VZCZCXRO8987
OO RUEHIK RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHMO #0056/01 0101738
ZNR UUUUU ZZH
O 101738Z JAN 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6089
INFO RUEHZG/NATO EU COLLECTIVE PRIORITY
RUCNCIS/CIS COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 MOSCOW 000056 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ECON OVIP PGOV RS
SUBJECT: SCENESETTER FOR SENATOR HAGEL'S VISIT TO MOSCOW 
 
¶1. (SBU) Summary: Russia's season for political surprises has 
ended.  The country now looks set to continue Putin's 
domestic and foreign policies with the expected shift to 
Medvedev as President and Putin as Prime Minister this 
spring.  The expected Putin-Medvedev team appears set to 
ensure continuity of policy and continued economic stability. 
 Despite our frustrations with the course that Putin has 
charted -- notably, the overcentralization of political power 
and foreign policy toward some of Russia's neighbors, Russia 
will matter enormously for American interests for years to 
come.  Russia is the world's largest energy producer, remains 
the only nuclear power comparable to the U.S., and is a 
permanent member of the UN Security Council.  Against this 
backdrop, the U.S. remains committed to deepening cooperation 
with Russia in areas of strategic concern, while dealing 
forthrightly with our differences.  Your visit is a chance 
for some frank dialogue on a full range of bilateral issues 
in this election year for both countries.  End summary. 
 
Political Overview 
------------------ 
 
¶2.  (SBU) Your visit occurs as Russia's anticlimactic 
presidential election campaign unfolds.  The virtual 
certainty that Putin protege First Deputy Prime Minister 
Dmitriy Medvedev will win in the first round on March 2, then 
name Putin as his Prime Minister, has reduced speculation 
here to how Putin and Medvedev will share power in their new 
administration.  Two of the four parliamentary parties --the 
Communists and the Liberal Democrats-- have nominated their 
traditional candidates and independent contenders are, with 
varying degrees of success, attempting to get their names on 
the ballot, but their presence will do little to sidetrack 
Medvedev's march to the presidency. 
 
¶3.  (SBU) The presidential contest was preceded by a Duma 
campaign whose December 2 election produced a constitutional 
majority for the pro-Kremlin United Russia party.  With 
Putin's decision to head the party list, there was little 
doubt that United Russia would win the lion's share of seats. 
 That said, the use of administrative resources to support 
United Russia and the unequal playing field for the 
opposition were cited by international observers, who judged 
the campaign to be neither free nor fair. 
 
¶4.  (SBU) The Duma election was preceded over the last two 
years by changes to the laws on elections, extremism, and 
NGOs that effectively made it more difficult for voices 
independent of the Kremlin to be heard.  Compounding the 
effect of the changes to the laws were the unsuccessful 
efforts by opposition parties to appeal to an electorate that 
is content with unprecedented improvements in its standard of 
living.  In pursuit of continued popularity, the Kremlin has 
both fed and played on grassroots anti-western sentiment 
which remains strong here. 
 
Economic Overview 
----------------- 
 
¶5.  (SBU) Russia is enjoying an economic boom fueled by high 
oil and gas prices and rising consumer spending.  The World 
Bank recently ranked Russia's economy eighth in the world in 
terms of GDP.  Russia is the world's largest energy producer 
and has the world's largest gas reserves.  Eight years of 
strong economic growth have created an expanding consumer or 
middle class and increased individual economic freedom. 
However, there is an uneven distribution of benefits and 
widespread poverty in the Russian Far East and the North 
Caucasus.  Other concerns include pervasive corruption, 
increasing state interference in the economy, and health and 
demographic problems. 
 
Bilateral Agenda: Areas of Cooperation 
-------------------------------------- 
 
¶6.  (SBU) The Russia of the 1990s -- flat on its back 
economically and preoccupied with internal woes -- is gone. 
Armed with hydrocarbons, cash, strong domestic support, 
nukes, and a UN Security Council veto, Russia is reasserting 
itself on the world stage.  2007 marked the 200th anniversary 
of bilateral diplomatic ties, but last year was particularly 
challenging for U.S.-Russia relations, and this year promises 
more of the same. Nonetheless, there is no alternative to 
pursuing cooperation in areas of strategic importance to the 
United States. 
 
¶7.  (SBU) Halting the spread of weapons of mass destruction 
is a key component of the U.S.-Russia strategic security 
dialogue.  We are making significant progress with our 
Russian counterparts on Nunn-Lugar programs to enhance 
nuclear security at Russian facilities, and are on track to 
 
MOSCOW 00000056  002 OF 002 
 
 
meet the goals set by the President at the Bratislava Summit 
with Putin.  Russia's role in the Six Party Talks over the 
denuclearization of North Korea has generally been 
constructive (if limited).  Russia joined the U.S. in 
co-founding the Global Initiative to Combat Nuclear Terrorism 
in 2006, which now includes 65 participants and seeks to 
interdict unauthorized transfers of nuclear weapons and 
technology.  Rosatom Director Kiriyenko and Energy Secretary 
Bodman signed in November a joint statement outlining a plan 
for Russia's program to dispose of 34 metric tons of surplus 
plutonium from its weapons program. 
 
¶8.  (SBU) Regarding Iran's nuclear weapons aspirations, 
Russia and the United States share the same strategic goals, 
but differ over tactics.  Russia agrees that Iran's 
possession of a nuclear weapon would be dangerous and is 
working with us on a third UN Security Council resolution, 
but continues to urge patience, direct engagement with Iran, 
and collective action.  Russia contends that its recent 
delivery of fuel to Iran's Bushehr nuclear plant precludes 
the need for Iran to continue its enrichment program.  Russia 
has played a helpful role in advancing the Middle East Peace 
Process through the Quartet, and plans to host a 
post-Annapolis conference in Moscow later this year. 
 
¶9.  (SBU) The U.S. and Russia have initialed a text for a 123 
(Peaceful Uses of Nuclear Energy) Agreement which, if 
approved, will allow for an expansion of civilian nuclear 
cooperation.  Russia has also signed on to the Global Nuclear 
Energy Partnership, a multilateral effort spearheaded by the 
U.S. to expand the peaceful uses of nuclear energy worldwide 
in a secure and sustainable manner. 
 
¶10.  (SBU) The U.S. actively supports Russia's bid to join 
the World Trade Organization.  Russia's WTO accession 
negotiations are in the endgame.  It is in our interests to 
have Russia integrated into a rules-based, global economic 
system.  The eventual revocation of Jackson-Vanik will be 
needed to ensure that U.S. firms can compete fully in the 
Russian market after Russia's WTO accession. 
 
Bilateral Agenda: Differences 
----------------------------- 
 
¶11.  (SBU) Our differences with Russia are prominent and 
public.  Despite U.S.-proposed confidence building and 
transparency measures, Russia continues to view U.S. missile 
defense plans in Central Europe as threatening.  Foreign 
Minister Lavrov has repeatedly warned that Kosovo's 
unilateral independence would set a dangerous precedent for 
the resolution of other separatist conflicts, including in 
Georgia and Moldova.  Russian suspended its participation in 
the Treaty on Conventional Forces in Europe on December 12, 
but continues to engage with the U.S. to try to bridge the 
current impasse. 
 
¶12.  (SBU) The U.S. has repeatedly raised concerns about 
Russia's conventional weapons sales -- a $7 billion per year 
industry -- to Iran, Syria, Venezuela, and others.  Russia 
has voiced concerned about U.S. involvement in its backyard: 
calls for further NATO expansion, support for democratic 
movements and governments in the region, and encouragement 
for alternative energy supply routes from Central Asia and 
the Caucasus to Western Europe. 
 
¶13.  (SBU) Simply put, U.S. relations with Russia will likely 
continue to include both competition and cooperation.  As 
difficult as the Russians can be at times, we cannot simply 
ignore or bypass Moscow, which matters too much on too many 
critical issues.  We will need to speak forthrightly about 
our differences and to work creatively in the existing areas 
of common ground where our top strategic interests can be 
advanced.  Your visit offers an opportunity for some frank 
dialogue on our challenging relationship with Russia in this 
election year for both countries. 
RUSSELL