RUMORS BEGIN AROUND FUTURE APEC SUMMIT

UNCLAS SECTION 01 OF 02 VLADIVOSTOK 000035

SIPDIS

E.O. 12958: N/A
TAGS: ECON PGOV
SUBJECT: RUMORS BEGIN AROUND FUTURE APEC SUMMIT

VLADIVOSTO 00000035 001.2 OF 002



1. Summary. In 2006, federal authorities announced plans to
hold 2012's Asia-Pacific Economic Cooperation Summit in
Vladivostok. Plans were made for several large-scale
infrastructure improvements to prepare the city for the
international event, which would bring world attention to
Vladivostok. Some APEC construction projects are already
underway in Vladivostok, but others have been delayed and scaled
back. Comments by officials have begun to make city residents
skeptical that the event will be held in their city.

New Infrastructure, Spotlight Would Benefit City
-------------- ---


2. Three years ago Primorye residents first heard of Moscow's
intention to hold the 2012 Asia-Pacific Economic Cooperation
Summit in Vladivostok. Authorities announced plans for several
large-scale infrastructure projects to prepare the city for the
international event, which would bring attention to Vladivostok
as a Russian Far East city attractive to foreign business, and
help integrate the region with the rest of Asia. Plans also
call for building Summit facilities on Russkiy Island, just off
the coast of Vladivostok, which would be used as a new Federal
University after official meetings have ended.

Change of Plans? Rumors Abound
--------------


3. There has been no overt indication the plans to hold the
Summit in Vladivostok have changed, but rumors have begun
circulating among official circles. The first public call of
doubt was sounded at the Krasnoyarsk Economic Forum in late
February, when an unnamed Ministry of Finance Official called
APEC-2012 a 'senseless event' and reminded colleagues about
existing world-class facilities in Strelna near St. Petersburg.
Federal Finance Minister Aleksey Kudrin had been against the
idea from the beginning, voicing concerns about what he
euphemistically termed 'inappropriate use of funds' (a reference
to the notoriously corrupt Far East.) In mid-February Nikolay
Ashlapov, Head of the RFE Directorate of the Rosstroy Company,
mentioned a likely reduction of construction projects,
especially at the future summit/university site. Rumors are
strong enough that Mayor Sergei Pushkaryov made a statement in
the March 13 edition of the 'Vladivostok' newspaper assuring
that the Summit will be held as planned.


4. The construction of a tunnel to the Golden Horn Bay has been
halted because developers forgot to put in a drainage system.
Though not a significant detriment to the project, this is not a
confidence builder for those funding the project. There have
also been hints about freezing some Russkiy Island projects due
to the economic crisis. Bridge construction to the island is
facing a shortage of special material for the bridge's
underwater pylons and unavailability of special construction
vessels for use in icy waters. Construction inspectors recently
discovered 283 violations at the two APEC-related bridge sites,
77 of which remain unfixed. One of the bridge construction
developers committed suicide after the inspection, leaving a
note behind that called attention to the safety violations and
his doubts that the project could be completed on time and
within government specifications.

'Optimizing' = 'Reducing'
--------------


5. Of the 284 billion rubles budgeted for APEC in Vladivostok,
22 billion have been spent. Another 62 billion rubles are to be
transferred from Moscow later this year. Rosstroy RFE
Directorate Head Ashlapov promised an 'optimization' -- not
'reduction' -- of expenses by at least by 20 percent. Some
analysts say that announcing a budget reduction may signal an
intention to eventually cancel the project.

Not Much Enthusiasm for University Idea
--------------


6. Local education experts have criticized plans for the future
Federal University for 50,000 students on Russkiy Island.
Professors of several Vladivostok universities say the
institution will have trouble attracting regional students, who
are decreasing in number, and foreign students, who already have
a wide array of choices among more established institutions.
Aleksandr Latkin, a Consulate contact and a leading professor of
economics in Vladivostok, stated that he would not accept an
offer to work at this university and will not recommend others
to send their children to study there because of the island's
remote location and extreme weather conditions.

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


7. Vladivostok is now facing a shortage of everything --

VLADIVOSTO 00000035 002.2 OF 002


professional specialists, laborers, and especially time-- to
prepare for the Summit. If authorities can find ways to solve
the problems, holding the summit here would benefit the city by
focusing attention on the RFE, helping Russians find partners
who could unlock some of the region's natural riches, and
integrating the RFE into the Asian economy. A possible scenario
is that Moscow will find an appropriate official excuse to split
APEC-2012 activities into two parts, with Presidential
delegations meeting in Strelna near St. Petersburg (as other
members of APEC including Australia requested in 2007) and
working committee meetings being held in the RFE. However, there
are high-level commitments that APEC will be held here and money
has been invested. The summit could also be held in Vladivostok
on board cruise ships if the official facilities are not
completed. In any case, whether this is the Russian Far East's
coming out party or simply a chance to get acquainted, the
region offers many opportunities for American business and there
are existing successful partnerships worth highlighting. The
question is whether Moscow is ready to get in touch with its
Pacific side.
ARMBRUSTER