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DE RUEHMO #0861/01 0931522
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O 031522Z APR 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2734
INFO RUCNCIS/CIS COLLECTIVE IMMEDIATE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
RUEHXD/MOSCOW POLITICAL COLLECTIVE IMMEDIATE

UNCLAS SECTION 01 OF 04 MOSCOW 000861 
 
SENSITIVE 
SIPDIS 
 
H FOR CONGRESSMAN MIKE ROGERS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL OREP PINR MARR PARM RS
SUBJECT: SCENESETTER FOR VISIT OF CODEL ROGERS TO MOSCOW, 
APRIL 7-10 
 
¶1. (SBU) Embassy Moscow warmly welcomes your visit to Russia 
next week.  Your trip comes following the first meeting 
between President Obama and President Medvedev in London on 
April 1, which was seen by both sides as very positive and 
reaffirming the mutual desire to "reset" the U.S.-Russia 
relationship.  While Russia cherishes this high-level 
engagement, which it sees as affirming its status as a global 
power, the political establishment has had the wind knocked 
out of it by the economic crisis, with which it is struggling 
to cope.  With the Russian economy contracting rapidly, the 
fiscal accomplishments of the Putin years are quickly being 
erased, and the social compact of economic growth in exchange 
for political stagnation is coming under question. Russia 
again stands at a crossroads.  It is in our interest that 
Russia engage on a new footing with the West, but after ten 
years of sharp policy conflicts that culminated in the 
Georgia war, we need to reinvest in our joint strategic 
interests and rebuild a badly eroded foundation of trust. 
 
Rebuilding U.S.-Russian Relations 
--------------------------------- 
 
¶2.  (SBU) The U.S. and Russia issued two joint statements 
following the Presidents' meeting: A Joint Statement defining 
areas where we will work together to address common 
challenges such as non-proliferation, the economic crisis, 
and  terrorism, while seeking to resolve our differences over 
issues such as missile defense and European security; and a 
Joint Statement committing to negotiate a legally-binding 
follow-on agreement to the START Treaty which expires in 
December of this year.  The latter effort will be the top 
priority this year, as we endeavor to reach agreement on a 
new treaty which will reduce the number of strategic 
offensive arms below the level of the 2002 Moscow Treaty, 
while maintaining a strong verification and transparency 
regime. 
 
¶3. (SBU) Many commentators here have noted the positive "tone 
and spirit" of the Presidents' meeting, and have expressed 
the hope that it would translate into better cooperation and 
concrete actions.  Still, the level of anti-Americanism in 
the official Russian media remains high, and the temptation 
to blame the U.S. for Russian problems, including the 
economic crisis, will persist.  You will have an opportunity 
to ask your Russian interlocutors for their vision of 
U.S.-Russian relations under the new U.S. administration, and 
how best to manage a relationship that will be defined as 
much by cooperation as by competition.  We share an important 
agenda, with on-going cooperation in safeguarding and 
reducing nuclear weapons stockpiles, preventing the emergence 
of a nuclear Iran, countering terrorism, advancing peace in 
the Middle East, pushing North Korea to wind down its nuclear 
program, and working collaboratively in space on projects 
that advance health and understanding of climate change. 
Conclusion of a "123" agreement, set aside after the Georgia 
conflict, could open significant new cooperation and trade in 
civilian nuclear energy and build on our Global Nuclear 
Energy Partnership.  Your interlocutors will also be looking 
for indications that the President will follow through on his 
commitment to assist Russia's accession into the World Trade 
Organization, and may press you for repeal of Jackson-Vanik. 
We do not lack for a positive agenda, but will need to 
rebuild an architecture to our bilateral relationship that 
allows wide-ranging and candid engagement on all issues of 
concern. 
 
The Economic Crisis 
------------------- 
 
¶4. (SBU) The international financial crisis has replaced the 
war with Georgia as the defining issue for Russia's political 
class and the Russian public, with the "real economy" now 
taking a hit -- GDP contracted by 7 percent in the first 
quarter of 2009, following years of robust growth.  The 
crisis actually started in Russia earlier than elsewhere, as 
foreign investors reacted to Georgia by withdrawing capital, 
leading to a collapse of Russia's stock markets.  Capital 
flight accelerated as the global financial crisis deepened 
and, adding to Russia's woes, the price of oil, gas and other 
commodities plunged and the ruble lost nearly 40 percent of 
its value. 
 
¶5. (SBU) The weaknesses in the Russian economy, especially 
its lack of diversification and its dependence on foreign 
capital, were painfully exposed by the end of 2008.  Even 
with growth rapidly contracting, inflation has remained in 
double-digits, complicating efforts to stimulate demand. 
 
MOSCOW 00000861  002 OF 004 
 
 
That said, years of budget surpluses and rising oil prices 
had lifted the country's foreign currency reserves to almost 
$600 billion, third highest in the world, and the government 
has used its strong fiscal position to respond to the crisis. 
 It committed more than $200 billion of its reserves to a 
gradual depreciation of the ruble, which improved 
competitiveness while avoiding the panic that might have 
accompanied a sudden drop in the ruble (a la 1998) and 
another $200 billion in budgetary resources via a substantial 
budget deficit to supply liquidity, recapitalize banks, 
assist corporations, and support social spending. 
Nevertheless, tight credit markets at home and falling demand 
globally are causing continued contraction and increased 
unemployment. 
 
¶6. (SBU) Putin and Medvedev are as close to economic 
modernists as Russia has, holding the line on fiscal policy 
in the face of opposition from liberal and conservative 
forces that want more spending, but disagree on priorities. 
The real debate here is whether to resume efforts to 
modernize, open, and diversify the economy.  The uptick in 
Soviet-era nostalgia and xenophobic violence that has 
accompanied this economic crisis is a reminder of the 
autarkic forces also at play here, who advocate an alternate 
vision of militarization and state intervention. 
 
Tandem Politics 
--------------- 
 
¶7.  (SBU)  A year after Medvedev's election, questions remain 
about Russia's political succession.  As Prime Minister, 
Putin continues to play a major and possibly dominant role. 
Medvedev has yet to prove that he has the wherewithal to 
supersede Putin as the preeminent decisionmaker.  Although 
there have recently been indications of some slight cracks in 
the unanimity between the two camps, there is little daylight 
between them on major decisions or domestic or foreign policy 
issues.  There is intense speculation inside the Moscow 
beltway over whether the economic crisis will hasten 
Medvedev's rise or speed Putin's return to the Kremlin.  Both 
men are polling in the mid-60's, but this reflects a drop 
from Putin's 80 percent approval and a rise from Medvedev's 
40 percent approval rate six months ago. 
 
Key Issues 
---------- 
 
¶8. (SBU) In addition to seeking agreement on a post-START 
treaty and the economic crisis, the key priorities in our 
relationship with Russia are: 
 
-- ECONOMIC DIALOGUE:  Building on the G20 process, economic 
issues offer a way to generate early momentum in the 
bilateral relationship.  Russia seeks to play a responsible 
role in coordinated global efforts to address the crisis and 
to reform the international financial architecture.  In the 
Joint Statement, the two Presidents committed to launch an 
intergovernmental commission on trade and economic 
cooperation and to intensify our business dialogue. 
 
-- IRAN:  Russia has welcomed the Administration's 
willingness to engage in dialogue with Iran, but continues to 
balk at additional sanctions or other "sticks" if Iran is 
recalcitrant.  In the Joint Statement, the two leaders 
recognized Iran's right under the NPT to a civilian nuclear 
program, but stressed that Iran needed to restore confidence 
in its exclusively peaceful nature, and fully implement all 
relevant UN and IAEA resolutions.  Russia 
continues to juggle competing strategic interests as its 
works to prevent Tehran's nuclearization: it has strong 
trade, historical and cultural ties to Iran, values Iranian 
restraint in the North Caucasus and Central Asia, 
anticipates future arms and civilian nuclear energy deals, 
seeks oil and gas cooperation in the Caspian Sea, and credits 
Iran as an important peace process player. 
 
-- MISSILE DEFENSE:  Moscow continues to maintain that a U.S. 
missile defense system in eastern Europe is -- or could be -- 
aimed at Russia, and continues to threaten to deploy Iskander 
missiles in Kaliningrad if the U.S. deployment goes forward. 
Russia expects the new U.S. administration to revisit missile 
defense plans in Europe, and will argue that its offer of 
cooperation at the Qabala radar facility in Azerbaijan was a 
missed opportunity to present a common front against Iran. 
Russia's offer of cooperation was premised on the U.S. 
halting the development of radar and interceptor sites in the 
Czech Republic and Poland.  Russia rejects the physics 
 
MOSCOW 00000861  003 OF 004 
 
 
driving the geographic selection of the two sites, and the 
U.S. decision to provide Poland with Patriot batteries has 
been pocketed as evidence of the "anti-Russian" nature of the 
program.  Since October 2007, we have proposed a number of 
transparency and confidence-building measures to reassure 
Russia, providing extensive technical briefings on the threat 
from Iran as well as on the characteristics of the system, 
showing that it could not be effective against Russia's 
nuclear arsenal.  While Russia is slowly coming to accept 
that the threat of Iran developing a medium-range missile is 
increasing, it continues to oppose U.S. MD plans. 
 
-- NATO/NEIGHBORHOOD:  Although Russia welcomed NATO's 
decision to resume engagement in the NATO-Russia Council 
post-Georgia as a "return to realism," it continued its 
policy of demanding greater cooperation even as it decried 
the security organization as an existential threat to Russian 
security.  Russia continues to strongly oppose NATO 
enlargement, particularly to Georgia and Ukraine, claiming 
that the U.S. promised at the time of German reunification 
that there would be no deployment of Alliance forces 
eastward.  In the Joint Statement, the Presidents agreed to 
explore a dialogue on Medvedev's European Security Treaty 
(EST) proposal, which is less an initiative than an 
expression of Russia's dissatisfaction with existing security 
structures.  While denying that Russia is seeking to 
reestablish a "sphere of influence," Moscow asserts that 
Russia and the former states of the Soviet Union have 
"mutually privileged interests," and have made relations with 
the CIS its top foreign policy priority. Moscow uses this to 
justify its actions in Georgia in August 2008, asserting that 
it has a right to protect Russian citizens 
in countries where it has dispensed passports to former 
Soviet citizens.  While we continue to disagree about 
Russia's actions in Georgia, both Presidents agreed that we 
must continue efforts toward a peaceful and lasting solution 
in the region. 
 
-- AFGHANISTAN:  Russia has signaled interest in playing a 
greater role in efforts to stabilize Afghanistan.  Its 
Special Conference on Afghanistan in MoQw under auspices of 
the Shanghai Cooperation Organization brought together 
countries of the region, international organizations, and 
Europe and the U.S. to address counternarcotics and 
counterterrorism issues.  In February, the U.S. and Russia 
reached agreement to allow transit of non-lethal U.S. 
equipment to ISAF across Russia.  The first shipment of 100 
containers successfully crossed Russian territory to 
Afghanistan in late February, and we expect more to follow 
soon.  Russia has also hinted at the possibility of 
concluding an agreement to allow the transit of lethal 
equipment, but there has been no discussion to date. 
 
-- MIDDLE EAST:  Russia has expressed the intention of 
hosting a Moscow conference as the follow-on to Annapolis, 
possibly this summer.  Russia has been a useful peace process 
partner, playing a positive role in the Quartet, and 
reinforcing U.S. messages in the region.  We have differed in 
the past over the virtues of engagement with Hamas, Damascus, 
and Tehran, with Russia generally having little to show for 
its diplomatic efforts.  Nevertheless, Russia's much improved 
relations with Israel, with whom it now has a visa-free 
regime and a vigorous strategic dialogue, and the presence of 
a pro-Israel lobby at home (tied to the substantial Israeli 
Russian community), has transformed Russia from its 
reflexively pro-Arab stance of Soviet days. 
 
-- DEMOCRACY, HUMAN RIGHTS AND OTHER AREAS OF DISAGREEMENT: 
We have underscored to Russia that our efforts to reset the 
relationship do not mean we will compromise on our commitment 
to democracy and human rights.  Both sides recognize that 
there are areas where we will disagree, but 
our goal is to minimize the harsh exchanges over those 
disagreements that characterized our relationship in recent 
years.  We will continue to differ over issues such as 
missile defense, NATO enlargement, Russian arms sales to 
countries of concern, and Abkhazia and South Ossetia, but are 
committed to finding seek ways to address these differences 
more effectively. 
 
The "Real Russia" 
----------------- 
 
¶9. (SBU) The bright lights and vibrant post-industrial 
economy in Moscow mask the deeper economic problems that 
Russia faces beyond the capital's "beltway."  Your day trip 
to Ulyanovsk region can help put your experiences in Moscow 
 
MOSCOW 00000861  004 OF 004 
 
 
in perspective - the Ministry of Regional Development listed 
this region on the middle Volga as "critical" because of the 
expected problems of crisis-related unemployment.  The 
region's economy is based on Soviet-era giants like the 
Aviastar manufacturing plant (which builds the world's 
largest production airplane) and the UAZ car factory - both 
of which are suffering from the economic slowdown. Politics 
in the region are dominated by the Governor Sergey Morozov, a 
"law and order" administrator from the Ministry of Internal 
Affairs who remains loyal to Putin and his vision for Russia. 
(Morozov once encouraged his subordinates to "work like 
Putin" and his administration sponsored a "Days of South 
Ossetia" festival to show support for the Medvedev/Putin 
decision to recognize the two Georgian separatist regions as 
independent states.) The region remains a ultra-conservative 
region with strong patriotic feelings, flavored by 
Soviet-flavored expectations for government administration of 
the economy. 
 
BEYRLE 
BEYRLE