VZCZCXRO5500
RR RUEHDBU RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHMO #0397/01 0491241
ZNR UUUUU ZZH
R 181241Z FEB 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 2000
INFO RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 MOSCOW 000397 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: PREL PGOV MASS EAID ETRD EPET EINV ENRG RS XM
SUBJECT: CASTRO VISITS MOSCOW TO REJUVENATE RELATIONS 
 
MOSCOW 00000397  001.2 OF 002 
 
 
¶1. (SBU) Summary:  Cuban President Raul Castro visited Moscow from 
January 28 to February 4 in an effort to boost trade ties and 
rejuvenate relations with Russia.  Despite some exercises in 
Communist-era nostalgia, experts were quick to downplay any 
anti-U.S. angle to the trip.  Medvedev and Castro signed a number of 
agreements to establish joint ventures in various areas of economic 
activity, including automobile manufacturing and energy cooperation, 
although energy experts were quick to discount the oil agreements. 
Additionally, Cuba will receive over USD 350 million in loans and 
aid, which are contingent on purchasing Russian goods and services. 
Prior to Castro's visit, DPM Sechin negotiated a number of economic 
agreements with the Cuban government, continuing his role as the 
frontman for this vanity foreign policy.  End summary. 
 
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Despite Communist-Era Nostalgia, Visit Not Anti-U.S. 
--------------------------------------------- ------- 
 
¶2. (SBU) On a January 28 to February 4 visit to Moscow, Raul Castro 
and Dmitriy Medvedev signed at least 24 documents on mutual 
cooperation, capping recent Russian efforts to revitalize its 
relationship with Cuba.  This was the first high-level Cuban visit 
to Russia since 1985.  Despite some exercises in nostalgia, such as 
when Castro ate "salo" (bacon lard:  a delicacy) at the former 
Politburo hunting lodge in Zavidovo, a place he last visited in 
1984, analysts were quick to discount any anti-U.S. angle to the 
trip.  They instead focused on practical steps taken by both sides 
to boost economic cooperation.  They pointed out that, despite FM 
Lavrov's statements made in Prensa Latina ahead of Castro's visit 
that Russia would press for the lifting of U.S. sanctions against 
Cuba, no new Russian initiatives toward this end have been 
undertaken. 
 
¶3. (SBU) Director of the Latin America Institute Vladimir Davydov 
said that any gestures of support for Cuba against the United States 
have always been merely symbolic.  This trip, he said, "should 
dispel concerns that Russia was reviving ties with Cuba to spite the 
United States." 
 
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Increased Trade Sought 
---------------------- 
 
¶4. (U) In a January 30 press conference, Medvedev said that 
Russian-Cuban bilateral trade stood at USD 239 million, with Cuba 
representing 0.05 percent of Russia's foreign trade, while Russia 
accounted for 2.2 percent of Cuba's.  Medvedev claimed this level of 
trade was "absolutely not the kind of level that can satisfy our 
countries," and said steps must be made to implement agreements the 
two countries signed. 
 
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Joint Ventures Announced 
------------------------ 
 
¶5. (U) Medvedev and Castro signed documents establishing numerous 
joint business ventures.  After several months of negotiations, 
Russia's largest truck producer, KamAZ, will not only sell its 
trucks to Cuba, but also establish an assembly plant with Cuba's 
Tradex.  Aeroflot and Cubana de Aviacion will also establish a joint 
venture.  The United Shipping Company and Sovcomflot, Russia's 
largest shipping company, are also considering joint projects with 
Cuba. 
 
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Energy Cooperation 
------------------ 
 
¶6. (U) According to press reports, Russian power producer Inter RAO 
UES reached an agreement with Cuba's Union Electrica to set up a 
joint venture for thermal and hydropower generation, and to build a 
600 megawatt thermal power plant in Cuba.  (Note:  Hurricanes in the 
fall of 2008 badly damaged Cuba's power grid, and the joint ventures 
with Russia will help Cuba meet some of the continuing electricity 
generation shortfall.)  The press speculated that, because most 
Cuban power plants use oil, Russian oil producers may soon get a 
foothold in the Cuban oil and gas sector, including developing 
off-shore resources. 
 
¶7. (SBU) According to TNK-BP International Relations Manager Davlet 
Ovezov, however, there is no agreement.  During the Russian/Cuban 
Intergovernmental Committee's meeting in Moscow, the National Oil 
Consortium comprising Rosneft, Gazprom, LUKOIL, Surgutneftegaz, 
TNK-BP, and Cubapetroleo (Cupet) signed an MOU with specific terms 
and conditions to be stipulated in separate agreements and 
contracts.  There are no definite deadlines set for finalizing the 
contracts, nor there is an indication of each party's share in and 
contribution to the project.  The general idea was to assist the 
 
MOSCOW 00000397  002.2 OF 002 
 
 
Cuban government to develop their sea oil terminals with some 
involvement in Cuban upstream/downstream.  It is also said that 
extension of the co-operation framework to include some "third 
parties from the Caribean" in addition to Cuba and Russia is being 
discussed.  A Conoco-Phillips representative" told us that Lukoil 
was not serious about any of the Cuba initiatives because the terms 
and economics of proposed deals were "terrible."  (Note: 
ConocoPhillips is Lukoil's strategic partner and owns 20% of the 
company.) 
 
----------------------- 
Aid And Loans Doled Out 
----------------------- 
 
¶8. (U) In a boost to Russian exports,  Castro reportedly negotiated 
state loans at below market interest rates worth over USD 300 
million to buy and/or lease Russian agricultural, construction, and 
other equipment, including a Tu-240SE transport plane.  (Note:  This 
is in addition to three Tu-204 and three Il-96 civilian planes Cuba 
acquired under a loan negotiated in September 2006.)  Cuba will 
spend USD 20 million of this new loan to repair and purchase spare 
parts for military equipment it purchased from the Soviet Union. 
Additionally, Russia has pledged to donate two batches of grain of 
25,000 and 100,000 metric tons, worth USD 37 million, to Cuba to 
alleviate the food shortage there. 
 
------------------------------------ 
Deals Signed Before Castro's Arrival 
------------------------------------ 
 
¶9. (U) On January 23, Deputy Prime Minister Igor Sechin negotiated a 
series of economic cooperation deals with Cuban government officials 
in Moscow.  A Gazprom-led consortium created in 2008 to develop 
Venezuela's gas and oil fields signed a cooperation agreement with 
Cuba Petroleo to jointly work on exploration, production, and 
refining.  Norilsk Nickel agreed to fund exploration of ore reserves 
in Cuba, with the prospect of mining them in the future.  Carmaker 
AvtoVAZ signed a deal to service its cars in Cuba.  In addition, 
agreements were signed to jointly work on developing vaccines and 
cooperate on telecommunications. 
 
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COMMENT 
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¶10. (SBU) As some Moscow-based oil company executives confided to 
us, the modest trade and investment deals that sprung from Castro's 
Moscow trip were motivated more by political considerations than 
purely economic reasons.  In addition, since the loan proceeds that 
Castro secured are contingent on Cuba buying Russian goods and 
services, Russia is not only extending a helping hand to Cuba, but 
also boosting its own exports at a time when global demand for much 
of what Russia produces is sliding.  DPM Sechin's extensive role in 
mid-wifing the Russian-Cuban relationship likely reflects PM Putin's 
personal interest in reasserting a Russian presence in the Western 
Hemisphere.  Although this vanity political project carries a 
moderate price tag, as the economic crisis in Russia intensifies, 
the appeal of proving Russia's reemergence in the far-flung corners 
of the former Soviet empire may be less than anticipated.