VZCZCXYZ0021
OO RUEHWEB

DE RUEHMO #2879/01 1661522
ZNR UUUUU ZZH
O 151522Z JUN 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1265
INFO RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY

UNCLAS MOSCOW 002879 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT ALSO FOR EUR/RUS AND ISN 
 
E.O. 12958: N/A 
TAGS: ENRG KNNP TRGY RS
SUBJECT: RUSSIA: PENDING CHANGES CAST ROSATOM AS CORPORATION 
 
REF: 05 MOSCOW 014309 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY.  NOT FOR 
INTERNET DISTRIBUTION. 
 
¶1. (U) SUMMARY. Over the past year and a half, Russia has been 
working to restructure its nuclear industry.  In a June 8 meeting 
with EST, Natalya Klishina, head of the Bilateral Relations Division 
in Rosatom's Department of International Relations, clarified what 
these changes mean and what other changes are expected.  Klishina 
said that the laws and decrees that have been passed thus far, such 
as the February 5, 2007 "Tunnel Law" and the recent Putin decree on 
April 27, are actually phases required to implement one law -- a law 
that both makes some fundamental changes to nuclear material 
handling and ownership within Russia and sets the agenda for 
follow-on changes that must be made to other laws.  This cable 
reviews the typical phases of Russian lawmaking, discusses this 
process in terms of the changes being made within the nuclear 
industry, and gives the Rosatom perspective on these changes, 
including the intention to convert Rosatom from a government agency 
to a state-owned corporation.  END SUMMARY. 
. 
------------------------ 
Lawmaking, Russian Style 
------------------------ 
. 
¶2. (U) There are three phases to fully implementing a law within 
Russia. 
 
-- The parliament is comprised of the Duma (lower house) and the 
Federation Council (upper house).  The law must pass through three 
readings in the Duma, with most negotiation and changes occurring 
between the first and the second readings; the third reading is 
typically a formality.  The Federation Council must then pass it. 
It is very rare that the Federation Council would refuse to do so. 
The president must then sign it, thereby making the passed bill an 
official law.  The law's effective date is specified in the 
legislation. 
 
-- Next, the Russian president must issue a decree stating that the 
new law will be implemented. 
 
-- Finally, the executive branch, also known as the "Federal 
Government" or the "Government," issues a resolution outlining a 
detailed implementation plan.  (NOTE: Not all laws need implementing 
instructions or decrees, but there are many laws that are general in 
nature -- such as the law on restructuring the nuclear industry -- 
that require further decrees by either the President or the 
government stipulating the details.) 
 
¶3. (U) This process is already at work in the case of the current 
Russian effort to reorganize the nuclear industry.  On January 19, 
2007, the legislature -- the lower and upper houses together -- 
passed the bill "On the Restructuring of the Nuclear Industry," 
commonly referred to as the "Tunnel Law," outlining the future legal 
changes that are necessary in order to achieve the overall 
restructuring, as well as creating the legal basis for the 
vertically-integrated holding company Atomniy Energopromyshlennyi 
Kompleks (AEK) -- popularly known as "Atomenergoprom" or even 
"Atomprom" -- that will act as an umbrella organization bringing 
together the various entities involved in the civilian nuclear 
sector.  The bill was then passed to the president for his 
signature.  On February 5, President Putin signed the bill that the 
legislature passed, thereby making it an official federal law. 
Putin issued the Presidential decree "On Restructuring the Nuclear 
and Energy Industry Complex of the Russian Federation" outlining 
presidential approval on April 23.  On May 26, the Federal 
Government issued a resolution resolving to implement the 
Presidential decree. 
 
¶4. (U) According to Klishina, the new law stipulates that changes to 
parts of at least twelve other laws are expected, although some of 
these changes may be relatively minor.  She explained that sometimes 
when a new law is created, changes need to be made to existing laws, 
such as the law allowing the import of spent nuclear fuel; this 
required a parallel adjustment to the Nuclear Energy Law to allow 
importation to Russia of spent nuclear fuel.  The existing laws to 
which changes are expected include: Education, Closed Cities, Civil 
Code of the Russian Federation, Nuclear Energy, Privatization, 
Licensing, Registration of Entities, Law on Land Development, Law on 
Privatization of State Ownership, Environmental Protection, Law on 
Electrical Energy, and Law on Shareholding Companies.  (COMMENT: We 
expect that these would follow the same general pattern noted above 
of Legislative approval, Presidential decree, and Executive 
resolution.  END COMMENT) 
 
---------------------------------------- 
Restructuring: Past, Present, and Future 
---------------------------------------- 
. 
¶5. (U) Klishina said that she does not know who precisely is behind 
all the current changes but that the general idea of a restructuring 
has been around for years, going back as far as the days when 
Rosatom was the Ministry of Medium Machine Building (REFTEL).  She 
said, however, that it is actually good that reorganization is only 
happening now, implying that she thought that such care would not 
have been taken if the idea had found traction previously. 
 
¶6. (U) Klishina said that in the near future, it is expected that 
Rosatom as a federal agency will be "going away" and will be 
replaced by a 100 percent state-owned "non-profit" company called 
Rosatom Corporation.  Rosatom Corporation would be the managing 
company on behalf of the state.  (COMMENT: This is the first time 
that a Russian government official has discussed this with Embassy 
officials. END COMMENT) 
 
¶7. (U) Klishina said that the reason behind the restructuring -- in 
particular creation of the Atomenergoprom holding company and the 
Rosatom Corporation -- is to allow for more flexibility to manage 
and conduct business activities, which is not possible when an 
entity is a government agency with a long chain of command.  She 
explained further, however, that there would still be tight control 
by the state.  Key decisions and commercial contracts will be 
subject to government approval and sometimes even approval by the 
President.  In addition, the federal accounting of nuclear material 
and IAEA obligations would still be managed by the Rosatom 
Corporation.  Finally, Klishina said that Rosatom Corporation will 
be held to the obligations of international agreements that have 
already been signed by Rosatom as a federal agency. 
 
¶8. (SBU) As an aside, Klishina commented that it was her personal 
opinion that not only should the civilian not be separated from the 
nuclear weapons complex, but that it should be preserved as one 
entity and remain a federal entity. 
 
¶9. (U) There have been -- and will continue to be -- a number of big 
structural adjustments within Rosatom due to the changes that have 
occurred already.  The Atomic Energy department (which dealt with 
nuclear power plants) and the Fuel Cycle department have now been 
combined into one.  Three other departments -- Radiation, Spent 
Nuclear Fuel, and Decommissioning -- have also been consolidated 
into one department. 
 
¶10. (U) Klishina then outlined the expected chronology for 
completing the creation of Atomenergoprom.  By July 4, 
Atomenergoprom must be created and operative.  By autumn, the draft 
law on the Creation of Rosatom Corporation will be passed to the 
Duma for consideration and should be signed by the end of the year. 
The expectation is that by the beginning of next year, the company 
Rosatom Corporation will fully exist, and Rosatom as a governmental 
agency will cease.  She said that all basic decisions will be made 
before the election. 
 
BURNS