BILATERAL COOPERATION A BRIGHT SPOT IN AN ECONOMIC

UNCLAS YEKATERINBURG 000027


DEPARTMENT FOR EUR/RUS

E.O. 12958: N/A
TAGS: ECON PGOV SCUL RS
SUBJECT: BILATERAL COOPERATION A BRIGHT SPOT IN AN ECONOMIC
BACKWATER

Sensitive but unclassified. Not for internet distribution.


1. (SBU) Summary: On a visit to Kurgan Oblast April 27-29,
the Consul General (CG) found a striking mix of highly visible
areas of U.S. -- Russian bilateral cooperation and durable
personal relationships forged by exchange programs. Everyone
from the Governor on down praised the long-term sister city
relationship between Kurgan and Appleton, WI. CG and Embassy
Moscow Law Enforcement Section (LES) chief handed over 4 million
rubles worth of equipment to the local Federal Narcotics Control
Service (FSKN). Green Cross activists in the village of
Shchuchye expressed disappointment in the Russian government's
failure to realize promises of social infrastructure development
upon completion of the nearby chemical weapons destruction
facility (CWDF),to which the U.S. made a major contribution.
End Summary.


Official Meetings Cordial
--------------

2. (SBU) Official meetings with Kurgan Oblast Governor Oleg
Alekseyevich Bogomolov and Kurgan Mayor Anatoliy Fedorovich
Yelchaninov were cordial. The Governor characterized the
economic situation in Kurgan as "difficult but not disastrous,"
though the region remains dependent on Moscow for budget
subsidies. Kurgan is the leading agricultural region in the
Urals, and according to media reports, agricultural production
remains at 99 percent of last year's level. These same sources,
however, report that industrial production is down 16.7 percent
in the region and freight carried by rail down 41.6 percent.
The automotive industry is struggling and state orders for
military armored personnel carriers produced by the
Kurganmashzavod enterprise are down. Public and private
indebtedness stands as a major obstacle to overcoming economic
difficulties. According to media reports, the regional
government will be required to seek credit from the center to
pay off 300 million rubles of debt. Unemployment, which
exceeded 9 percent at the end of 2008, continued to grow through
the first quarter of 2009, according to media reports.
Meanwhile, the Governor stated publicly that he will not accept
the economic crisis as an excuse for poor performance from
officials and enterprise directors.


3. (SBU) Mayor Yelchaninov, a United Russia party member,
expressed confidence that he would be re-elected for a sixth
term in October. There are indications, however, of increasing
opposition to his continuation in office. His relationship with
the governor has been contentious in the past. In early April
the governor took part in a conference staged by a movement
called "This is Our City" that strongly criticized the mayor's
performance. According to media reports, the mayor's critics,
including some from within United Russia, found fault with the
city's small business development program and decried the
mayor's failure to attract investment. Others speakers took on
the city's land use policies, especially in the "historic" city
center, where numerous striking examples of 19th century
provincial Russian architecture are deteriorating and in need of
restoration or neighborhood development. "This is Our City"
describes itself as a civic action movement, but looks more like
a political campaign: several full-size billboards featuring
the organization's co-chairman Ivan Belykh were prominently
displayed in the downtown area.


CG, LES Chief hand over equipment to FSKN
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4. (U) Our visit coincided with the visit of Embassy Moscow
LES chief and enabled us to participate in the handover of over
4 million rubles worth of equipment to the Kurgan FSKN. A press
conference provided the CG with an opportunity to highlight the
connections between Kurgan and the U.S. and enabled the LES
chief to explain how the contribution of equipment to FSKN units
along the border with Kazakhstan strengthens the ongoing
partnership between the U.S. and Russia in combating narcotics
trade in the region. Two all-terrain vehicles, computer
equipment and surveillance equipment formed an excellent
background for media photos of the handover ceremony that
appeared in the local internet media.


Exchange program alumni active
--------------

5. (U) Alumni of Sister Cities and Open World and other U.S.
Government exchange programs were eager to tell of their
experiences and expressed hope for continuation of these
relationships. Governor Bogomolov said that his daughter had
spent a year in Appleton and that he had personally hosted the
family with whom she stayed. Mayor Yelichanov spoke of his two
visits to Appleton in the 90's, though he suggested that
interest in the relationship had recently waned somewhat.
Alumni members of the city's active Rotary Club, however, were
anxious for more contact, and the vice rector of the
agricultural academy told of plans to visit the U.S. in June on
a Fulbright grant.


Shchuchye's fate
--------------

6. (SBU) Returning to Yekaterinburg we took a side trip to
the village of Shchuchye to visit Galina Vepreva, head of the
local branch of the Green Cross organization, the contractor
that monitors the welfare and rights of citizens residing near
the CWDF. The Russian government is obligated to contribute 10%
of the total cost of the facility - to which the U.S.
contributed USD 1.39 billion through the Cooperative Threat
Reduction program - for the development of the region's social
infrastructure. Though Governor Bogomolov spoke of the benefits
this project brings to the region and praised the U.S. for its
cooperation, the deteriorating village of Shchuchye itself
reflected very little of this promise.


7. (SBU) Vepreva complained that only 70% of the funds
designated for social infrastructure development had been spent
and that control over some of the benefits, such as a mobile
environmental testing unit that was ceded to the military, had
been diverted. Though the village received a new school and a
new clinic, it remains poor even by Russian rural standards.
According to Vepreva, there is no hot water in homes, no sewage
treatment facility, and gas is available only to those who can
afford to be connected.


8. (SBU) We had to take a detour into town because flooding
had rendered the main road impassable. The dirt road into the
center was in such poor condition that vehicles were forced to
run a slalom course to negotiate the crater-like potholes. The
administrative buildings in the center of town were in an
advanced state of neglect and the main features of the central
park were litter and rusted playground equipment. Elderly
people sold clothing and household goods at a small flea-market
in the central square. Even the modern residential complex that
rises above the ramshackle wooden houses of Shchuchye is
something of an illusion: According to Vepreva, workers at the
CWDF will be housed in this complex for the life of the
facility, but apartments will revert to state ownership when the
facility is closed, with no clear provision for the occupants.
She commented that she fears mismanagement of the social
infrastructure program more than she fears the proximity of the
CWDF.


9. (SBU) Comment: We found the predominantly agricultural
region lacking economic dynamism. Though a beautiful theater
had recently been built, there was little new construction in
the city. In contrast to other regional capitals in our
consular district, Kurgan was dusty, run down and provincial, a
city where two popular American Wild West-themed restaurants did
not seem particularly out of place. Notable aspects of the
region's landscape included broad marshlands remarkable for a
lack of bird life and birch and pine forests that had been
extensively burned by a wildfire that claimed numerous lives
earlier this decade. Along with these features, expanses of
fields being readied for cultivation emphasized the influence
that climate and topography have on Kurgan's economy and its
people.


SANDUSKY