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FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 3566
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 04 MOSCOW 001424 
 
SIPDIS 
 
DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND WRIGHT 
DOE FOR HEGBURG, EKIMOFF 
DOC FOR JBROUGHER 
NSC FOR MMCFAUL, JELLISON 
 
E.O. 12958: DECL: 05/28/2019 
TAGS: EPET ENRG ECON PREL RS EU
SUBJECT: LATEST RUSSIA-EU SUMMIT, LIKE ITS IMMEDIATE 
PREDECESSORS, PRODUCES FEW RESULTS 
 
REF: MOSCOW 1120 
 
Classified By: DCM ERIC RUBIN for Reasons 1.4 (b/d) 
 
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Summary 
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¶1. (C) The May 21-22 Russia-EU Summit, held in Khabarovsk in 
the Russian Far East (RFE), resulted in no breakthroughs on 
major energy, political and trade issues.  Press reports 
focused on continuing "tensions" over energy, a topic 
dominated by Russia's push for the EU to finance Ukraine's 
gas needs in order to avoid another crisis.  Russian 
officials expressed continued concern over the EU's Eastern 
Partnership Initiative (EPI), with President Medvedev saying 
he was not convinced that it was not directed against Russia. 
 Trade was another sticking point, with the Russia side 
expressing frustration over the slow pace of WTO accession 
and the EU protesting Russian protectionism.  Euro-Atlantic 
security was also a major topic of discussion, with the MFA 
reporting to us that the Summit achieved "greater 
understanding" between the two sides.  However, a Czech 
representative reported to us that the Russians presented 
"nothing new."  The location of the Summit in the RFE, a 
stone's throw from China loomed large in press accounts and 
analyses.  Medvedev said the 11-hour flight from Brussels 
cemented "the greatness of Russia" in the minds of the 
European Commissioners, but one commentator quipped that it 
only showed the Europeans Russia's vast emptiness.  End 
summary. 
 
------ 
Energy 
------ 
 
¶2. (SBU) On the issue of gas, both sides agreed on the need 
to avoid a repeat of previous years' gas crises and ensure 
the uninterrupted flows of Russian gas through Ukraine. 
However, there was no agreement or clarity regarding the 
mechanism by which this goal could be achieved.  At the press 
conference following the Summit President Medvedev stressed 
that the problem would not be with Russian supplies but with 
Ukraine's inability to pay.  President Medvedev suggested at 
the Summit that the EU offer Ukraine some form of financing 
in order to prevent supply disruptions.  Barroso's public 
comments were limited to statements that both Russia and 
Ukraine must do everything in their power to avoid another 
gas cutoff. 
 
¶3. (C/NF) The EC Delegation's Counselor for Energy, 
Environment, Science, and Transportation, Ulrich Weins 
(strictly protect), told us May 26 that the Russians had 
"pushed hard" on the issue of financing Ukraine's gas needs. 
Weins, who was not present at the Summit, said he had no 
information on whether the EU was seriously considering such 
an option.  He agreed, however, that the EU has a strong 
interest in seeing Ukraine's storage facilities full before 
the winter.  EC Delegation First Secretary Kevin Tait told us 
May 28 that Russia was creating an artificial crisis by 
demanding that Ukraine prepay for its gas and that if Ukraine 
refused, the GOR would face a decision June 7 on whether to 
cut supplies to Ukraine. 
 
¶4. (SBU) The two sides also discussed Russia's proposal for a 
new legal framework for energy trade (reftel), with Russia, 
as expected, pressing for a "new" system.  President Medvedev 
reiterated that Russia does not intend to ratify the existing 
Energy Charter Treaty (ECT) to which it is a signatory.  The 
EU, for its part, maintained its position that there is no 
need to replace the ECT, but that it is willing to discuss 
with Russia its concerns and proposals related to this issue. 
 
¶5. (C/NF) On the ECT, Weins said that the two sides "seem to 
have divergent views on the need for open access to transit 
systems" and also on what constitutes open investment regimes 
in the energy sector.  Weins said that the EU is unwilling to 
abandon the ECT, the principles of which are sound, and to 
which so many states have already agreed.  That said, Weins 
added that the EU is "happy to discuss" any Russian proposal, 
but that "there is nothing on the table yet to discuss." 
 
MOSCOW 00001424  002 OF 004 
 
 
 
¶6. (C) Russian MFA EU Unit head Petr Plikhin, who was present 
at the Summit, told us May 28 that the EU had agreed to work 
with Russia to create a new, binding energy security 
agreement that would be based on Medvedev's statement of 
principles and the existing EU Energy Charter Treaty. 
Plikhin also underlined that the EU needed to work now to 
avoid another gas crisis because in Russia's view, Ukraine 
could not meet its payments for gas consumption now and would 
not have funds to fill gas storage facilities necessary to 
deliver gas to Europe next winter.  He added that the GOR, 
for its part, has maintained that Russia is ready to 
participate in a financial assistance package to Ukraine. 
However, Ukrainian Embassy Counselor Myroslava Scherebatiuk 
told us separately that she finds it &odd8 that Russia was 
so concerned about helping Ukraine as "Ukraine had never 
asked Russia for this favor." 
 
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Trade 
----- 
 
¶7. (C/NF) The two sides also discussed trade and other 
economic issues during the Summit, again, without any 
substantive results.  EU officials complained about recent 
protectionist measures and policies on the part of Russia, 
while Russian officials voiced frustration about insufficient 
progress on Russia's accession to the WTO.  According to 
Plikhin, Russia said at the summit that it was looking to 
reinvigorate its WTO efforts and hopes to accede by the end 
of the year.  Czech Embassy First Secretary Pavel Bucek, who 
was also present at the Summit, discounted Russia's "take us 
soon or else" WTO strategy as a negotiating position. 
 
¶8. (C/NF) Describing the trade discussions in more detail, 
Bucek said the summit revealed that "both sides were guilty 
of imposing tariff and non-tariff trade barriers," but that 
the sides would continue to "coordinate."  Echoing Bucek, 
Plikhin said each side had "reviewed" what the other was 
doing with respect to protectionism: the EU hit Russia for 
relying on tariff measures to protect Russian industries, 
while Russia highlighted the EU's use of internal subsidies 
to protect European industries.  He said Russia would 
continue the dialogue begun with the European Commission in 
February on these points. 
 
¶9. (C/NF) Barbara Stacher, a first secretary in the EC Moscow 
Delegation's Economic, Agriculture and Trade Section (please 
protect), did not attend the Summit but shed more light on 
the trade issues from detailed readouts from the EU 
delegation that she shared with us.  Stacher told us that EC 
President Barroso and Czech President Klaus had expressed 
concern over Russia's recent protectionist measures.  In 
their meeting with Medvedev, they had argued that recent duty 
increases, such as on imported automobiles, were inconsistent 
with recent G20 Summit statements to avoid protectionism in 
response to the global economic crisis. 
 
¶10. (C/NF) Stacher said Medvedev had acknowledged Russia's 
G20 commitments, but said it was "not easy for all countries" 
to abide by them in the current economic circumstances and he 
had asserted that Russia's actions were "commensurate" with 
actions by the EU and other economic blocks to protect 
domestic industries.  According to Stacher, Medvedev had also 
reaffirmed Russia's commitment to join the WTO and had told 
the EU representatives that Russia wanted "to accede as soon 
as feasible," while acknowledging that some key issues, such 
as the timber export duty (a sensitive issue for EU members 
Finland and Sweden), had been left to the end and still 
needed resolution. 
 
¶11. (C/NF) Stacher said that EU Trade Commissioner Ashton and 
Economic Development Minister Nabiullina had met separately 
to discuss some of the thorny EU-Russia trade issue in more 
detail.  Nabiullina had expressed hope that Russia and the EU 
could make progress on WTO accession by the end of summer 
¶2009.  To that end, she said the two sides should aim to 
provide clear guidance to technical level experts on all 
outstanding issues following meetings on the margins of the 
St. Petersburg International Economic Forum June 4-6. 
Stacher said Nabiullina had reiterated the long-held Russian 
 
MOSCOW 00001424  003 OF 004 
 
 
view that as the accession had dragged on, WTO members, 
including the EU, had asked Russia to do more and more. 
However, when pressed by Ashton, Stacher said Nabiullina had 
been unable to back up this assertion with any concrete 
examples. 
 
¶12. (C/NF) Stacher said Ashton, in turn, had voiced EU 
concerns about creeping Russian protectionism.  Ahston had 
not only criticized recent duty increases on specific 
imported products but also the recent draft Russian customs 
and tariff policy planning document that appeared to 
contemplate duty increases for particularly vulnerable 
domestic industries over the course of the next three years. 
Nabiullina had responded that she understood the EU's 
concerns, but insisted that the impact of recent duty 
increases were smaller than the non-tariff measures that the 
EU had implemented in the form of subsidies and state support 
to EU domestic industries. 
 
¶13. (C/NF) Stacher said as in the previous summit, Nabiullina 
again floated the idea of an EU-Russia "early warning 
system," where each side would notify and consult with the 
other regarding any contemplated duty increases.  However, 
she said Ashton had maintained the EU's non-committal 
attitude toward the idea, which Stacher said they regard as 
clearly duplicative of the notice and consultation provision 
that already exists in the EU-Russia Partnership and 
Cooperation Agreement. 
 
¶14. (C/NF) Finally, Stacher said Nabiullina had told Ashton 
that Russia would proceed with plans for a Customs Union with 
Kazakhstan and Belarus but would do so in sync with WTO 
accession.  However, she had warned that if accession 
progress continued to move at a slow pace, Russia would forge 
ahead with the Customs Union alone.  (Comment: Stacher and 
other EU diplomats have told us privately they are concerned 
that the Customs Union could complicate reaching agreement at 
the WTO on Russia's bound tariff rates as of the date of 
accession.) 
 
------------------------------ 
Eastern Partnership Initiative 
------------------------------ 
 
¶15. (C/NF) President Medvedev said publicly at the close of 
the summit that the EU had failed to convince him completely 
that the EU's Eastern Partnership Initiative (EPI), adopted 
at a May 7 summit in Prague, was not directed against 
Russia's interests in the former Soviet Union.  Georgi 
Mikanau of the MFA's General European Cooperation Department 
told us May 28 that in Russia's view the EU must ensure that 
it does not violate a 2005 commitment not to overlap with 
agreements made under the Commonwealth of Independent States 
or to challenge integration processes underway in the 
Euro-Asian Economic Council or the Russian-Belarus Union 
State.  He also told us Russia would be sensitive to the 
comments of EPI partner states.  The EC's Tait told us that 
the EU-Ukraine agreement to upgrade Ukraine's gas pipeline 
network had seriously undermined EU efforts to assuage 
Russian concerns over the EPI, which had been reflected at 
the Summit. 
 
--------------------------------------------- ----- 
Euro-Atlantic Security Treaty and Frozen Conflicts 
--------------------------------------------- ----- 
 
¶16. (C/NF) One area where the GOR publicly and privately 
claimed to have made progress was on the Euro-Atlantic 
Security Treaty.  Plikhin said the initiative had gathered 
more interest and understanding in the year since Medvedev 
proposed it.  With regard to the frozen conflicts, the MFA's 
Mikanau told us that while the two sides raised the issues of 
Georgia and Moldova at the summit, Russia framed them as 
examples of challenges to the existing European security 
structure, lumping them in with Cyprus and Kosovo. 
 
¶17. (C/NF) With respect to the proposed Euro-Atlantic 
Security Treaty, the Czech Embassy's Bucek was dismissive of 
Russian claims of progress, noting that Medvedev had offered 
¬hing new8 on proposal.  Bucek told us the EU had not 
pressed Russia on Georgia beyond asking for greater 
 
MOSCOW 00001424  004 OF 004 
 
 
humanitarian assistance access to South Ossetia, expressing 
its disappointment for Russia's lack of support for OSCE 
monitors, and urging Russia to continue with the Geneva 
talks. 
 
¶18. (C/NF) According to Bucek, Medvedev thanked the EU for 
its role in helping to resolve the Georgia conflict in August 
last year, but also underlined that he did not view Georgia 
as a democratic regime and said that Russia would not deal 
with Georgian President Saakashvili.  However, Russia would 
restore "traditional brotherly relations" after a new leader 
comes to power in Georgia.  Medvedev asked the EU to accept 
the new realities on the ground and not to ignore the 
existence of two new states, South Ossetia and Abkhazia.  The 
MFA's Mikanau and Plikhin denied that there was any 
substantive engagement on Georgia. 
 
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Location 
-------- 
 
¶19. (C/NF) Many observers viewed the venue of Khabarovsk in 
the Russian far east (RFE), a stone's throw from China, as a 
not-too-subtle signal that Russia would look East for future 
economic, energy and trade opportunities if the EU did not 
eventually choose to play ball on resolving key issues. 
Plikhin echoed to us President Medvedev's comment that the 
eleven-hour flight from Brussels cemented "the greatness of 
Russia" in the minds of the European Commissioners.  One 
commentator, however, suggested the remote location only 
served to emphasize Russia's vast emptiness. 
 
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COMMENT 
------- 
 
¶20. (C) Given the frequency of these summits, it strikes us 
that the glacial pace of progress is becoming problematic. 
Each summit that ends without results feeds a growing 
perception that the EU-Russian relationship is fraught with 
intractable disagreements.  Fewer summits with clearer 
deliverables might be preferable.  As one Russian pundit 
noted, perhaps the two sides should meet in smaller working 
groups and slowly resolve their issues beginning with easier 
items, before working their way up to summits. 
BEYRLE