VZCZCXYZ0002
RR RUEHWEB

DE RUEHMO #0831/01 0590631
ZNR UUUUU ZZH
R 280631Z FEB 07
FM AMEMBASSY MOSCOW
TO SECSTATE WASHDC 7747

UNCLAS MOSCOW 000831 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EUR/RUS, EUR/PRA, AND ISN 
 
E.O. 12958: N/A 
TAGS: PARM TBIO RS
SUBJECT: SIBBIOPHARM AGREES IN PRINCIPLE TO COMMENCE NDF BW FACILITY 
ELIMINATION PROJECT 
 
THIS CABLE IS SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT 
ACCORDINGLY. 
 
¶1. (SBU) SUMMARY: On February 26-27 a State/Nonproliferation and 
Disarmament Fund (NDF) delegation met with Sibbiopharm 
representatives to establish the scope and ground rules for an NDF 
project to eliminate former biological weapons (BW) building and 
equipment at Sibbiopharm's Berdsk facility.  The sides agreed to 
move ahead with work on buildings 32 and 34.  Sibbiopharm officials 
said that the firm would need either to retain the production 
capacity of Building 33 for future commercial needs or to receive 
assistance to expand capabilities at its current production 
facility.  They offered to provide a preliminary estimate of their 
needs during a meeting in Washington March 26.  End Summary. 
 
INTRODUCTION 
------------ 
 
¶2. (SBU) NDF Senior Adviser Smith began by noting that the NDF is 
prepared to proceed with demolishing Building 32, and eliminating 
the specialized dual-use equipment in Building 34 and the fermenters 
in Building 33.   Sibbiopharm agreed in principle to green-field 
Building 32 and eliminate the dual-use equipment in Building 34, but 
noted that they were not prepared yet to take a decision on Building 
¶33.  Smith noted that the NDF believes that it has sufficient funds 
to complete work on all three buildings and wants, for reasons of 
cost effectiveness, to reach agreement to commence work on all of 
them simultaneously. 
 
BUILDINGS 32 AND 34 
------------------- 
 
¶3. (SBU) Sibbiopharm Executive Director Nadezhda Orlova stated that, 
while Sibbiopharm is prepared to proceed with work on Buildings 32 
and 34, there remain a number of technical problems.  Orlova noted 
that Sibbiopharm wanted no debris to remain at the site after 
Building 32 is demolished that would hinder or raise the cost of 
building future infrastructure on the site.  She noted that 
Controlled Demolition, Incorporated (CDI) (the elimination 
specialists which the NDF intends to hire as prime contractor for 
this project) would not be familiar with Russian law and regulation. 
 Further, Sibbiopharm insists that the demolition technology 
employed be environmentally friendly.  For Building 34, Orlova 
required that the non-dual use equipment in the building (i.e. the 
electricity, water, and sewage) not be affected by the elimination 
project. 
 
¶4. (SBU) Smith noted that it would principally be CDI's 
responsibility to meet local requirements.  CDI normally discusses 
these requirements with all interested parties, including the 
proposed subcontractors and our international partner (e.g. 
Sibbiopharm.)  He stated that CDI was also responsible for providing 
the NDF with the lowest cost concomitant with effective work.  He 
stated that the two sides should agree in principle that CDI will 
have the right to solicit competitive bids from multiple Russian 
subcontractors.  While Orlova warned that only contractors in the 
vicinity of Berdsk and Novosibirsk would be cost-effective, the 
Sibbiopharm reps agreed with this principle.  Smith pointed out that 
any requirements based in Russian law or regulation that would raise 
project costs would have to be documented. 
 
BUILDING 33 (AND BUILDING 36) 
----------------------------- 
 
¶5. (SBU) Orlova noted that Sibbiopharm had not considered Building 
33 as an object for elimination under the NDF project.  Sibbiopharm 
currently intended to use Building 33's fermentation capacity for 
commercial purposes.  Orlova noted that Sibbiopharm's sales enjoyed 
30-40 percent growth in recent years.  Sibbiopharm currently 
produced its products (enzymes for animal feed and food) using 
fermentation capacity in Building 36, whose capacity is identical to 
that of Building 33.  (COMMENT: This was the first discussion of 
Building 36 between Sibbiopharm and the NDF.  End Comment.) 
Sibbiopharm also intended to expand its product line into bioethanol 
production.  Sibbiopharm currently uses about 56-57 percent of 
Building 36's capacity, but at current rates of expansion will 
require use of Building 33's capacity in approximately two to three 
years.  Orlova said that Sibbiopharm could agree to destruction of 
the production capacity of Building 33 only if it received 
assistance in expanding capacity at Building 36 to meet anticipated 
needs. 
 
¶6. (SBU) Smith noted that the NDF did not have the authority to 
provide Sibbiopharm with additional fermentation capability.  Orlova 
asked whether other State Department resources could address this 
problem.  Smith stated that, if Sibbiopharm developed a proposal 
outlining their commercial requirements, the NDF would look into 
whether there is any Department interest in pursuing such a parallel 
project.  Smith reiterated that, for reasons of cost, the U.S. would 
like to eliminate the equipment in Building 33 simultaneously with 
 
the work done in Buildings 32 and 34.  Sibbiopharm requested that 
CDI provide a detailed description of its proposed destruction 
methodology prior to its visit as a basis for soliciting bids from 
Russian firms.  She noted that previous discussions between CDI and 
a proposed Russian firm had foundered because the Russian firm did 
not understand CDI's proposed destruction method. 
 
NEXT STEPS 
---------- 
 
¶7. (SBU) All participants agreed that the NDF will request CDI to 
come to Russia with the objective of seeking bids from Russian firms 
for work on Buildings 32, 34, and 33.  Recognizing that no decision 
has been taken on Building 33, CDI will provide two estimates for 
Building 33; one estimate for the work done as part of a project 
including Buildings 32 and 34; the second estimate for the work done 
on Building 33 as a separate project.  Sibbiopharm agreed to review 
its commercial requirements for Building 33, and provide by March 26 
a preliminary proposal to the NDF as to how it can address its 
commercial requirements while going forward with elimination work in 
¶33. 
 
PARTICIPANTS 
------------ 
 
¶8. (U) The participant list follows: 
 
U.S. Delegation 
 
Raymond Smith, Senior Negotiator, ISN/NDF 
John Conlon, Foreign Affairs Officer, ISN/NDF 
Aaron Fishman, Health Officer, Office of Environment, Science, and 
Technology, U.S. Embassy to the Russian Federation 
Olga Borisova, Health Specialist, Office of Environment, Science, 
and Technology, U.S. Embassy to the Russian Federation 
 
Sibbiopharm Delegation 
 
Aleksandr Nikolayevich Krichevskiy, General Director 
Nadezhda V. Orlova, Executive Director 
Maksim S. Benevolenskiy, Technical Director 
 
This cable was cleared by the delegation prior to departure. 
 
BURNS