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OO RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHMO #0895/01 0980755
ZNR UUUUU ZZH
O 080755Z APR 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2798
INFO RUCNCIS/CIS COLLECTIVE IMMEDIATE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
RUEHXD/MOSCOW POLITICAL COLLECTIVE IMMEDIATE

UNCLAS SECTION 01 OF 04 MOSCOW 000895 
 
SENSITIVE 
SIPDIS 
 
H FOR CODEL LEVIN 
 
E.O. 12958: N/A 
TAGS: PGOV PREL OREP PINR MARR PARM PHUM RS
SUBJECT: SCENESETTER FOR VISIT OF CODEL LEVIN TO MOSCOW, 
APRIL 13-15 
 
¶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 welcomed by both sides as reaffirming the 
mutual desire to "reset" the U.S.-Russia relationship.  While 
Russia values 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 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. 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.  Good relations with Russia are 
not an end unto themselves; they are a means to help us 
achieve our most vital national security interests. 
 
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 Russian 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.  Congressional ratification 
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 engagement on all issues of concern -- 
especially those on which we disagree. 
 
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 the fighting in 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.  In short -- a "perfect 
storm," after seven years of steady growth. 
 
¶5. (SBU) The weaknesses in the Russian economy, especially 
its lack of diversification and its dependence on foreign 
 
MOSCOW 00000895  002 OF 004 
 
 
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. 
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 this cushion 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)  Today, a year after Medvedev's election, questions 
remain about Russia's political succession.  As Prime 
Minister, Putin continues to play a major decision-making 
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 friction between 
their advisors and deputies, the two camps, there is little 
daylight between Putin and Medvedev 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. 
 
Other Key Issues 
---------------- 
 
¶8. (SBU) In addition to seeking agreement on a post-START 
treaty and a common approach to the economic crisis, the key 
priorities in our relationship with Russia are: 
 
-- 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 toward 
Iran: while it has no desire to see a new nuclear neighbor, 
it also has strong trade and historical ties to Iran, seeks 
Iranian restraint in the North Caucasus and Central Asia, 
anticipates future arms and civilian nuclear energy deals, 
and needs Tehran's flexibility to permit more oil and gas 
exploration in the Caspian Sea. 
 
-- MISSILE DEFENSE:  Moscow continues to maintain that a U.S. 
missile defense system in eastern Europe is -- or could be -- 
aimed at Russia, and has threatened to deploy Iskander 
missiles in Kaliningrad if the U.S. deployment goes forward. 
Russia hopes the Obama administration will 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 geometry 
driving the geographic selection of the two sites, and the 
U.S. decision to provide Poland with Patriot batteries is 
produced 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 
 
MOSCOW 00000895  003 OF 004 
 
 
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, there is no let-up in the fierce opposition to 
U.S. MD plans. 
 
-- AFGHANISTAN:  Russia has signaled interest in playing a 
greater role in efforts to stabilize Afghanistan.  Its 
Special Conference on Afghanistan in Moscow 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.  The advent of a 
Russian-speaking Israeli Foreign Minister may further 
accelerate this shift. 
 
-- 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.  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 has 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, which for us means more UN, OSCE and EU 
monitors and more frequent discussions among the parties in 
Geneva on ways to reduce tensions. 
 
-- 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. 
 
-- 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 values and 
our commitment to democracy and human rights throughout the 
former USSR.  The challenge is to dissuade Russia from 
viewing our support for these core American values as an 
effort to humiliate or weaken Russia.  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 
the status of Abkhazia and South Ossetia, but are committed 
to seeking ways to address these differences more effectively. 
 
MOSCOW 00000895  004 OF 004 
 
 
BEYRLE 
BEYRLE