Identifier
Created
Classification
Origin
09MOSCOW653
2009-03-17 15:25:00
CONFIDENTIAL
Embassy Moscow
Cable title:  

DFM DENISOV: RUSSIA OPEN TO INCREASED ECONOMIC AND

Tags:  ECON ETRD PREL PGOV RS 
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VZCZCXRO1807
PP RUEHDBU
DE RUEHMO #0653/01 0761525
ZNY CCCCC ZZH
P 171525Z MAR 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 2429
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0465
RHEHNSC/NSC WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 000653 

SIPDIS

STATE FOR EUR/RUS; NSC FOR MCFAUL, ELLISON

E.O. 12958: DECL: 03/17/2019
TAGS: ECON ETRD PREL PGOV RS
SUBJECT: DFM DENISOV: RUSSIA OPEN TO INCREASED ECONOMIC AND
COMMERCIAL TIES; "UNCOMFORTABLE" WITH U.S. CIS POLICIES

Classified By: Ambassador John R. Beyrle for Reasons 1.5 (b) and (d).

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

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 000653

SIPDIS

STATE FOR EUR/RUS; NSC FOR MCFAUL, ELLISON

E.O. 12958: DECL: 03/17/2019
TAGS: ECON ETRD PREL PGOV RS
SUBJECT: DFM DENISOV: RUSSIA OPEN TO INCREASED ECONOMIC AND
COMMERCIAL TIES; "UNCOMFORTABLE" WITH U.S. CIS POLICIES

Classified By: Ambassador John R. Beyrle for Reasons 1.5 (b) and (d).

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


1. (C) In a March 13 meeting, First Deputy Foreign Minister
Andrei Denisov and the Ambassador agreed that we should look
for an early resumption and eventual expansion of bilateral
economic dialogues. The Ambassador stressed the importance
of Russia's WTO accession as a focal point of the dialogues.
Denisov acknowledged domestic opposition to accession, which
the GOR would need to overcome, but argued that negotiations
over accession were essentially complete )- what was needed
now was a political decision in favor. Denisov said Russia
was looking to the U.S. to lead the G20 response to the
economic crisis and hoped for concrete agreements at the
London Summit, including on additional financial support for
countries at risk of collapse, such as Ukraine.


2. (C) In that regard, Denisov underscored Russia's
discomfort with the U.S. approach to Ukraine and the rest of
the CIS, noting that this was Russia's "zone of
responsibility," as evidenced by the "unconditional" $5
billion loan Russia was prepared to offer Ukraine. The
Ambassador responded that the U.S. would not recognize a
Russian sphere of influence in the region and noted that the
Russian loan was making it more difficult for the IMF to
encourage reform and greater transparency in Ukraine.
Denisov said we would need to learn to coexist in Ukraine but
he and the Ambassador agreed that in Central Asia, where both
Iran and Afghanistan represented tangible threats, we would
need actual cooperation, while in the South Caucasus we would
need to seek stability through the Geneva process. End
Summary.

--------------
Economic/Commercial Relations and Dialogues
--------------


3. (C) The Ambassador told Denisov that one of the areas
where we were looking to improve relations was on economic
and commercial issues, which falls into Denisov's purview.
We wanted to restart a formal dialogue, accelerate commercial

ties and ensure coordinated responses to the crisis. With
respect to the dialogue, the Ambassador said we were
considering what sort of structure would work best for a
dialogue: government-to-government, business-to-business or a
combination of the two.


4. (C) Denisov agreed that we needed to take advantage of the
opportunity presented by our two young presidents to improve
relations. He said that his dialogue with former Under
Secretary for Economic Affairs Reuben Jeffery had been
friendly and productive and he was prepared to resume it with
Jeffrey's successor at an early date. The success of the
dialogue had been the result of an agreement to leave out
politics.


5. (C) Denisov said the GOR was also thinking about how best
to design a dialogue that would help facilitate closer
economic and commercial relations. The GOR was open to a
Biden-Putin Commission or some other framework, but perhaps
later, when more progress had been made. In the meantime, at
least on the economic dialogue, the GOR saw a three-tiered
structure. The first tier was a B2B dialogue, built on the
on-going relationship between the Union of Industrialists
(RSPP) and the U.S. Chamber of Commerce. The second tier was
a G2G dialogue between the MFA and the Economic Development
Ministry on the Russian side and the State and Commerce
Departments for the U.S. Finally, the third tier was a
dialogue between presidential administrations, perhaps
between Presidential Assistant Dvorkovich and his counterpart
in the NSC.


6. (C) The Ambassador responded that this structure could be
a good starting point for discussion and agreed that we
should start out small and that a &superstructure8 could
evolve over time. On the G2G dialogue, we still lacked key
personnel, including a Secretary of Commerce, a Trade
Representative, and a State Department Under Secretary for
Economic Affairs. On the B2B dialogue, while it seemed clear
that RSPP would take the lead in the B2B for Russia, the U.S.
had reached no conclusion about the U.S. Chamber of Commerce
as our lead; for us, it was important that the process be
inclusive.

MOSCOW 00000653 002 OF 003




7. (C) The Ambassador said that whatever the format, one of
the key issues would be Russia's WTO accession. WTO
accession could provide critical impetus to improved economic
and commercial ties. To make progress, we needed a clear
statement of intent by the GOR's senior leadership.
President Medvedev had made such a commitment earlier in the
week in his meeting with Senators Hagel and Hart, but a more
public declaration was needed. It would help to have the GOR
appoint someone who could enforce discipline within the GOR
and move the process forward.


8. (C) Denisov responded that the government was in favor of
accession but frankly saw it as primarily a political
decision at this point rather than a negotiation over trade
terms. He added that First DPM Shuvalov was in charge of WTO
accession for the GOR but acknowledged that there were
elements within the GOR who opposed membership, especially
the agriculture sector, which had been arguing for some time
that membership was not in Russia's interests because it
would limit the GOR's ability to support to the sector.
Denisov said the lobby was influential with First DPM Zubkov
acting as their advocate, and acknowledged that it might take
Prime Minister Putin's involvement to reach agreement within
the GOR on accession.

--------------
G20 Summit
--------------


9. (C) Denisov noted that the depth of the downturn could be
seen in the extent to which protectionism was tempting
countries, including Russia and the U.S. It was important
that the G20 Summit address this issue and said U.S.
leadership would be critical to the G20 process. Russia
understood that the U.S. needed time for its new
Administration to clarify its plans but the world was waiting
for the U.S. It was impossible to discuss reform of the
international financial architecture without the country that
accounted for 20-25 percent of the world's economic activity.


10. (C) The Ambassador responded that President Obama had
been focused on getting the domestic economy going again but
that the U.S. would come to London prepared and that we would
be looking for a strong anti-protectionism statement that
would help us avoid the missteps that turned the downturn of
the 1930s into a full-fledged depression.


11. (C) Denisov noted that the Finance Ministers were meeting
that weekend and that Russia's goal was to have the Financial
Stability Forum widened in advance of the Summit to include
Russia and the rest of the G20 who were not currently
members. (N.B. In an aside, Denisov also noted that the
British hosts of the summit were planning a P5 dinner for
Foreign Ministers April 1 and that Lavrov had already
accepted. The discussion topic was to be UNSC reform. In
addition, he said British FM Milliband was also planning a P5
plus others meeting to discuss Afghanistan and Pakistan.)

--------------
Coexisting in the CIS
--------------


12. (C) Denisov said another set of critical issues for the
G20 to consider as it discussed financial sector reforms
would be increasing assistance to the developing world and
providing additional assistance to countries that were in
trouble financially. He said Russia was particularly
concerned about its neighbors. In that regard, Russia made
no pretense to a sphere of influence but rather saw the CIS
as Russia's "zone of responsibility." It was prepared to do
its part: Russia had offered Belarus $2 billion, Kyrgyzstan
another $2 billion, Armenia another $1 billion or so and
finally, and most importantly, was prepared to offer Ukraine
$5 billion.


13. (C) Denisov said this assistance was designed to
supplement the efforts of the IMF and others to help these
countries avoid economic collapse. It was not, as President
Yushchenko had suggested, a new Moltov-Ribbentrop pact
between the GOR and his rival Yulia Tymoshenko. The $5
billion, he added, would come back to Russia anyway in
payment for Russian gas. In this way, Russia and Ukraine
could avoid another debilitating "gas war" and Ukraine would
have the energy it needed to get its economy moving again.


MOSCOW 00000653 003 OF 003



14. (C) Denisov added that the GOR was frankly
"uncomfortable" with the U.S. approach to the region, which
painted the various political actors in the region as either
black or white; free democrats or colonial stooges of Russia.
Ukraine would be a litmus test for our ability to cooperate
in the post-Soviet space. Russia's recognized that Ukraine
was an independent country now, but saw it much the way
Germany saw Austria -- two countries but with a common people
and a common language. The U.S. should not make this
situation more difficult.


15. (C) The Ambassador responded that we did not deny
Russia's interests in the CIS but did reject any "sphere of
influence" and that we needed to be able to talk openly about
our respective approaches. For instance, on Ukraine, it was
in both of our interests to prevent the country's economic
collapse. However, Russia's $5 billion loan was reportedly
without conditions. This undercut the efforts of the IMF to
improve transparency and governance in Ukraine. Was Russia
opposed to these conditions?


16. (C) Denisov responded that Ukraine was in a tough
situation and needed to be able to maintain social spending.
The old IMF schemes would not work and the conditions it had
attached to its assistance needed to be eased to allow
Ukraine to run a substantial budget deficit in support of
that spending. He added that Russia did support greater
transparency, noting that in the case of Belarus, and over
the objections of President Lukashenko, Russia had insisted
on giving the assistance to the general budget rather than to
individual companies and ministries were it would have more
easily disappeared.


17. (C) Denisov added that in Central Asia, we needed
cooperation, not just coexistence, because both Iran and
Afghanistan represented threats to both of us. He suggested
that we could both learn from our respective relations with
Uzbekistan, where after Andijan the U.S. had been too quick
to criticize and Russia too quick to support. Both of us had
since modified our positions and now viewed the country in
much the same way.


18. (C) The Ambassador agreed that we had interests in common
in Central Asia. He added that it was also in both of our
interests to bring stability to the South Caucasus and that
the only means to do that was through the Geneva process.
Denisov responded that Russia was prepared to let Abkhazia
and South Ossetia be long-term irritants in the relationship
but that Russia also needed stability in the South Caucasus
and was prepared to go forward with the Geneva process,
though without high hopes of any breakthrough for now. He
added that regardless of how long this lasted, it would not
spoil the historically close relations between the Russian
and Georgian people.

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


19. (C) Closer economic and commercial ties, including
especially WTO accession, can help Russia to become a more
prosperous and more predictable partner. WTO membership in
particular can help jump-start market reforms as Russia
adapts to the demands of membership and opens its economy
further.


20. (C ) The exchange on Ukraine, on the other hand,
highlighted the extent to which the post-Soviet space remains
the most intractable issue in our bilateral relations. While
we both support Ukrainian financial assistance to avoid
collapse, our approaches are diametrically opposed and mirror
the internal dispute in the country.
BEYRLE