VZCZCXRO7995
PP RUEHDBU RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHMO #5408/01 3200724
ZNR UUUUU ZZH
P 160724Z NOV 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 5278
INFO RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEANFA/NRC WASHDC PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUCNCIS/CIS COLLECTIVE

UNCLAS SECTION 01 OF 02 MOSCOW 005408 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KNNP PREL ENRG RS
SUBJECT: ROSATOM REORGANIZATION BILL SAILS THROUGH DUMA 
 
Summary 
------- 
 
Sensitive But Unclassified; please protect. 
 
¶1. (SBU) The Duma passed unanimously November 13 a bill to 
restructure Russia's civil nuclear sector.  In place of the current 
Rosatom Agency, the bill establishes the "Rosatom Corporation."  Its 
mandate will be to coordinate and manage nuclear policy in all 
sectors.  A centerpiece of Rosatom Corporation will be 
"Atomenergoprom," the vertically integrated state-owned company set 
up earlier this year encompassing all aspects of the civil nuclear 
industry.  The bill grants Atomenergoprom the right to keep profits. 
 Rosatom Corporation will also assume state functions: it will 
manage the nuclear weapons complex, oversee nuclear research and 
development, and supervise nuclear and radiation safety.  The state 
budget would continue to fund non-commercial activities.  Duma and 
Rosatom contacts expect Putin to sign the bill before the end of 
¶2007.  Whether Rosatom Director Kiriyenko will move over to head 
Rosatom Corporation is an open question.  End Summary. 
 
Rosatom (aka "The Corporation") 
------------------------------- 
 
¶2. (SBU) On November 13 the Russian State Duma passed 374-0, in its 
third and final reading, the "Federal Law on the State Corporation 
for Atomic Energy (Rosatom)."  President Putin had introduced the 
bill.  Following Federation Council (upper house) approval, Duma and 
Rosatom contacts expect Putin to sign the bill before the end of the 
year.  Restructuring Rosatom required the Duma to amend 18 federal 
laws, including budget, civil, and criminal codes.  Once the bill 
becomes law, the current Rosatom will transform into the Rosatom 
Corporation over a three-year transitional period.  Rosatom contacts 
tell us they expect significant changes in the first months of 
¶2008. 
 
Rosatom's Functions 
------------------- 
 
¶3. (U) According to the bill, the main responsibilities of the 
Rosatom Corporation will be: 
 
--To pursue state policies; 
--to assure uniform governance in the area of commercial atomic 
energy uses; 
--to provide for the sustainable operation of the nuclear energy 
industry entities and the nuclear weapons complex; 
--to assure nuclear and radiation safety and legal and normative 
regulations in this sphere; and 
--to carry out a long-term program of nuclear industry development. 
 
 
¶4. (SBU) In a recent interview, Rosatom Director Sergey Kiriyenko 
likened the new Corporation's structure to that of the USSR's 
"legendary" Ministry of Medium Machine Building (Minsredmash).  He 
noted that like Minsredmash, Rosatom Corporation would be "a 
management body that is both the authorized state body and the 
business entity directly responsible for the implementation of 
large-scale nuclear power engineering development projects approved 
by the state."   Vladimir Kuchinov, Director of Rosatom's 
International Department, told us November 14 that like Minsredmash, 
the Corporation would encompass the whole nuclear sector.  However, 
a fundamental difference would be that the civil nuclear industry 
sector, under the state-owned Atomenergoprom set up earlier this 
year, would operate on a for profit basis in market conditions. 
 
 
Rosatom Corporation as Legal Successor 
-------------------------------------- 
 
¶5. (SBU) The bill establishes that Rosatom Corporation will be the 
legal heir of Rosatom.  The bill gives the Corporation the right to 
represent Russia in initiating, negotiating, and concluding 
international agreements.  Rosatom Corporation will also be 
responsible for meeting GOR commitments in the areas of peaceful 
uses of nuclear energy, nonproliferation, and security and 
protection of fissile materials. 
 
Financing 
--------- 
 
¶6. (SBU) The Rosatom Corporation and its subordinate institutions 
will have the right to retain profits.  This is a break with past 
practice.  Previously, profits generated by Rosatom enterprises have 
been transferred back to the state budget.  According to some 
estimates, Rosatom earns several billion dollars annually in the 
nuclear trade.  There is a special provision in the bill prohibiting 
the reduction of the level of current budget allocations to Rosatom 
until 2010.  Thereafter, the budget will continue to support the 
 
MOSCOW 00005408  002 OF 002 
 
 
state functions assumed by the Corporation. 
 
Property 
--------- 
 
¶7. (SBU) The GOR will transfer all property which is now managed by 
Rosatom but owned by the state to the Corporation.  This includes 
property owned by Atomenergoprom (which operates nuclear power 
reactors), 15 nuclear weapons facilities, 11 R&D and 7 higher 
education institutions, 7 nuclear and radiation safety 
organizations, corresponding buildings and land as well as stores of 
special materials like natural uranium and plutonium.  According to 
some estimates, the capitalization of Rosatom Corporation could thus 
start at $40-50 billion. 
 
Management: Under Presidential Control 
-------------------------------------- 
 
¶8. (SBU) Under the bill, the President approves the long-term 
program of the Corporation's activities.  A Director General and a 
Supervisory Council) manage the Corporation.  The President appoints 
the Director General, who serves as chief executive.  The 
Supervisory Council will consist of nine members, the aforementioned 
DG (ex officio) and eight other representatives of the President and 
the GOR.  The President appoints and can remove the chairman of the 
Supervisory Council. 
 
Corporate Salaries 
------------------ 
 
¶9. (SBU) Salaries in commercial areas of the Corporation will be on 
a corporate scale.  Salaries at Atomenergoprom are already 
significantly higher than those for comparable positions at the 
existing Rosatom. 
 
Goal: A Commercial Footing 
-------------------------- 
 
¶10. (SBU) A strong proponent of the bill in the Duma's Energy 
Committee is Valentin Ivanov, a United Russia member and former Vice 
Minister of Rosatom's predecessor, MinAtom.   Ivanov emphasized to 
us the importance of putting Rosatom on a commercial footing to 
promote competitiveness.  Ivanov highlighted in particular 
separating out the commercial functions -- Atomenergoprom -- from 
the state functions.   Also key will be financing.  Ivanov 
underlined the importance of the Rosatom Corporation being able to 
retain profits rather than turn them back to the budget.  Ivanov 
admitted to us that the goals Kiriyenko has said for nuclear 
expansion -- including construction of up to two new reactors a year 
-- are over-ambitious.   However, for Russia to achieve even half of 
that, Rosatom needed such a reorganization. 
 
Uncertainty at Rosatom 
---------------------- 
 
¶11.  (SBU) Rosatom's Kuchinov reiterated to us that the existing 
structure of Rosatom was not compatible with a market economy.  It 
was necessary to separate civilian and military elements.  Kuchinov 
was frank, however, in saying he did not know how well it was all 
going to work.  He noted that the term "corporation" to define an 
entity which had state functions was confusing -- in Russian and in 
English.   He predicted that the first three months of 2008 would be 
an unsettled time at Rosatom. 
 
Comment 
------- 
 
¶12. (SBU) With Putin's imprimatur, the bill made it though the Duma 
without opposition.  Putin may have wanted the new structure in 
place before his departure so he can name the head of the new 
Corporation.  As Kuchinov noted, Rosatom staff are braced for the 
institutional upheaval to come in 2008 -- some contacts are already 
moving to new posts.  Commercial pay scales will improve the terms 
of service, especially for those at the top.  Whether Kiriyenko 
moves to be head of Rosatom Corporation is an open question.  Having 
shepherded the restructuring, his appointment would be logical. 
 
BURNS