold in the Cuban oil and gas sector, including developing
off-shore resources.


7. (SBU) According to TNK-BP International Relations Manager Davlet
Ovezov, however, there is no agreement. During the Russian/Cuban
Intergovernmental Committee's meeting in Moscow, the National Oil
Consortium comprising Rosneft, Gazprom, LUKOIL, Surgutneftegaz,
TNK-BP, and Cubapetroleo (Cupet) signed an MOU with specific terms
and conditions to be stipulated in separate agreements and
contracts. There are no definite deadlines set for finalizing the
contracts, nor there is an indication of each party's share in and
contribution to the project. The general idea was to assist the

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Cuban government to develop their sea oil terminals with some
involvement in Cuban upstream/downstream. It is also said that
extension of the co-operation framework to include some "third
parties from the Caribean" in addition to Cuba and Russia is being
discussed. A Conoco-Phillips representative" told us that Lukoil
was not serious about any of the Cuba initiatives because the terms
and economics of proposed deals were "terrible." (Note:
ConocoPhillips is Lukoil's strategic partner and owns 20% of the
company.)

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Aid And Loans Doled Out
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8. (U) In a boost to Russian exports, Castro reportedly negotiated
state loans at below market interest rates worth over USD 300
million to buy and/or lease Russian agricultural, construction, and
other equipment, including a Tu-240SE transport plane. (Note: This
is in addition to three Tu-204 and three Il-96 civilian planes Cuba
acquired under a loan negotiated in September 2006.) Cuba will
spend USD 20 million of this new loan to repair and purchase spare
parts for military equipment it purchased from the Soviet Union.
Additionally, Russia has pledged to donate two batches of grain of
25,000 and 100,000 metric tons, worth USD 37 million, to Cuba to
alleviate the food shortage there.

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Deals Signed Before Castro's Arrival
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9. (U) On January 23, Deputy Prime Minister Igor Sechin negotiated a
series of economic cooperation deals with Cuban government officials
in Moscow. A Gazprom-led consortium created in 2008 to develop
Venezuela's gas and oil fields signed a cooperation agreement with
Cuba Petroleo to jointly work on exploration, production, and
refining. Norilsk Nickel agreed to fund exploration of ore reserves
in Cuba, with the prospect of mining them in the future. Carmaker
AvtoVAZ signed a deal to service its cars in Cuba. In addition,
agreements were signed to jointly work on developing vaccines and
cooperate on telecommunications.

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COMMENT
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10. (SBU) As some Moscow-based oil company executives confided to
us, the modest trade and investment deals that sprung from Castro's
Moscow trip were motivated more by political considerations than
purely economic reasons. In addition, since the loan proceeds that
Castro secured are contingent on Cuba buying Russian goods and
services, Russia is not only extending a helping hand to Cuba, but
also boosting its own exports at a time when global demand for much
of what Russia produces is sliding. DPM Sechin's extensive role in
mid-wifing the Russian-Cuban relationship likely reflects PM Putin's
personal interest in reasserting a Russian presence in the Western
Hemisphere. Although this vanity political project carries a
moderate price tag, as the economic crisis in Russia intensifies,
the appeal of proving Russia's reemergence in the far-flung corners
of the former Soviet empire may be less than anticipated.