LAVROV AND STOERE TRADE TOUGH WORDS OVER NATO, BUSINESS DISPUTE

C O N F I D E N T I A L OSLO 000216

SIPDIS

E.O. 12958: DECL: 03/31/2019
TAGS: PINR, PREL, EINV, RU, NO
SUBJECT: LAVROV AND STOERE TRADE TOUGH WORDS OVER NATO,
BUSINESS DISPUTE

Classified By: Deputy Chief of Mission, Kevin M. Johnson
for reasons 1.4 b and d

1. (C) Summary: During his March 24-25 Moscow visit FM Stoere
clashed with FM Lavrov over the Telenor-Alfa Bank business
dispute and NATO issues. On the Arctic Council, Svalbard,
Afghanistan, Iran, the Middle East and energy cooperation,
discussions were characterized by the normal positive
atmosphere between the two ministers. Following the
meetings, Norway's Ambassador to Russia briefed Ambassador
Beyrle and the Deputy Director of the Norwegian MFA's Russia
section briefed Embassy Oslo, highlighting the GON's wish for
U.S. attention to the Arctic and the Secretary's
participation in the April 28-29 Arctic Council Ministerial.
The GON is concerned that Russia may drift in a more
aggressive line and believes U.S. presence at the Arctic
Council is necessary to balance this. The GON also seeks a
relaunch of a U.S.-Norway High North dialogue. End Summary

Stoere objects to the Shakedown of Telenor
--------------
2. (C) The MFA's Anne-Kirst Karlsen, Deputy Director of the
Russia section stated that despite their good personal
relationship, Stoere and Lavrov's discussions over the
Telenor-Alfa Bank business dispute were rough and tense. The
GON-owned Telenor (53.9% state ownership) is locked in a
heated dispute with the Alfa Group over control of their
joint company Vimpelcom (Telenor 30% Alfa 40% share),a
Russian mobile phone operator. Telenor has been in the
Russian market since 1992 and in partnership with Alfa from
1998. Trouble between the partners began in 2004 over Alfa's
wish to expand into Ukraine, leading to a series of court
cases which have not resolved the issue. Through
questionable legal maneuvers conducted by a front company,
Alfa won the most recent court case on March 11, resulting in
the seizing of Telenor's shares in Vimpelcom, currently worth
about 1.8 billion dollars (11.8 billion NOK) and their
possible forced sale. Under Russian law these shares could
be sold before the appeal (currently scheduled for May 26) is
heard.

3. (C) Stoere challenged Lavrov to ensure that Telenor's
shares are not sold before their appeal can be heard. He
stressed the damage that Russia's economy would suffer if it
continues to be unpredictable and arbitrary. The abrupt fall
in the Russian stock market on the day the Telenor verdict
was announced was proof of this. Lavrov objected to Stoere's
statement that the Russian economy was unpredictable and
accused Telenor of stopping Russian investment into Ukraine
and other former Soviet states in the interest of limiting
Russian influence over these areas. Lavrov suggested the
TNK-BP model of resolution where BP was forced to cede
control and shares to TNK at less than market values, a
solution which would not be welcome to the GON.

Real and Imagined Tensions over NATO
--------------
4. (C) Pointing to the NATO meeting held in Reykjavik in
January, the NATO Cold Response exercise held in
February-March in Northern Norway, and a Norwegian video
game, Lavrov criticized NATO for unnecessarily increasing
tensions in the Arctic. Demonstrating impressive research by
the Russian Embassy in Oslo, Lavrov objected to the video
game Naval War: Arctic Circle, to be released in 2010 by a
Norwegian company, Turbo Tape Games (which recently received
a substantial grant from the Norwegian Film Institute) and
which depicts Russia as the enemy in a conflict over Arctic
resources. On the NATO Russia Council Lavrov welcomed new
meetings but insisted that they be at the same level as
before the Georgian war. He also asked why there have been
no discussions on human rights violations in Georgia or NATO
shipment of weapons to Georgia.

5. (C) Stoere responded strongly, saying that Norway and NATO
have the right to rehearse military maneuvers and that Lavrov
should look in the mirror before criticizing NATO military
activities in the Arctic, given the substantial increase in
Russian military activities in the area. Stoere also urged
Russian leaders to make an effort to change Russia's image of
the enemy and of the West, particularly in the north where
bilateral cooperation is strong. Stoere also pressed Lavrov
for an explanation on why there has been no substantial
progress in the NATO Russia Council.

Less Tension on High North Arctic / Svalbard Issues
-------------- --------------

6. (C) There was only a brief mention of Svalbard, and
surprisingly Lavrov did not raise any of Russia's standard
issues of principle. The ministers discussed Barents
cooperation issues, including the implementation of visa-free
travel for residents, fishing, the maritime border, and
nuclear safety issues. Although agreeing on the importance
of the Arctic Council, Stoere and Lavrov discussed their
different views of expanding membership, with Russia
objecting to a wider membership, particularly the EU.

Energy and Carbon Capture
--------------
7. (C) In discussions over development of Shtockman Lavrov
maintained that a decision on investment would be taken at
the end of this year. He did not believe the financial
crisis would impact this decision. Lavrov was also very
interested in Stoere's explanation of the GON's carbon
capture and storage program. Lavrov complained to Stoere
that the European Commission had gone behind his back in
making a deal with Ukraine on gas supplies before the
Commission-Russia-Ukraine meeting in Brussels the week of
March 16. The Norwegian MFA feels that the EU-Russia energy
relationship was not good, even claiming that the Russian
purposely created traffic and passport problems to ensure
that Commissioner Ferroro-Waldner missed her flight during a
recent visit to Moscow.

Afghanistan, Iran and the Middle East
--------------
8. (C) Lavrov had just returned from a visit to Afghanistan
and was struck by the bad security situation. He said that
Russia was considering offering training and small arms
assistance to the Afghan police. On Iran, Lavrov welcomed
U.S. engagement and stated that Iran is ready to use its
leverage in the region positively, but needs to know what
they will receive in return. Without prompting, Lavrov
mentioned that if Iran is brought into greater engagement
with the world, Russia would even welcome the Nabucco
pipeline. Lavrov also mentioned Russia's intent to host a
Middle East meeting in Moscow during the summer, using the
Annapolis format.

Will Norway Keep their Russian Rose-Colored Glasses?
-------------- --------------
9. (C) Comment: The GON is growing more concerned about
developments in Russia, although they are careful to
continually stress the positive developments in the bilateral
relationship. The GON continues to (perhaps wishfully)
explain away negative developments in Russia. The latest
example was the dismissal of the long-standing governor in
Murmansk, after accusations of treason for giving away
resources and being too friendly to Scandinavians and
Americans. This was characterized as sad, but not an attack
on the Norwegian-Russian relationship and was not raised by
Stoere in his meetings with Lavrov.

10. (C) It has taken the Telenor business dispute to slightly
sharpen Norway's criticism of Russia. Despite this serious
dispute, the GON wishes to continue good relations with
Russia possibly because it does not see any way to
effectively counter Russian moves without damaging Norwegian
interests. Oil and Energy Minister Riis-Johansen's April
22-24 visit to Russia and PM Stoltenberg's May 19 visit to
Moscow will show if the GON maintains a positive approach to
Russia.

11. (C) Despite the generally rosy outlook, the GON is aware
that the potential for trouble with Russia could be rising.
The decision to directly brief the U.S. Embassy in Moscow on
the Minister's meetings is indicative of the GON wish for the
U.S. to counterbalance increased Russia activity in the
Arctic. Norway and FM Stoere (helped by the Russians
increased activity) have succeeded in raising NATO and U.S.
awareness of the Arctic and Barents region but have been
struggling to determine what steps they would like to see the
U.S. take in the region, beside ratification of the Law of
the Sea. In his April 6 meeting with the Secretary, FM
Stoere will likely ask for increased dialogue with the U.S.
on creative ways to engage in the Arctic and with Russia.
Officials from the MFA are scheduled to visit Washington in
May to speak with the State Department on a possible restart
of the U.S.-Norway High North Dialogue, with a focus on
issues such as climate, shipping, energy, Arctic research and
resource management. End Comment.
WHITNEY