VZCZCXRO9124
RR RUEHLN
DE RUEHMO #1894/01 1851041
ZNR UUUUU ZZH
R 031041Z JUL 08
FM AMEMBASSY MOSCOW
TO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/SECSTATE WASHDC 8868
INFO RUEHLN/AMCONSUL ST PETERSBURG 4998
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 MOSCOW 001894 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/RUS 
STATE PASS TO USTR 
STATE PASS TO EXIMBANK 
COMMERCE FOR 1000/OFFICE OF SECRETARY 
COMMERCE FOR 4000/MAC AS 
COMMERCE FOR 420O/MAC FOR EUR DAS DYCK 
COMMERCE FOR 4231/MAC/ORUE/BROUGHER/EDWARDS 
NSC FOR MWARLICK 
 
E.O. 12958: N/A 
TAGS: BEXP ETRD RS
SUBJECT: COMMERCE SECRETARY GUTIERREZ IN ST. PETERESBURG, 
RUSSIA, JUNE 5-6, 2008 
 
 ¶1.  (U) On June 6 and 7 in St. Petersburg, Secretary of 
Commerce Carlos Gutierrez delivered remarks at the opening 
plenary session of the annual International Economic Forum as 
well as a U.S.-Russia CEO roundtable, held talks with 
Russia's leading economic officials, and led a President's 
Export Council delegation in a series of meetings to assess 
the Russian market. 
 
¶2.  (U) Responding to the Forum plenary session topic of 
"National Economic Interests vs. Global Governance 
Institutions", Secretary Gutierrez commented that the 
challenge is not globalization vs. national interests. 
Instead, he asserted, globalization is in national interests. 
 If an economy has sustained growth, then 
anything is possible.  A policy of growth, he said, requires 
active participation in the global economy, adding that he 
could not think of a single economy that has been able to 
grow and create prosperity and jobs through self sufficiency. 
 He cited estimates that a good Doha Round agreement could 
lift 500 million people out of poverty.  Noting President 
Medvedev's emphasis on innovation, institutions, investment 
and infrastructure, he agreed that they are key ingredients 
of a growing economy.  In conclusion, the Secretary suggested 
to the international audience that they have the challenge of 
creating opportunity and providing education to enable people 
to compete in the international economy. 
 
¶3.  (SBU) In bilateral meetings with First Deputy Prime 
Minister Igor Shuvalov, Deputy Prime Minister Aleksei Kudrin, 
Deputy Prime Minister Alexander Zhukov, Minister of Economy 
Elvira Nabiullina and First Deputy Foreign Minister Andrey 
Denisov, the Secretary stressed the openness of the U.S. 
market to Russian investors as well as the significant 
contributions that American companies are making in the 
Russian market.  He advocated for progress on Russia's WTO 
accession, including completion of Russian commitments under 
the bilateral market access agreement regarding data 
protection and import licensing of products with encryption. 
The Russian officials participating in the Forum all 
described plans for completing accession, claiming that all 
requirements would be met. Several stressed that Russia could 
not solve its problem with Georgia by itself and would need 
U.S. support. 
 
¶4.  (SBU) During a briefing for the Secretary and the PEC, 
former economic minister and current Sberbank Chairman German 
Gref spoke strongly in favor of WTO accession, but also noted 
the existence of significant opposition in Russia.  He said 
that the Ministries of Industry and Agriculture, which were 
part of the lobby against WTO accession, had stepped in to 
grab trade away from the Ministry of Economy and transfer it 
to the Ministry of Industry.  Gref had gone to the Prime 
Minister and the President, and the decision to move WTO 
responsibility had been suspended, although only until the 
end of the year. 
 
¶5.  (SBU) Secretary Gutierrez and Minister of Economy 
Nabiullina discussed and agreed on most aspects of 
establishment of a business dialogue pursuant to the Sochi 
Strategic Framework Declaration, including the desirability 
of having CEOs meet by September and develop recommendations 
that could be presented to ministers at a first meeting of 
the Business Dialogue in October in Russia.  Assistant 
Secretary David Bohigian and Deputy Minister Andrey Belousov 
were assigned to complete a joint statement that could be 
used to announce the Dialogue during the St. Petersburg 
Forum.  Bohigan conducted extensive consultations on June 6 
and 7, but the Russians were not prepared to agree to a 
designation providing accountability on the part of 
government officials for hearing and acting upon a business 
dialogue's recommendations.  During a subsequent meeting, 
First Deputy Prime Minister Shuvalov agreed with the 
Secretary's position and said he would speak with Minister 
Nabiullina, the Prime Minister and the President. (Comment: 
As of July 3, it has not been possible to confirm that a 
Shuvalov-Nabiullina conversation had taken place, nor had the 
Russian side agreed to language that would provide for 
accountability by government officials.) 
 
¶6.  (U) Through discussion with Sberbank Chairman Gref, 
 
MOSCOW 00001894  002 OF 002 
 
 
Secretary Gutierrez and the PEC delegation gained insight 
into prospects for Russia's WTO accession as well as plans 
for further development of Russia's largest bank.  Gref 
asserted that, while some Russian banks were affected by the 
financial crisis in the United States and had suffered losses 
in the first quarter of 2008, Sberbank had earned a profit of 
1 billion Euros.  He said that Sberbank's capital is now $85 
billion, but should reach more than $200 billion by 2014. 
 
¶7.  (U) Secretary Gutierrez and the PEC delegation were 
briefed on the new Russian Government by U.S. Embassy 
Moscow Charge Dan Russell, and heard St. Petersburg governor 
Valentina Matvienko describe her plans for further 
development of Russia's second largest city.  The PEC 
delegation attended the Forum's U.S.-Russia CEO Roundtable 
hosted by Russian Union of Industrialists and Entrepreneurs 
President Alexander Shokhin, and attended a reception in 
their honor with American and Russian CEOs.  In a meeting 
with Deputy Prime Minister Alexander Zhukov, Secretary 
Gutierrez emphasized the capabilities of U.S. companies for 
support of preparations for the Sochi Olympics and was 
assured by Zhukov that Russia was completely open to 
investment and supply of facilities, including for skating 
and other events. 
 
¶8.  (SBU) In a briefing organized by the American Chamber of 
Commerce in Russia, more than 25 U.S. company 
representatives reported impressive growth in the Russian 
market.  For example, Alcoa Chairman Belda said that his 
company's operation should reach profitability by next year, 
when sales in Russia would account for 60% of the business. 
Conoco's Wallette said that his company had $10 billion 
invested in Russia and revenue of $1.8 billion in 2007, or 
about 15% of the company's earnings.  P&G's Price said that 
his company's business in Russia is now equivalent to about 
90% of its business in China.  Microsoft's Steen said that 
Russia was the fastest growing market globally, increasing by 
a factor of 9 over 2 years.  GM's Gubney reported sales of $3 
billion in 2007.  Boeing's Kravchenko said that his company 
had successfully faced the challenge of showing in Russia 
that interdependence is good by pioneering the export of 
intellectual property from Russia, including unique software. 
 
 
¶9.  (SBU) In private conversations with Russian officials, 
Secretary Gutierrez raised issues encountered in Russia by 
Bank of New York Mellon and TNK-BP.  He also met with TNK-BP 
President Bob Dudley.  Amcham President Andrew Somers told 
the Secretary that he found the TNK-BP dispute "disturbing" 
and believed that, if the problems were not solved, this 
would be the biggest blow to the investment environment since 
the Yukos Affair.  Secretary Gutierrez was quoted in Russia 
media in regards to a solution to the TNK-BP dispute as 
saying that the "world community is interested in a 
transparent way, free of violations."  The Secretary was 
accompanied in meetings with Russian officials by Charge 
Russell and Assistant Secretary Bohigian. 
 
¶10.  (U)  This cable was cleared by Commerce traveling party. 
RUSSELL