VZCZCXRO8677
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHHM RUEHIK RUEHKW
RUEHLA RUEHLN RUEHLZ RUEHMA RUEHNP RUEHPB RUEHPOD RUEHROV RUEHSK
RUEHSR RUEHTM RUEHTRO RUEHVK RUEHYG
DE RUEHMO #0333/01 0421515
ZNR UUUUU ZZH
P 111515Z FEB 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 1867
INFO RUCPDOC/USDOC WASHINGTON DC
RUEHLN/AMCONSUL ST PETERSBURG 5211
RUEHVK/AMCONSUL VLADIVOSTOK 3095
RUEHYG/AMCONSUL YEKATERINBURG 3451
RUEHZN/ENVIRONMENT SCIENCE AND T COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 08 MOSCOW 000333 
 
DEPARTMENT FOR OSTP J.ROLF 
USDOC/MAC FOR J. BROUGHER/M EDWARDS 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: TNGD TPHY ETRD BTIO TSPL PREL KIPR KTIA RS
SUBJECT: RUSSIA MOVING INTO HIGH GEAR ON NANOTECHNOLOGY; ACTIVELY 
SEEKING COOPERATION WITH U.S. 
 
REF A: Moscow 3586, REF B: Moscow 3641 
 
MOSCOW 00000333  001.2 OF 008 
 
 
Sensitive but Unclassified, Not for Internet Distribution 
 
¶1.  (SBU) Summary: Since Russia's preeminent manager Anatoliy 
Chubays became Director General of Russia's Corporation of 
Nanotechnologies (Rusnano) on September 22, 2008 Rusnano has both 
bolstered its international reputation and begun investing in 
nanotechnology in Russia.  To showcase Russia's commitment to and 
accomplishments in nanotechnology, Rusnano organized its first 
annual International Nanotechnology Forum on December 3-5, attended 
by more than 3,000 scientists, investors, businesspeople and 
officials from all over the world.  High-level Russian government 
officials joined Chubays to emphasize Russia's interest in using 
nanotechnology to spur overall innovation and to diversify the 
Russian economy.  While the Forum highlighted Rusnano's desire for 
international cooperation, many Rusnano officials noted in public 
and in private that the United States, with its lead in 
nanotechnology, is Rusnano's would-be partner number one.  Chubays 
personally expressed his appreciation for the United State's 
high-level support for the Forum to Special Representative for 
Commercial and Business Affairs J. Frank Mermoud. 
 
¶2.  (SBU) In light of the economic crisis, Chubays is aggressively 
keeping Rusnano focused on demonstrating concrete commercial success 
as quickly as possible.  Rusnano has already invested at least 6 
billion rubles (USD 168 million, using today's rate 35.6 ruble = 1 
dollar), and plans to invest some 20 billion rubles (USD 562 
million) in more than 20 projects by March, and up to USD 10 billion 
more "in the near future."  We learned during a January 30 visit to 
the nanotechnology cluster at the Special Economic Zone in Dubna 
that it will almost certainly take more time than Rusnano is 
anticipating for its projects to be realized.   Chubays and a large 
delegation plan to visit the United States from May 3-9 to attend 
the Nanotech Conference and Expo 2009 in Houston, consult with 
business leaders in Silicon Valley, and meet with officials in the 
new administration in Washington.  They expressed interest in 
developing a joint statement to capture our bilateral cooperation on 
nanotechnology.  MFA officials proposed agreeing on an "action 
framework" to ensure that bilateral cooperation has specific 
results, such as exchanging technology and creating joint ventures. 
To avoid potential dual use and export control concerns, one MFA 
official argued that it is necessary to conclude a Technology 
Safeguards Agreement.  End Summary. 
 
Rusnano Forum Proclaims Russia Serious About Nano... 
--------------------------------------------- ------ 
 
¶3.  (U) Deputy Prime Minister Sergey Ivanov opened the December 3-5 
Forum Plenary Session with an address from President Medvedev 
declaring that Russia has "all the necessary conditions to make 
future breakthroughs in the field of nanotechnologies, including 
government support, the interest of business, and strong 
intellectual potential."  Ivanov quoted experts who expect the world 
nanotechnology market to grow from today's USD 147 billion to USD 
3.1 trillion by 2015 and that global government, corporate and 
venture investment in nanotechnology totaled USD 13.5 billion in 
¶2008.  He confirmed that the Russian government will invest about 
USD 10 billion to develop nanotechnology in the next few years, half 
in research and development (R&D) and half through Rusnano in 
commercialization.  Ivanov and later speakers, including Minister of 
Economic Development Elvira Nabiullina, stressed to the hundreds of 
plenary session attendees that by developing nanotechnology, Russia 
overcome the consequences of the global financial crisis more 
quickly, develop the spectrum of R&D and innovation, bring 
manufacturing to a new level, and improve people's lives. 
 
¶4.  (U) Rusnano Director General Anatoliy Chubays promised Opening 
Plenary participants that Rusnano will offer the best business 
conditions in the world for companies to begin manufacturing 
nanotechnology-enabled products in Russia.  Rusnano will help 
scientists and businesses to work out business plans which will be 
reviewed by independent panels to establish both their scientific 
and their business viability.  Chubays stated that in exchange for a 
minority share of stock, Rusnano can offer 90% of the financing for 
up to ten years with interest rates starting at 8 percent.  When the 
time comes for Rusnano to divest itself, it will not seek the 
highest possible price for its shares.  Chubays welcomed foreign 
firms, stressing that Rusnano's conditions would be the same for all 
firms.  He promised that Rusnano would use its connections with the 
Russian government to cut through bureaucracy and corruption. 
Chubays declared both in his opening remarks and later in the press 
that Rusnano is ready to invest some 20 billion rubles (USD 562 
 
MOSCOW 00000333  002.2 OF 008 
 
 
million) in more than 20 projects by the end of February. 
 
 
... And Seeks International, Particularly U.S., Cooperation 
--------------------------------------------- ---------- 
 
¶5.  (SBU) Rusnano officials have made it clear that Russia is 
looking for international cooperation.  Many have noted in public 
and in private that the United States, with its lead in 
nanotechnology, is partner number one.  From Chubays down, Rusnano 
actively sought U.S. participants for the Forum (ref A).  Rusnano 
invited Special Representative for Commercial and Business Affairs 
¶J. Frank Mermoud as the senior U. S. government official and 
featured Dr. Paras N. Prasad, Professor of Chemistry and Director of 
the Institute for Lasers, Photonics, and Biophotonics at State 
University of New York (SUNY), Buffalo, as the only international 
speaker at the Opening Plenary.  Prasad captivated the audience with 
his presentation on the wide scope and tremendous promise of 
nanotechnology applications, including some ready for 
commercialization.  Prasad and other U.S. business and scientific 
reps attracted significant attention from Rusnano, would-be private 
investors, and a myriad of business "facilitators" seeking to ride 
on their coattails. 
 
¶6.  (SBU) Rusnano also lobbied hard for other prominent U.S. 
government officials to attend the forum.  Since Clayton Teague, 
current Director of the Federal National Nanotechnology Coordination 
Office, was not available, Rusnano invited James Murday, the first 
Director of the U.S. National Nanotechnology Initiative, to give the 
keynote presentation and then chaired the afternoon panel on 
December 3 on how governments can most effectively help develop 
nanotechnology.  Murday shared lessons learned from the U.S. 
government's experience, cautioning that it takes many years to go 
from concept to prototype. 
 
¶7.  (SBU) At the second afternoon panel session on December 3, 
Mermoud described U.S. international efforts to develop 
nanotechnology.  He expressed hope that Russia will participate even 
more actively with the OECD Working Party on Nanotechnology as it 
develops policy related to commercialization and he urged Russia and 
other countries with nano programs to contribute financially to OECD 
projects.  He welcomed Russia's plans to get involved with testing 
in the framework of the OECD's Working Party on Manufactured 
Nano-materials.  He also reiterated the U.S. government's interest 
in exploring bilateral cooperation on areas also explored in July 
with the visiting Rusnano delegation: 
 
-- Modeling and simulation of the properties of photonic and 
electronic materials at the nano-scale; 
 
-- Modeling and simulation of the properties of engineered 
nano-scale materials in a biological environment, including 
predictive toxicology; 
 
-- Self assembly of nano-structured materials and devices; 
 
-- Instrumentation and techniques for characterizing physicochemical 
properties of materials at the nano-scale, including biological 
materials; 
 
-- Instrumentation and methods for detecting and 
characterizing engineered nano-scale materials in the body 
or the environment, and protocols for evaluating their human health 
impacts and environmental effects; and 
 
-- Nano-materials for water purification and environmental 
remediation. 
 
A summary of Mermoud's remarks are posted on the Embassy's website 
in English and in Russian at: 
http://moscow.usembassy.gov/tr-mermoud120308. html. 
 
Chubays: Nano Cooperation Will Help Bilateral Relations 
--------------------------------------------- ---------- 
 
¶8.  (SBU) In a private meeting with Mermoud on December 4, Chubays 
expressed appreciation for Ambassador Beyrle's and the U.S. 
government's support for the Forum.  Chubays noted that he was 
"extremely upset" by the tenor of bilateral relations and wanted to 
avoid a return to the cold war dynamic.  He expressed hope that 
U.S.-Russian cooperation on nanotechnology and high technology will 
help build a new dynamic in the bilateral relationship.  He 
explained that Russian business and the Russian government have the 
 
MOSCOW 00000333  003.2 OF 008 
 
 
next ten years to build the high-tech sector and put Russia on the 
global map.  The resulting economic growth will strengthen Russia's 
development and integration with the rest of the world.  The United 
States is number one in the world on high technology, so Russia sees 
the United States as its highest priority partner.  Next in priority 
is cooperating with Israel, Europe, and Asia.  Chubays confirmed he 
plans to spend a week in the United States in May 2009 to cement 
wide-ranging bilateral cooperation on nano and high technology, 
including meetings in Silicon Valley and Washington. 
 
¶9.  (SBU)  Mermoud confirmed that Chubays and others had correctly 
understood that Mermoud's attendance at the Forum demonstrates the 
importance the Department places on cooperating with Russia on 
developing nanotechnology and economic and commercial relations. 
Echoing statements made by the President and Prime Minister on 
nanotechnology's potential role in lifting the entire economy, 
Mermoud welcomed Chubays' May trip, and suggested that Chubays 
consider also travelling to Raleigh Durham to meet with industry 
associations.  When Mermoud indicated that U.S. companies have 
concerns with Russian IP practices and customs practices, Chubays 
immediately responded that Rusnano will be active and aggressive in 
protecting business.  It will take time, Chubays added, but he is 
committed to get the corporation law and the tax, budget, and civil 
codes revised to support innovation.  He expressed interest in 
hearing from U.S. companies concerning issues that impede 
high-technology development. 
 
MFA Wants Concrete U.S.-Russia High-tech Cooperation, TSA 
--------------------------------------------- ---------- 
 
¶10.  (SBU) Rusnano arranged for Mermoud and Embassy officers to meet 
on December 4 with Ministry of Foreign Affairs North America 
Department Deputy Director Nikolay Smirnov and Department for 
Security, Technological and Disarmament Affairs Deputy Director 
Andrey Krutskikh.  Although they hailed Mermoud's attendance at the 
Nano Forum as a welcome, positive signal, both Smirnov and Krutskikh 
proceeded to give examples of how Russia has gotten "nothing" in 
return for its many previous political and economic concessions to 
the United States.  Smirnov expressed hoped that we would work 
together in the months before Chubays's May 2009 visit to the United 
States as we did on the July 2008 visit of Rusnano officials. 
 
¶11.  (SBU) Krutskikh cautioned that Russia wants more than just U.S. 
speeches and exchanges of delegations on high-tech cooperation -- it 
wants concrete results such as exchanging technology and creating 
joint ventures with the United States, the world's number one 
high-tech power.  The United States, however, Krutskikh mused, seems 
to have an innate resistance to real high-tech cooperation with 
Russia -- it lets cooperation go only to a certain point and then 
cooperation inexplicably hits a barrier.  So if the United States 
does not want to truly cooperate with Russia, Russia has strong 
cooperation with Europe on the Eurolaser and other projects. 
Krutskikh pointed out that there are also good opportunities with 
Brazil, India, and China, albeit not as attractive as with the 
United States.  (Comment:  There is a market component to the 
relative lack of U.S.-Russia R&D cooperation.  Russia's long and 
distinguished history of strong R&D is not market driven and often 
does not respond to what the world's industries and markets require. 
 End Comment)  Given the potential dual use and export control 
concerns of nanotechnology and high technology, Krutskikh argued 
that the United States and Russia should create an "action 
framework" for cooperation, including a Technnology Safeguards 
Agreement. 
 
Rusnano in a Rush to Find and Fund Viable Proposals 
--------------------------------------------- ------ 
 
¶12.  (SBU)  After the Opening Plenary, the Forum bifurcated into 
two-and-a-half-day simultaneous business and science programs. 
Business presentations ranged from international experience on 
forming national innovative systems to measures to stimulate the 
development of financial, manufacturing and technology, information 
and educational infrastructure, support of the fundamental science, 
and improving legislation.  Forum participants also discussed 
venture capital investment development in Russia, focusing on nano's 
applications in electronics, medicine and biotechnologies to 
mechanical engineering, oil and gas and chemical industry as well as 
to regional development programs in Russia.  Rusnano intends to use 
its funds to leverage funding from venture capital firms, private 
companies, and the Russian Federation's Investment Fund, State 
Corporation "Development and Foreign Economic Activity Bank", and 
Open Joint Stock Company " Special Economic Zones.  Rusnano speakers 
assured skeptical Forum participants that by 2015, the portion of 
 
MOSCOW 00000333  004.2 OF 008 
 
 
the Russian enterprises nano products on the world market will grow 
from today's 0.07 to 3 percent. 
 
¶13.  (SBU) Chubays is in a hurry to show that he can deliver.  Two 
days before the Forum, he demanded that Rusnano officials focus on 
demonstrating that the Forum was generating concrete results.  With 
significant fanfare, Chubays, ONEXIM Group Head Mikhail Prokhorov, 
and Ural Optical and Mechanical Plant Director General Sergey Maksin 
used the Forum as a venue to sign an investment contract to 
establish an enterprise to manufacture 120 million solid-state 
light-emitting diodes annually.  The diodes will eventually replace 
incandescent light bulbs.  The element base for the light-emitting 
diodes will be made in the Saint Petersburg innovation zone in 
collaboration with the Ioffes Institute.  Prokhorov, who founded the 
investment firm ONEXIM Group in May 2007, is on Rusnano's 
Supervisory Board.  The Ural Optical and Mechanical Plant named 
after E.C. Yalamova" (UOMP) is one of the leading Russian 
enterprises in the area of designing and manufacturing optical and 
electronic devices for military and civilian uses.  Under the terms 
of the 3.35 billion ruble (USD 94 million) project, Rusnano will 
invest 1.7 billion rubles (USD 48 million) for a 17 percent stake, 
the plant will invest some 620 million rubles (USD 17 million) for a 
33 percent stake, and Onexim will invest 840.5 million rubles (USD 
24 million) and control 50 percent together with the scientists who 
developed the project.  The project is expected to become profitable 
by 2011 and earn a profit of up to 6 billion rubles annually by 
¶2013.  Hailing the deal, Chubays said the LED lamps, for use in home 
and office displays as well as in cell phones, would eventually 
account for around 1 percent of the Russian market and consume seven 
times less energy than an ordinary electric lamp. 
 
¶14.  (U) The most significant international agreement Russia signed 
at the Forum was with Finland to establish an information exchange 
on national policy for nanotechnologies, scientific research, 
potential markets, certification and standardization of nano 
research results and intellectual property rights protection for 
nanotechnologies.  A key component of the agreement involves 
cooperation on commercialization of Russian and Finnish 
nanotechnology developments and developing a road map for the way 
ahead. 
¶15.  (SBU) U.S. businesses received substantial attention.  In a 
private meeting on December 5, Chubays invited SUNY Buffalo's Paras 
Prasad to serve as an International  Nanotech Expert Technical 
Adviser and agreed to visit Buffalo during his May visit. (Note: 
Rusnano officials have since confirmed that this will not be 
possible.  End Note.)  After Chubays expressed interest in 
developing and licensing Prasad's firm's technology for medical 
diagnostics for manufacturing in Russia (a Flow Cytometry project 
and a R&D project on chemical and biosensors with Academician 
Professor Alfimov, Director of the Photochemistry Center), Rusnano 
assigned a project director and contacted Prasad repeatedly to help 
him to apply for Rusnano funding.  During their December 5 meeting, 
Prokhorov noted that he had been impressed with Prasad's 
presentation and also expressed interest in visiting Prasad in 
Buffalo.  Chubays also met privately to discuss cooperation with the 
Chief Executive Officer of Nano-dynamics, a Buffalo firm that 
produces nano-cement. 
 
¶16.  (SBU) EST arranged for the U.S. delegation to the International 
Science and Technology Center (ISTC) Governing Board and ISTC Acting 
U.S. Deputy Executive Director Tim Murray to meet on December 10 
with Sergey Mostinskiy, Rusnano Director for International 
Cooperation, and Rusnano Senior Advisor Vladislav Chernov to explore 
possible mechanisms for Rusnano to fund commercialization of ISTC 
nanotechnology projects (ref B). Murray gave an overview of a 
nano-titanium and a brachio-therapy bio-seed proposal for which ISTC 
had already funded pilot projects.   Both ISTC partner companies 
have had initial dialogue with Rusnano regarding larger-scale 
funding, and are in the process of preparing concrete proposals for 
Rusnano's formal consideration.  Mostinsky subsequently arranged a 
February 12 joint workshop with the ISTC to brief Rusnano officials 
about potential opportunities for collaboration, as well as 
exploring holding a roundtable with ISTC partners for Chubays in the 
United States in May.  On February 5, EST Counselor also gave 
Rusnano officials a summary from the U.S. Civilian Research and 
Development Foundation (CRDF) of its work to determine if Rusnano is 
interested in cooperating with CRDF as well. 
 
Rusnano Dependent on, but Not Interested in Funding Science 
--------------------------------------------- ---------- 
 
¶17.  (SBU) Rusnano officials have made it abundantly clear that 
Rusnano is not interested in funding scientific research.  Although 
 
MOSCOW 00000333  005.2 OF 008 
 
 
the Forum featured two-and-a-half days of a total of 263 scientific 
presentations in 29 areas by 80 firms and organizations from Russia, 
Austria, Germany, Latvia, the U.S., Finland, and Iran, Rusnano 
International Affairs Department officials told us after the Forum 
that they do not expect next year's forum to have a science 
component.  The science exhibits, covering 18 main nanotechnologies 
and nano-material development possibilities, were almost exclusively 
in Russian.  Few of the exhibitors spoke English.  Nano-enabling 
technology, such as electron microscopes and atomic force 
microscopes that Russia is already commercializing and selling on 
the international market was on display.  Russia's strength in 
material science, in particular metallurgy and ceramics, was evident 
by the large number of exhibitors showing various powders and 
coatings, such as mono-crystalline and multi-crystalline silicon for 
solar cells.  Russian companies also supply carbon nanotubes to 
international market.  In January, Deputy Prime Minister Ivanov 
confirmed in a press article that Russia did not display its most 
most advanced formulations. 
 
¶18.  (U) The Forum showcased several signing ceremonies.  Flanked by 
Deputy Prime Minister Ivanov and Minister of Education and Science 
Fursenko, Chubays signed cooperation agreements with two of Russia's 
leading scientific institutions.  In the agreement Chubays signed 
with 
President of the Russian Academy of Sciences (RAS) Yuriy Osipov, RAS 
agreed to assist Rusnano to define the key directions for developing 
nano-industry, to cooperate in commercialization projects on 
nanotechnologies, nano-materials and nano-systems, and in the 
development of competitive scientific and technical schools in 
Russia.  To achieve these goals, Rusnano and RAS will jointly train 
professionals for nano-industry and work to attract young 
specialists, post-graduate students and post-doctoral researchers to 
the field of nanotechnologies. 
 
¶19.  (SBU) Chubays also signed an agreement with Moscow State 
University (MGU) Rector Viktor Sadovnichiy.  On December 6, 
Professor Yuriy Tretyakov, Dean of MGU's Department of Materials 
Science, gave Mermoud a tour of the department and laboratories 
which he founded in 1991 on the U.S. interdisciplinary model, 
combining chemistry, physics, mathematics, and liberal arts. 
Tretyakov and Deputy Department Director Aleksey Lukashin described 
the rigorous selection process for the 200 students in their 
department.  Those that make it through the program are in high 
demand by foreign universities and companies.  While hardly any 
remained in Russia during the 1990s, more have chosen to stay in the 
past 2-3 years because of the improvement in the economic situation. 
 (Numerous MGU students and graduates were featured in the over 300 
nano-projects displayed at the Forum by young Russian scientists. 
End Comment.) 
 
¶20.  (SBU) Tretyakov agreed with Chubays's Opening Plenary statement 
that Rusnano needs to build a bridge between science and business. 
But he opposed Rusnano's decision not to fund fundamental research. 
(Note:  Although USD 5 billion was reported to have been invested in 
nanotechnology-related science, it has apparently gone primarily to 
the Kurchatov Institute and Special Economic Zone Dubna.  As 
Tretyakov guided Mermoud through the earnest, but antiquated 
laboratories dotted with occasional newer equipment and the low-tech 
classrooms, it was evident that MGU is still in serious need of 
upgrade.  End Note)  Without a single nanotechnology international 
patent, he argued, it will be hard for Russia to manufacture. 
Scientists need over USD 250,000 to get an international patent and 
then must manufacture to keep it.  Only Rusnano can provide both. 
One of the MGU scientists pointed out that only one of the seven 
projects Rusnano has agreed to fund has a legitimate nanotechnology 
connection.  Tretyakov described MGU's close relationship with the 
RAS institutes, whose aged researchers need MGU's youth.  Like MGU, 
RAS has gotten very little money for nanotechnology.  But Tretyakov 
was hopeful that as Chubays gets better acquainted with the 
situation and with MGU, which he has asked to develop a course to 
train his personnel, he will direct more funding to MGU. 
 
Emerging Nanotech Cluster at SEZ Dubna 
-------------------------------------- 
 
¶21.  (SBU) On January 30, EST counselor and staff visited Special 
Economic Zone (SEZ) Dubna, one of 13 SEZ's in Russia, about 100 km 
north of Moscow.  Aleksandr Rats, the Head of the Federal Agency for 
Management of SEZ's Territorial Directorate, briefed us on Dubna's 
history as a closed Soviet science city and expressed hope that 
Dubna would one day become Russia's Silicon Valley.  Established in 
2005, SEZ Dubna's main goal is to provide favorable conditions (such 
as tax and customs holidays) to facilitate the development of high 
 
MOSCOW 00000333  006.2 OF 008 
 
 
technology industries, particularly new products and services in 
nanotechnologies, nuclear-physical technologies, and information 
technologies.  Highlighting the importance of SEZ Dubna to Russia's 
plans to develop high-tech, President Medvedev visited in April 
2008, declaring that "the projects being implemented here are such 
that nobody in the world has tackled..." 
 
¶22.  (SBU) Two major agreements boosted Dubna's attractiveness to 
potential nanotechnology investors:  an agreement between SEZ Dubna 
and Rusnano, signed on April 25, 2008, forming its nanotechnological 
cluster and the creation of the CIS Intergovernmental Center of 
Nanotechnologies announced at an October 3, 2008 meeting of the 
Heads of the State Authorities on Science from CIS countries. 
According to Rats, there are currently 32 resident companies 
registered in SEZ Dubna, and space ultimately for up to 300 total 
enterprises.  Rats and his staff treated EST staff to an insider's 
tour of the 300 hectare SEZ territory, pointing out as yet 
undeveloped sites which are already earmarked for specific nanotech 
companies.  One of these companies, U.S.-owned firm and 
Russian-registered Bonasana, is awaiting Rusnano approval of funding 
for its proposed project to build a pre-clinical trial nanotech 
testing facility.  Despite SEZ Dubna's clear promise, Rats and his 
staff were candid about obstacles to producing innovation, 
including: (1) lack of a NASDAQ-type mechanism in Russia that would 
allow ordinary citizens to invest in S&T; (2) lack of unified 
procedures in patent laws and arcane intellectual property laws; and 
(3) lack of a fully developed business culture in Russia.  Rats and 
colleagues were sanguine that SEZ Dubna will meet its objectives, if 
businesses are patient. 
¶23.  (U) In November 2008, Rusnano approved a 1.29 billion ruble 
investment in SEZ Dubna's Trackpor Technology to establish 
commercial production of medical technology for "cascade filtration 
of blood plasma" (a high-tech method of cleansing blood using 
nano-sized flat track membranes) to remove harmful substances from 
and destroy viruses in blood.  This project could have enormous 
medical value as it is directed towards the treatment of a number of 
widespread cardiovascular and other related diseases which 
contribute to a high mortality rate in Russia, with 1.5 million 
deaths per year from heart disease alone.  The project will be 
realized in three stages over a 6.5 year period.   Emboffs were 
fortunate to visit Trekpor's existing small-scale production 
facility, see its existing blood cleansing device, and learn 
first-hand from its scientists about proposed technological 
improvements using Rusnano investment funds which should allow 
large-scale production of a third generation "membrane 
plasmapheresis" (aka blood plasma filter) device by 2011. 
Planning for Chubays's Visit to U.S. - Joint Statement? 
--------------------------------------------- ---------- 
 
¶24. (SBU) On Feb. 5, 2009, ESToffs met with Rusnano International 
Cooperation Department officials Sergey Mostinskiy and Vladislav 
Chernov to begin coordination for Rusnano Director Chubays's May 
3-9, 2009 planned visit to the United States.  Mostinskiy described 
Rusnano's restructuring plans complete with an increase in 
personnel, Chubays's proposal to the government that Rusnano take on 
additional functions to catalyze innovation.  Chubays will likely 
announce soon a new working title "Chairman of the Board, Director 
General."  Chernov elaborated Chubays's three main goals for the 
trip: 
 
-- Science and technical:  widening areas for cooperation with the 
United States, the leader of the nanotechnology.  A key part of this 
is Rusnano's participation in the Nanotech Conference and Expo 2009 
in Houston for which Chernov said Rusnano is "preparing 
intensively."  Chubays plans to deliver a keynote speech in Houston 
on May 5th and Rusnano plans to have a 40-square-meter exhibition 
stand.  Rusnano is still discussing internally what to display 
because to date, Rusnano hasn't actually produced any commercial 
nanotech products; 
 
-- Business/economic:  Mostinskiy explained that Chubays is anxious 
to attend an "Open Door Conference" in Silicon Valley sponsored by 
Intel and Hewlett-Packard to strengthen his contacts with U.S. big 
business with a view toward setting up informational exchanges and 
possibly joint programs in nanotech safety.  They are hoping that 
reps from these firms will attend Rusnano's next forum scheduled to 
be held in Moscow in October, which they promised would be "much 
better" than the first one.  Mostinskiy added that they would 
welcome any additional help from the U.S. Government to establish 
other points of contact in Silicon Valley.  Rusnano wishes to send a 
small "reconnaissance" delegation to the U.S. in the April 
time-frame to try to finalize the Silicon Valley agenda.  Post is 
working closely with Rusnano to facilitate the visa application 
 
MOSCOW 00000333  007.2 OF 008 
 
 
process of its delegation members. 
 
-- Political:  establishing contacts with the new Administration 
officials and meeting with those he already knows.  Chernov joked 
that Chubays is a consummate "political animal" who will want to 
meet with key U.S. government officials.  (Note: A close Chubays 
advisor specified to poloff that these officials include the Vice 
President.) 
 
¶25.  (SBU) Mostinskiy suggested the U.S. and Russian sides work 
together to prepare some kind of "political document" establishing 
our joint interest in establishing a high-tech relationship in the 
field of innovation of "nano-technology.  He suggested this document 
might take the form of a joint statement that might possibly be 
announced or read at the first ministerial between Secretary Clinton 
and FM Lavrov, even before Chubays's U.S. visit.  EST offs agreed to 
draw up some initial draft working blocks which might be included in 
such a statement to send to Washington for review.  Although EST 
counselor emphasized USG interest in engaging Russia on the 
environment, health and safey aspects of nano R&D, Chernov quickly 
pointed out that the GOR, not Rusnano, has the natural lead on these 
issues.  "We are a venture fund, not a research lab," said Chernov. 
 
Other Rusnano News and Goals 
---------------------------- 
¶26.  (SBU) In January, Chubays publicly pronounced that Rusnano 
plans to ramp up its procedures significantly in the coming weeks 
with the target of approving 5-6 funding projects monthly from June 
2009 onward.  Nevertheless, Mostinskiy and Chernov frankly confided 
to Emboffs that Rusnano is clearly still in a transition phase, both 
in cementing efficient operational procedures and even physically -- 
they will be relocating their 300 plus staff to a new building by 
September.  To date, while Rusnano has approved only seven projects 
and allocated 6 billion rubles in funding (including the Trekpor 
project at SEZ Dubna discussed above), Mostinskiy hinted at the 
incredible pressure they are facing to show the public they can 
fulfill their goal of helping Russia increase its stake in the 
nanotechnology field, and even to minimize the consequences of the 
financial crisis in Russia.  "We need a success story badly," he 
lamented.  To that end, Mostinskiy informed us that there are 
several proposals, "including from U.S. companies," that are 
currently under rewiew and consideration by the Supervisory Council 
with the expectation of being approved in the immediate future.  And 
to make the process more transparent, Rusnano now intends to post 
all approved projects on its Internet website for public information 
hereafter. 
 
Comment 
-------- 
 
¶27.  (SBU) While Rusnano has made great advances since September in 
both its public relations and in setting up structures and 
procedures, much work must be done if Rusnano seriously aims to 
achieve 900 billion (USD 25 billion) rubles worth of nanotech 
production by 2015.  International Forum presenters were frank - if 
Russia wants to become a global nanotech player, it needs to 
continually improve its innovation environment by improving 
education, the business environment, entrepreneurship, and 
developing early stage capital.  It also needs to rely on the 
market.  International presenters were unanimous - to be successful, 
Russia needs to develop a realistic country strategy that relies on 
Russia's traditional strength in fundamental research and focuses on 
expanding industries where Russia has competitive advantage, such as 
oil and gas or perhaps construction.  Trying to break into a mature 
industry with ample global production capacity, such as electronics 
and photonics, they pointed out, makes little sense.  Finally, they 
warned, it can take millions of dollars of investment over more than 
a decade for even a prototype to be developed. 
 
¶28.  (SBU) Russian policymakers hail Chubays as Russia's most 
effective manager and declaim that if he cannot succeed in bridging 
the historical, yawning gap between science and business, no one 
else in Russia can.  Chubays and Rusnano will need some time to 
develop Rusnano's portfolio of nanotechnology-related projects.  But 
the combined financial and economic crisis puts them under great 
pressure to show quick results.  Rusnano officials have told us they 
are not interested in any investment under USD 10 million and are 
seeking projects that can result in production in the next 2-3 
years.  Time will tell if Chubays will be able to protect his war 
chest from the depredations of both frantic budgeteers and those who 
don't understand nanotechnology's long time-frame, that markets 
should drive R&D, and that top-down, Soviet-style programs to 
develop high technology and manufacturing in every sector will be 
 
MOSCOW 00000333  008.2 OF 008 
 
 
counterproductive. 
 
BEYRLE