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PP RUEHAST RUEHDBU RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM RUEHTRO
RUEHVK RUEHYG
DE RUEHMO #0842/01 0921207
ZNR UUUUU ZZH
P 021207Z APR 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 2694
INFO RUEHYG/AMCONSUL YEKATERINBURG 3529
RUEHVK/AMCONSUL VLADIVOSTOK 3176
RUEHLN/AMCONSUL ST PETERSBURG 5290
RUEHCP/AMEMBASSY COPENHAGEN 1649
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RHEHNSC/NSC WASHDC
RUEAEPA/HQ EPA WASHDC
RUEHC/DEPT OF INTERIOR WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDC/NOAA WASHDC

UNCLAS SECTION 01 OF 05 MOSCOW 000842 
 
AIDAC STATE FOR USAID/E&E A/AA YAMASHITA, BREWER, ROBINSON AIDAC 
STATE FOR USAID/EGAT/ESP/GCC 
STATE FOR OES/STC, OES/PCI, EUR/ACE, EUR/RUS, EUR/PGI 
STATE FOR OES/EGC 
STATE PASS TO NASA 
INTERIOR PLEASE PASS TO USFWS 
OSTP FOR MARBURGER, RUSSELL 
COPENHAGEN FOR ERIK HALL 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGQ EAID, TSPL, OSCI, KGHG, ENRG, SENV, KSCA, RS 
SUBJECT: Engaging Russia on Climate Change - Untapped Opportunities 
 
REF: A. 08 MOSCOW 3673 
 ¶B. MOSCOW 438 
 ¶C. 08 MOSCOW 3693 
 
MOSCOW 00000842  001.2 OF 005 
 
 
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SUMMARY 
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¶1. In response to State, USAID, and DOE discussions over the future 
direction of the Global Climate Change (GCC) and Clean Energy 
Initiative programs in the Europe and Eurasia region, Post's 
Assistance Coordination Working Group has reviewed potential 
approaches to engage Russia.  As the country with the third largest 
emissions of CO2 from fossil fuels, the world's largest forest 
resources, the largest natural gas reserves, and one of the least 
efficient energy production and consumption systems, Russia can make 
a substantial contribution to addressing GCC.  However, it faces 
technological shortcomings and political obstacles stemming from the 
country's continued economic dependence on hydrocarbon exports. 
Post proposes exploring targeted engagement with Russia on (1) clean 
energy, including energy efficiency, (2) sustainable management of 
forests and affected ecosystems, and (3) policy coordination and 
science cooperation.  Progress on GCC issues would benefit from a 
renewed bilateral cooperation structure that provides high-level 
political blessing and regular review of progress.  With modest 
resources the USG could help shape Russia's response to GCC and 
expand channels of cooperation.  Post welcomes Washington 
recommendations and further discussions on how best to engage Russia 
on GCC.  END SUMMARY. 
 
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Why Engage Russia on Global Climate Change? 
------------------------------------------- 
 
¶2. RESOURCES: Russia is the world's second largest oil producer 
after Saudi Arabia.  Following the collapse of the Soviet Union, 
Russia's oil output fell sharply, but rebounded significantly in the 
early 2000s.  Oil production dropped in 2008 for the first time in a 
decade and is forecast to drop again in 2009.  Russia has the 
largest natural gas reserves in the world and is the largest natural 
gas exporter.  Until the recent financial crisis, rising electricity 
consumption had increased natural gas consumption.  Russia has the 
second largest amount of recoverable coal reserves in the world, and 
the Russian Energy Ministry is optimistic about future growth in 
coal use.  Since Russian coal is predominantly dirty, burning it at 
power stations greatly contributes to CO2 emissions.  Introduction 
of clean coal technologies is vitally important as coal continues to 
play a key role in the Russian energy mix. Russia's forest 
resources, which cover 22 percent of the world's forested areas, 
also represent one of the world's largest potential carbon sinks, if 
managed and measured appropriately.  These resources make Russia a 
huge factor in the GCC equation and also grant the country some 
financial capabilities that can be focused, especially given the 
country's scientific capacity, to address the challenge. 
 
¶3. ENERGY INEFFICIENCY: Russia is one of the least efficient users 
of energy in the world, due in part to its inherited Soviet-era 
capital stock and system of continued government subsidies.  A 
September 2008 World Bank study grabbed headlines with its findings 
that Russia can save 45 percent of its total primary energy 
consumption, and that Russia's current energy inefficiency is equal 
to the annual primary energy consumption of France.  Given this 
situation, the GOR recognizes it can benefit from relatively cheap 
efficiency gains.  Currently, natural gas prices are kept at low, 
regulated levels.  In 2007, the Russian government instituted a plan 
to transition industrial consumers to market prices for gas by 2011, 
in hopes of encouraging energy efficiency.  President Medvedev has 
rolled out several green initiatives, including hosting a June 2008 
conference to discuss sustainable environment and energy efficiency 
and signing a decree in June 2008 calling for new laws to create 
energy-efficient technologies and setting a goal of increasing the 
country's energy efficiency by 40% by 2020 (ref C).  Unfortunately, 
 
MOSCOW 00000842  002.2 OF 005 
 
 
we understand that the economic crisis has derailed many of these 
plans.  The government has continued to increase natural gas prices 
despite the economic crisis, but the deadline for market pricing is 
once again up for debate, and may  be delayed even as the market 
price continues to drop closer to the subsidized price. 
 
¶4. A major portion of Russia's greenhouse gas emissions comes from 
flaring of natural gas by Russian oil companies.  These companies 
are forced to flare due to Gazprom's refusal to allow them access to 
the natural gas transport system. Estimates of gas flaring range 
from 390 Bcf (RosStat) to 2,400 Bcf (US National Oceanic and 
Atmospheric Organization), or 11-70 Bcm; roughly 25% of production. 
The government of Russia has called on oil companies to reduce their 
gas flaring by 95% and GazpQm to allow oil companies access to its 
pipeline network so that associated gas from oil wells could be 
captured and sold, rather than being burned away.  However, 
government-owned Gazprom has thus far refused to comply. 
 
¶5. RUSSIAN POSITIVE MOTIVATION: Russia will be one of the first and 
greatest victims of climate change and is now in a position to be 
motivated to tackle GCC.  A November 2008 report from Russia's lead 
scientific agency on climate change issues, the Federal Service for 
Hydro-meteorology and Environmental Monitoring (Roshydromet) (ref 
A), warns that GCC will have a disproportionate effect on Russia 
because of its geographic position.  A rise in Arctic temperatures 
will endanger infrastructure that is built on permafrost.  The water 
supply in the south, critical to agricultural production, will 
suffer due to changes in rainfall patterns.  Climate trends could 
increase the spread of certain vector-borne diseases, negatively 
affecting human health.  Droughts could increase the risk of forest 
fires in some regions, and other parts of the country could see 
significant increases in flooding along rivers. 
 
¶6. Another potential motivator for Russia is cracking down on lost 
tax revenue from illegal logging, which would indirectly help GCC by 
preserving more of Russia's forests.  Russia is a particularly large 
source of illegally harvested timber, much of which is then 
illegally exported into China, eventually making it into the United 
States and other developed countries in the form of finished wood 
products.  Russia's forests act as a carbon sink and thus directly 
affect global climate. 
 
¶7. OBSTACLES:  Russia's economic dependence on the export of fossil 
fuels and the entrenched interests of Russia's fossil fuel 
industries are among the greatest obstacles preventing Russia from 
embracing efforts to combat climate change.  In many cases, internal 
political deadlocks have prevented Russia from making progress on 
its most important GCC problems.  For example, efforts to tackle 
Russia's greenhouse gas emissions must involve the country's largest 
methane emitter and its largest corporation, Gazprom.  The gas 
monopoly has cooperated with EPA, though only on a small scale, to 
share best practices on reducing methane emissions, and cooperation 
could be expanded.  But making a significant dent in emissions from 
natural gas flaring will require sustained political will and 
internal efforts on the part of Russia's federal government. 
 
¶8. Significant constituencies in Russia's scientific and policy 
communities still dispute the evidence of climate change, while 
others argue that Russia will actually benefit from warming trends. 
However, Dr. Yuriy Izrael, from 2002 to 2008 a vice-chairman of the 
Intergovernmental Panel on Climate Change (IPCC) and one of the lead 
authors of the Roshydromet report on climate change, told us in a 
December 2008 meeting that the evidence of climate change is clear, 
and that a high degree of confidence exists that human activity has 
been its primary cause since the mid-20th century.  That scientific 
certainty, however, has not yet made its way to all parts of the 
Russian government structure and populace. 
 
--------------------------------------------- 
Three Opportunities for Technical Cooperation 
--------------------------------------------- 
 
 
MOSCOW 00000842  003.2 OF 005 
 
 
¶I. Improve Energy Efficiency in Domestic Operations and the Energy 
Supply System: 
 
¶9. Clean energy and energy efficiency are of keen interest to a 
range of Russian local, regional, and national institutions and are 
areas where the USG has programmed on a small scale in the past with 
good success.  USG implementing partners have established 
relationships with a range of national, regional, and local entities 
on energy-related issues.  With appropriate technical assistance, 
these organizations could serve as a basis for advancing a number of 
USG policy, technological, and resource management issues in Russia. 
 As one example, regional and municipal governments have been active 
participants in USAID's Community Development Support Program (CDSP) 
which encourages improvement of local resource management through 
energy efficiency projects. 
 
¶10. There are several areas where the USG could increase efforts, 
contingent upon additional resources: 
 
a) Encourage the development of energy-efficiency policies in 
cooperation with local governments and the Ministry of Regional 
Development. 
 
b) Encourage strengthening of energy-efficient building standards. 
Commercial, residential, and public buildings account for more than 
50% of the country's total energy usage.  Russia's progressive 
efficiency standards will also need to be reauthorized soon in order 
to remain in force beyond 2010. 
 
c) Encourage new legislation establishing efficiency targets for 
heat generation facilities and distribution networks.  Nearly 70 
percent of the heat supplying Russia's buildings is generated by 
large and inefficient centralized district heating systems.  New 
legislation should mandate the installation of meters and 
temperature controls in buildings so that utility bills reflect 
actual energy use. 
 
d) Engage local and regional government on energy efficiency 
policies, practices, technologies, financing structures, and 
demonstration projects which raise community awareness and reinforce 
existing democracy programs. 
 
e) Develop partnerships with the private sector and Russian 
government agencies to address natural gas leakages during 
transportation, the excessive flaring/venting of gases, and 
re-injection technologies. 
 
f) Provide technical assistance to explore renewable energy sources, 
including the largely untapped hydropower potential of numerous 
rivers, geothermal energy, biomass production in agricultural 
regions, wind on the sea shores, and solar energy applications in 
the south. 
 
g) Provide technical assistance in development of a domestic 
cap-and-trade system.  The Russian Minister of Energy supports the 
idea of such a system among power plants to facilitate energy 
efficiency, and the government may be receptive to cooperation on 
design and development of a Russian system. 
 
II. Enhance Sustainable Management of Forest Resources and Affected 
Ecosystems: 
 
¶11. Given Russia's vast forest resources and fragile Arctic habitat, 
there are significant opportunities to cooperate, exchange 
knowledge, and improve forest and natural resource management 
practices in Russia.  In response to a Congressional directive, Post 
has made a modest contribution to the GCC earmark in the past 
through USAID/Russia's work with the U.S. Forest Service (USFS) to 
promote sustainable forest management in parts of the Russian Far 
East and Siberia.  USAID also partners with the Russian Federal 
Forest Agency and the Russian Ministry of Natural Resources to 
address fire management, illegal logging, and watershed management, 
 
MOSCOW 00000842  004.2 OF 005 
 
 
which directly relate to climate change.  Large portions of the 
Russian Far East remain under threat from illegal logging and 
ineffective resource management. 
 
¶12. Initiatives the USG could pursue in this area include: 
 
a) Scale up limited forest management efforts throughout the Russian 
Far East in partnership with Russian NGOs and the Russian Forest 
Agency to improve forest management, increase public awareness about 
resource management, and reduce illegal logging. 
 
b) Explore options for adaptation and mitigation through sustainable 
woody biomass utilization.  In addition to offering significant 
social benefits to local communities, woody biomass utilization 
would result in reduced greenhouse gas emissions and atmospheric 
concentrations of greenhouse gases through substitution of fossil 
fuels and provision of "carbon neutral" energy. 
 
c) Provide technical assistance to forestry agencies on carbon sink 
accounting to ensure that Russia accurately measures forest 
resources in relation to carbon trading. 
 
d) Develop public-private partnerships to address illegal logging 
practices in the Russian Far East, Siberia, and along the 
Russia-China Border. 
 
III. Step up Policy Coordination, Information Exchange, and 
Capacity-building: 
 
¶13. Sustainable policy and technical cooperation on GCC, as in other 
issues, is hampered by the stifling top-down nature of Russia's 
bureaucracy, combined with a tendency to read U.S. designs as taking 
advantage of perceived Russian weakness.  After the 2000 end of the 
Gore-Chernomyrdin Commission, cooperation in many areas dwindled to 
a trickle or ceased because of the lack of a political 
superstructure for high-level blessing and regular progress review. 
The Russia-U.S. Climate Change Policy Dialogue Working Group, 
launched in January 2003, has not met since 2005, although certain 
projects under the Dialogue continue.  Progress on GCC issues would 
benefit greatly from a renewed cooperation structure, such as a 
bilateral interagency task force on Russian climate change issues. 
 
¶14. Enhanced U.S.-Russia technical cooperation on global climate 
change could provide substantial benefits to both countries in areas 
including technologies and practices to reduce greenhouse gas 
emissions, improved monitoring and management of international 
ecosystems and the Arctic, the development of Russia's carbon 
accounting capacity, and improved coordination in the development of 
policies.  Such cooperation would also more generally strengthen the 
U.S.-Russia dialogue on climate change in the run-up to and 
following the United Nations Framework Convention on Climate Change 
(UNFCCC) COP-15 in Copenhagen in December 2009.  Russian Academy of 
Sciences (RAS) President Yuriy Osipov agreed with Ambassador Beyrle 
on February 17 that bilateral science cooperation should be 
increased to a more robust level (ref B), proposing joint work on 
natural sciences, environment and climate change, energy efficiency 
and renewable energy, among others.  The Russian Energy Ministry 
announced in January that the Russian government plans to invest in 
research and infrastructure for water, heat, solar, and wind power, 
as well as attract private funds to industry that could provide a 
basis for joint activities with the United States. 
 
¶15. In the areas of policy coordination, information exchange and 
capacity building, the USG could increase engagement in a number of 
areas including: 
 
a) Arctic monitoring issues such as ocean observations, especially 
of trends in ocean temperature and changes in ecosystem structure in 
a warming ocean; efforts to quantify current values and detect 
future trends in methane emissions from thawing permafrost, shallow 
Siberian lakes, and shallow gas hydrate fields in the coastal Arctic 
Ocean; and enhancing atmospheric observations at the Tiksi 
 
MOSCOW 00000842  005.2 OF 005 
 
 
Observatory and expanding this effort to other sites in Russia. 
 
b) Bilateral expert-level discussions on methods of adaptation, 
including cooperation in design and development of financing 
mechanisms for adaptation vital to many of Russia's small 
communities. 
 
c) Addressing shared resource management challenges in the Arctic 
stemming from climate change, including: threats to the 
Alaska-Chukotka cross-border polar bear population and other 
migratory endangered species, coordinated standards of shipping in 
Arctic seaways, and coordinated fishery regulations. 
 
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COMMENT 
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¶16. Climate is one area where the Russian Federation and the United 
States often share similar viewpoints and, potentially, objectives. 
Global progress on climate change cannot happen without Russia's 
participation; even modest changes in Russian practices can have a 
significant impact globally.  Agencies at post and in Washington are 
well-positioned to more actively engage Russia, building on past 
work in the areas of clean energy, forest management, and science 
cooperation to move Russia towards bilateral partnerships and joint 
ventures, joint science, public-private collaboration, new 
technology, and financing.  U.S. policy and technical cooperation 
can bring our positions closer in international GCC negotiations, 
catalyze new observations and science, and facilitate better use of 
resources to most effectively address GCC.  Post requests guidance 
from State, USAID, EPA, DOE, NOAA, USFWS and other agencies on how 
best to capitalize on this opportunity. 
 
BEYRLE