VZCZCXYZ0000
PP RUEHWEB

DE RUEHMO #2269/01 2181356
ZNR UUUUU ZZH
P 051356Z AUG 08 ZDK
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 9320
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS MOSCOW 002269 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/RUS, EEB/CBA 
DOC FOR 4231/IEP/EUR/JBROUGHER 
NSC FOR WARLICK 
 
E.O. 12958: N/A 
TAGS: ECON ETTC ENRG RS
SUBJECT: SPECIAL REPRESENTATIVE MERMOUD'S JULY 21 VISIT TO 
MOSCOW 
 
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Summary 
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¶1.  (SBU) The main themes of Special Representative for 
Commercial and Business Affairs J. Frank Mermoud's visit to 
Moscow on July 21 were development of Russia's high-tech 
sectors and opportunities for official as well as informal 
exchanges.  Chairman of the Onexim Group investment fund 
Mikhail Prokhorov offered a frank assessment of the country's 
prospects for becoming a global leader in technological 
innovation.  He also outlined his own vision for regaining 
the country's competitive edge.  Presidential Administration 
Advisor Arkadiy Dvorkovich presented an overview of the 
government's plans for making nanotechnology-related 
investments domestically and abroad.  Speaking of the 
administration's broader goals, Dvorkovich suggested that a 
wider array of business and educational exchanges could 
multiply Russia's judicial and economic reform efforts.  He 
also acknowledged Russia's delayed response to the U.S. 
proposal on the business-to-business dialogue.  Rosatom 
Deputy Director-General Nikolai Spasskiy expressed his 
support for close cooperation with the U.S. on nuclear energy 
issues.  He recommended a bold approach in bilateral 
cooperation, suggesting that capturing each government's 
imagination would be the key to sustaining a mutually 
beneficial partnership.  End Summary. 
 
---------------------- 
Prokhorov on High-Tech 
---------------------- 
 
¶2.  (SBU) Special Representative Mermoud met with former 
Norilsk Nickel CEO Mikhail Prokhorov to discuss his support 
for the development of high technologies, particularly 
nanotechnology, in Russia.  Forbes ranks Prokhorov the 
world's 24th richest person.  In 2007, he launched the 
private investment fund Onexim Group with USD 25 billion in 
assets, focusing on high-tech investments.  He is also a 
member of the Government Council for Nanotechnologies. 
Despite Onexim's focus on high-tech, Prokhorov is cynical 
about Russia's chances to become a world leader.  He reported 
that during his tenure at Norilsk Nickel, he conducted a 
thorough inventory of the scientists working at Russia's 
far-flung science institutes, and found only about 300 
capable of working on new, marketable technologies.  He said 
most Russian inventors are very old or very young and have 
little or no idea how to bring a product to market, 
especially the older inventors.  His goal over the next 2-3 
years is to bring the 300 scientists he has identified 
together in Moscow to work on marketable projects.  Prokhorov 
warned, however, that Russia has no national market for new 
technologies, so innovations must be geared for the world 
market. 
 
¶3.  (SBU) Prokhorov was particularly skeptical about the 
GOR's plans for Rosnanotech, the state corporation that 
received $5 billion to serve as a venture capital fund for 
Russian nano companies.  Prokhorov said that the GOR "doesn't 
get it," and that their goals for Rosnanotech are "patriotic, 
not realistic."  He thinks it would be necessary for Russia 
to capture 5-10 percent of the world market in nanotech to be 
competitive, and that this would cost USD 30 billion, six 
times what the GOR has invested.  He also noted that he had 
"heard rumors" that Rosnanotech Director General Leonid 
Melamed, who just returned from an official visit to the 
U.S., will soon be replaced. 
 
¶4.  (SBU) Prokhorov reported that in 3-4 months he will talk 
to Prime Minister Putin to ask about his high tech 
development strategy.  If the Prime Minister does not have 
one, Prokhorov will "create his own."  He said the focus of 
that strategy will depend on whether the Prime Minister plans 
to develop a Russian market, or produce for the world market. 
 He noted that he considers Russia to have a competitive 
advantage vis-a-vis the world market in only a few areas, 
such as fuel cells.  He added that ecology could be another 
area, if Russia's laws weren't so poor in this area. 
Regarding U.S.-Russia cooperation in the sector, Prokhorov's 
view is Russia "isn't ready."  He said that Russia lacks 
infrastructure, and is still too closed and concerned about 
revealing secrets.  He advised that cooperative ventures 
should start small, and completely avoid any sensitive 
sectors. 
 
------------------------------------ 
 
Dvorkovich on Investments, Exchanges 
------------------------------------ 
 
¶5. (SBU) Presidential Administration Advisor Arkadiy 
Dvorkovich said the nano-technology fund was starting 
operations and looking for places to invest not just in 
Russia but globally, including in the United States.  He 
noted that more broadly, Russian companies were looking to 
invest in the U.S. and other countries and that one of the 
new governments principal economic tasks was to support these 
companies overseas.  He also highlighted the GOR's interest 
in making Moscow an international financial center. 
 
¶6. (SBU) Dvorkovich explained that the new government's 
principal economic reform focus was on judicial reform and 
fighting corruption.  The GOR would release its plan in the 
fall and introduce needed legislation in the Duma.  Mermoud 
responded that we would look for ways to be helpful. 
Dvorkovich said Russia no longer needed financial or even 
technical assistance but was interested in the two 
governments' facilitating greater private sector Russian and 
American interaction, for example, company-to-company or 
university-to-university.  He was personally involved in 
setting up a university partnership between Duke's Fuqua 
Business School, of which he was an alumnus, and a business 
school in Russia. 
 
¶7. (SBU) On the U.S-Russia business-to-business dialogue, 
Dvorkovich acknowledged that the ball was in Russia's court 
but said that the government reorganization was slowing a 
response to the U.S. proposal as was the GOR's unfamiliarity 
with the proposed format.  Russia preferred Intergovernmental 
Commissions (IGCs), which it had with many other countries. 
Mermoud noted that Commerce had the lead in the USG on this 
issue and expressed hope that Dvorkovich would find time to 
visit the U.S. in the fall. 
 
--------------------------------- 
Rosatom's Spasskiy on Cooperation 
--------------------------------- 
 
¶8.  (SBU)  Rosatom Deputy Director General Nikolai Spasskiy 
spoke at length on his priorities and his vision for future 
cooperation between the U.S. and Russia.  He said that there 
was "no alternative to working together" and that Russia had 
a genuine interest in working with the U.S. nuclear industry, 
while maintaining both nonproliferation and security goals. 
Spasskiy visualized three bases for cooperation.  The first 
was a "political dovetailing" based on the St. Petersburg, 
Kennebunkport and Sochi meetings between Presidents Bush and 
Putin.  The second, a "proper legal foundation," which he 
defined as the finalizing and approval of the 123 agreement 
between the US and Russia.  The third was a "business 
component," which Spasskiy adamantly declared must be based 
on a full-fledged bilateral arrangement between the U.S. and 
Russia. 
 
¶9.  (SBU)  Spasskiy said that Russia could be of assistance 
if the nuclear renaissance actually takes off because, as he 
described it, the US would have a deficit in enrichment 
capacity to support the new reactors.  He also allowed that 
Russia could provide new designs for reactors and turbines 
and peripheral equipment.  But to do this, the 123 agreement 
was required.  He then made a short statement on the Rosatom 
reorganization, basically saying that it was not a finished 
product and much remained to be worked out in terms of how 
the organization will manage its assets. 
 
¶10.  (SBU)  Spasskiy then broached a completely new line of 
thought.  He said that the key to the future cooperation 
between the U.S. and Russia was to start with a "big 
project," something that would catch the attention of the 
public in both nations as well as their respective 
governments.  Spasskiy said that it had to be something "big, 
attractive economically and feasible."  He was quite clear 
that "starting small is not the way."  He suggested to 
Special Representative Mermoud that it might be useful to 
compare our visions on what this big project might be at a 
meeting in the late summer or fall. 
 
¶11.  (U) This message has been cleared by Special 
Representative Mermoud's office. 
RUBIN