VZCZCXRO6648
RR RUEHAST
DE RUEHMO #2917/01 2760346
ZNR UUUUU ZZH
R 020346Z OCT 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 0197
INFO RUEHTA/AMEMBASSY ASTANA 0201
RUEHDBU/AMEMBASSY DUSHANBE 0095
RUEHEK/AMEMBASSY BISHKEK 2613
RUEHKV/AMEMBASSY KYIV 0292
RUEHSI/AMEMBASSY TBILISI 3892
RUEHYE/AMEMBASSY YEREVAN 0517
RUEHAST/USO ALMATY 0007

UNCLAS SECTION 01 OF 03 MOSCOW 002917 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR ISN/CTR AND EUR/PRA 
 
E.O. 12958: N/A 
TAGS: PARM KNNP PARM TBIO TSPL MNUC EAID TRGY PGOV OSCI
TPHY, TSPL, RS 
SUBJECT: DOES RUSSIA WANT THE INTERNATIONAL SCIENCE AND TECHNOLOGY 
CENTER? 
 
REFS: A. MOSCOW 2883 
      ¶B. MOSCOW 1631 
 
SENSITIVE BUT UNCLASSIFIED.  NOT FOR INTERNET DISTRIBUTION. 
 
¶1. (SBU) SUMMARY: Post understands that the Department is 
considering the future direction of the International Science and 
Technology Center (ISTC), in consultation with ISTC international 
partners.  Key local contacts over the past month have indicated 
that although powerful forces would like to shut ISTC down in its 
current incarnation and perhaps altogether, the GOR has yet to 
arrive at a coherent position on ISTC's future.  We believe there is 
still time for Washington to work with the other ISTC partners to 
prevent ISTC from being crippled by an upcoming GOR decision on 
taxation and to resolve other political and bureaucratic challenges. 
 END SUMMARY. 
 
------------------------------ 
RUSSIA STILL UNDECIDED ON ISTC 
------------------------------ 
 
¶2. (SBU) Rosatom Deputy Director Nikolay Spasskiy told the DCM in 
August, "You have to stop saying that ISTC is intended to employ 
unemployed or underpaid Russian scientists so they don't go sell 
their skills to Hezbollah and Al Qaida."  Although the DCM denied 
that the Embassy was making such comments, Spasskiy argued that the 
U.S. had said similar things on many occasions in the past.  He 
stressed, "Russia can pay its own scientists and in fact has lots of 
good work for them.  The ISTC needs to be refocused and rejustified 
as a partnership in both countries' interest." 
 
¶3. (SBU) Spasskiy's comments reflect thinking on ISTC at higher 
levels in several agencies.  There seems to be a tussle between 
those who want to save an ISTC with a broadened mandate and those 
who want to kill it outright or through a slow death by bureaucratic 
strangulation.  None of our contacts believes ISTC should remain 
focused solely on nonproliferation.  In a meeting on September 29, 
ISTC's Executive Director, Adriaan Van der Meer, described the wide 
range of comments on ISTC from his Russian contacts, ranging from 
solid support to extreme suspicion.  The scientific community and 
some Rosatom contacts contend that ISTC is a vital player in science 
and technology cooperation and functions more effectively than 
bilateral activities.  On the other end of the spectrum, Federal 
Security Service (FSB) officials and some at the MFA view ISTC as a 
"Cold War instrument" that is stealing Russian know-how without 
compensating Russian scientists for their intellectual property. 
Van der Meer was horrified when the chairman of the commission at 
the Russian Academy of Sciences responsible for approving ISTC 
projects asked him only a week ago whether ISTC still existed. 
 
¶4. (SBU) Aleksey Ubeyev, the acting director of Rosatom's 
international department, told us on September 19 that the Russian 
interagency is still trying to work out a coordinated position on 
ISTC, joking that "in Russia, it is more difficult to close down an 
entity than it is to establish one" (REF A).  A working-level 
contact at Rosatom's international department told us on September 
30 that the MFA is engaging with the Finance Ministry to ensure that 
ISTC maintains its tax-exempt status as an inter-governmental 
institution (see below).  The same contact, however, told us 
approximately two months ago that then-Deputy Foreign Minister 
Sergey Kislyak was a strong opponent of ISTC, and that the MFA would 
likely be more favorably disposed toward the Center once Kislyak had 
relocated to Washington as Ambassador. 
 
--------------------------------- 
AN IMPENDING DECISION ON TAXATION 
--------------------------------- 
 
¶5. (SBU) On September 26, Russian Academy of Sciences (RAS) 
Vice-President Nikolay Laverov warned us that the Government of 
Russia (GOR) is poised to deny tax-exempt status to ISTC (septel). 
Decree Number 485 signed on June 28 by Prime Minister Putin cuts the 
list of foreign grant-making organizations from approximately 100 to 
12, all multilateral entities.  The GOR is reportedly preparing a 
new list, and previously tax-exempt organizations not included in 
the new list will be liable for taxes beginning January 1, 2009. 
Laverov said this decision would effectively kill ISTC, as the 
Center's international partners would refuse to have their payments 
to ISTC taxed in excess of 30 percent.  Laverov expressed sadness, 
saying that he had participated in establishing ISTC and had always 
been a fervent supporter of the institution. 
 
MOSCOW 00002917  002 OF 003 
 
 
 
¶6. (SBU) Van der Meer was surprised and disappointed when we 
conveyed Laverov's remarks, noting that although he has not been 
informed of an official decision to remove ISTC's tax exemptions, he 
had heard informally from MFA and Rosatom contacts that such a 
decision might be coming.  He said that ISTC has been lobbying the 
MFA behind the scenes and provided MFA with ISTC's legal analysis 
that the decree does not pertain to the Center because it was 
established by international agreement.  Although the MFA's legal 
department has agreed orally that the decree should not apply, it 
has not provided ISTC with a document to that effect. 
 
---------------------- 
ISTC'S MANY CHALLENGES 
---------------------- 
 
¶7. (SBU) ISTC faces many challenges besides the possibility of 
crippling taxation.  Van der Meer cited the issue of "inefficiency" 
in obtaining host government concurrence on project proposals, with 
an average of 400 days elapsing from the date of a project proposal 
submission until concurrence.  ISTC projects must receive 
concurrence by the relevant Russian agency: Rosatom (for nuclear 
projects), or RAS (for everything else).  Approvals have slowed to a 
relative trickle since 2006.  The 20-25 project proposals that 
Rosatom has approved and that now await ISTC Board approval are all 
very non-sensitive, with no hint of any dual-use purpose.  RAS 
assured Van der Meer that it would convene its committee in early 
October and approve a number of projects for Board consideration. 
 
¶8. (SBU) Our GOR contacts suggest that these delays may be due 
largely to political inertia, as the GOR has not designated a single 
lead agency for ISTC issues.  Almost two years ago, the GOR resolved 
to establish an interagency commission on interaction with ISTC, 
which in turn was to authorize entities to issue host government 
concurrence.  Over the past year, the Ministry of Science and 
Education, RAS, and Rosatom were all considered as possible lead 
agencies.  Laverov told us that he made an attempt to have RAS 
designated, but other forces in the government did not support the 
proposal.  Laverov noted pointedly that Science and Education 
Minister Andrey Fursenko did not volunteer his ministry as the lead 
agency and added that there are serious doubts whether Rosatom, 
which is a state-owned corporation and no longer formally part of 
the government, can legally serve as lead agency.  Because the 
question of what agency should be the lead for ISTC has not been 
resolved, agencies have issued few host government concurrences.  In 
June, we invited the MFA to convene bilateral discussions on how to 
transform ISTC's mission (REF B).  The proposed dates for the talks 
have repeatedly slipped for various reasons, and we are now awaiting 
a GOR response on a proposed date in late October. 
 
¶9. (SBU) Finally, Van der Meer cited the challenge of financing 
ISTC's operations.  He noted that the institution suffers from 
excessive personnel costs and a significant number of 
underperforming staff.  Shedding this institutional dead-weight, he 
said, is made difficult to impossible by Russia's restrictive labor 
laws.  He also leveled sharp criticism against the USG, which he 
said had reduced its core funding of ISTC.  He suggested that the 
USG should back up its rhetorical support of the Center with greater 
financial backing.  Unless the U.S. party increases its project 
funding, he said the Center would need to consider reducing its U.S. 
expatriate staff.  He knows that the EU has also been looking 
critically at the disproportionate amount of U.S. staff at the 
Center. 
 
--------------------- 
POSSIBLE WAYS FORWARD 
--------------------- 
 
¶10. (SBU) Van der Meer said that he wants to force a bold departure 
for ISTC to break out of the current stalemate.  He would like to 
host a strategy session of the principal partners before the ISTC's 
December board meeting to discuss the Center's future.  If ISTC 
remains in Russia, Van der Meer sees three possible options: (1) 
Gain Russia's active buy-in to make ISTC into an international 
center of excellence for non-proliferation that would make its 
know-how accessible to other countries.  This means that ISTC would 
need to find new funding sources. (2) Alternatively, ISTC could 
become an international center for science cooperation addressing 
global security issues, such as safer nuclear energy, biomedical 
research, global security and counterterrorism, climate change 
research, and development of alternative energy. (3) ISTC could 
 
MOSCOW 00002917  003 OF 003 
 
 
change its regional focus to Central Asia and the Caucasus. 
 
------------------- 
COMMENT: ENGAGE NOW 
------------------- 
 
¶11. (SBU) In order to keep ISTC as a vital instrument of 
international cooperation in nonproliferation and other scientific 
research and development activity, the U.S. needs to act before the 
Russian government makes a decision on ISTC's future.  We agree that 
ISTC should be transformed in place to meet the needs of its 
partners.  But to meet Russia's needs, ISTC's mandate will need to 
be broadened beyond nonproliferation, which means that partners, 
including Russia, will need to find new sources of funding. 
 
¶12. (SBU) Post supports Van der Meer's proposal of an informal 
roundtable meeting with all the parties, including Russia, before 
the December ISTC board meeting.  Post agrees that it would be 
useful for the Department to express to key GOR contacts and ISTC 
partners our interest in exploring broadening ISTC's mandate, even 
though Ambassador Kislyak may not be the most supportive audience. 
Hopefully, doing so will not precipitate a GOR decision that we 
would not like. 
 
¶13. (SBU) For its part, post has already requested an appointment 
with the head of the Ministry of Science and Education's 
International Department Nichkov for EST Counselor and a meeting 
between Ambassador Beyrle and Minister Fursenko in the coming days. 
Post also recommends that Department and post work with ISTC to 
develop a list of ISTC accomplishments outside the field of 
nonproliferation that were spurred by nonproliferation-related and 
non-nonproliferation-related funding.  This might help reinforce the 
position of those who would like to save ISTC. 
 
BEYRLE