VZCZCXRO9047
OO RUEHDBU RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHMO #0946/01 1040931
ZNR UUUUU ZZH
O 140931Z APR 09 ZDK
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2859
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 MOSCOW 000946 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV KDEM ECON EINV PINR RS
SUBJECT: ULYANOVSK OFFICIALS STRESS WESTERN INVESTMENT TO 
VISITING CODEL ROGERS 
 
¶1.  (SBU) Summary.  Congressman Michael J. Rogers (R-MI) and 
Ambassador Beyrle traveled to the Ulyanovsk region on April 9 
for a better understanding of how the economic crisis is 
affecting regional economies beyond Moscow's beltway.  The 
Ulyanovsk administration used the visit to tout its successes 
in bringing foreign investment to the region, highlighting 
Mars factories to produce chocolates and pet food, an 
SAB-Miller brewery, and a new, federally approved 
customs-free zone around one of the city's three airports. 
Tours of the giant Aviastar plant, which is building the 
middle-range passenger/cargo Tu-204 aircraft and built the 
AN-124 Ruslan, the world's largest production cargo hauler, 
and the privately-held Volga-Dnepr air heavy-lift company, 
demonstrated the region's high hopes to expand Soviet-era 
aircraft manufacturing capacity.  Administration officials 
acknowledged that the region faces the daunting challenges of 
managing growing unemployment and falling salaries.  End 
Summary. 
 
¶2. (SBU) The Ulyanovsk regional administration used the visit 
of the Ambassador and Congressman Rogers to emphasize its 
commitment to drawing in Western investment, not only as a 
part of its anti-crisis program, but also as a means to 
prepare the region for post-crisis growth.  Minister for 
Industry Vildan Vinnurov acknowledged the benefits of 
competition and the region's need to make itself attractive 
to investors.  On one hand, that means providing incentives 
for investors, such as the tax breaks and other benefits 
offered to woo Mars to Ulyanovsk.  According to Vinnurov, 
this involves improving the transportation infrastructure and 
access to markets.  In this regard, Deputy Chairman of the 
Regional Government Vladimir Kozin emphasized not only the 
2010 completion of the twenty-year project to build a second 
bridge over the Volga (an engineering marvel and second 
longest in Europe) as a means to relieve the hour-long wait 
and heavy traffic over the Soviet-era 2-lane bridge, but also 
a key link in the federal program for improvement of the road 
transportation corridor between Nizhniy Novgorod and Samara. 
The region also boasts plans for improving the rail network 
and won a federal competition for a tariff-free port zone 
based at the city's Eastern Airport.  Perhaps most important, 
the regional administration has the imagination to see a 
booming industrial zone built on the black earth fields 
around the airport and is investing in the infrastructure to 
make those dreams come true -- despite the shadow of the 
present economic crisis. 
 
An Important Partner for the U.S. 
--------------------------------- 
 
¶3. (SBU) The professionalism and efficiency of the 
Volga-Dnepr company, centered in Ulyanovsk, but with offices 
worldwide, offered evidence of a regional company that "gets 
it" when it comes to the competitive global market of 
international air transport.  The company's comparative 
advantage comes from the unsurpassed lift capacity of the 
firm's 10 AN-124s (providing special services to move 
oversized cargoes for GE, Boeing, LUKoil, and many other 
firms) as well as other transport aircraft.  Company 
President Alexey Isaikin also told the delegation about his 
plans for expanding Volga-Dnepr over the coming years, moving 
into cargo transport markets with new Boeing aircraft and an 
idea of building the AN-124 fleet by buying 40 new aircraft 
(Aviastar, the manufacturer, has indicated that it will take 
a significantly larger order to re-open the line).  He 
discussed the role that Volga-Dnepr plays in supporting U.S. 
military efforts in Iraq and Afghanistan under contract 
through the Air Mobility Command; the firm undertakes an 
average of 40 AN-124 missions per month and more than 300 
missions with their IL-76 transport aircraft.  (The number of 
missions varies widely based on AMC's needs and 
requirements.)  Isaikin's team seemed confident that the 
company would continue to see increased demand for its 
services and was largely unconcerned that revenues from the 
U.S. military operations could one day diminish or even cease 
as the conflict wanes, believing that civilian demand would 
grow to fill the gap. 
 
¶4. (SBU) Volga-Dnepr's future depends far more on the fate of 
the Aviastar factory, particularly its need to replace or 
upgrade existing "Ruslan" AN-124s and expand its fleet. 
Isaikin said that his firm would order 40 new Ruslans from 
Aviastar, if production of that model was resumed at the 
plant.  However, without government support and secure 
contracts for more aircraft, the Volga-Dnepr team have 
concerns that their plans for a modernized version of the 
aircraft might not be realized.  Currently, Aviastar is 
keeping its head above water producing the TU-204 (building 
about one to two planes per month) and doing maintenance work 
 
MOSCOW 00000946  002 OF 002 
 
 
on several models of aircraft, including the AN-124. 
 
A Firm Hand 
----------- 
 
¶5. (SBU) In his presentation, First Deputy Governor Kozin 
gave credit for Ulyanovsk's success in attracting investment 
(claiming that the region took first place in the Volga area) 
to the "wise and far-sighted" team around Governor Sergey 
Morozov.  Morozov, with his roots in the Ministry of Internal 
Affairs, appears to be a "law and order" administrator, yet 
with a pragmatic plan for furthering economic development. 
Indicative of the former aspect, his administration has 
imposed a curfew on youth under 16 between 10 p.m. and 6 a.m. 
and implemented a ban on sale of spirit alcohol after eight 
in the evening.  For the latter, he has taken a no-nonsense 
approach to the economic crisis, forming eight separate 
committees to deal with a host of issues from garnering new 
investment to insuring social stability.  He has spent 
considerable time in Moscow recently, negotiating for greater 
federal support for the region and, to that end, 
demonstrating his commitment to Prime Minister Putin and the 
federal administration.  (Indeed, he was in Moscow during the 
delegation's visit, precluding a meeting with Representative 
Rogers).  Typical of his efforts to gain Moscow's favor, a 
regional contact told us that Morozov had backed a "Day of 
South Ossetia" in February that feted the "ambassador" from 
the separatist region and hosted several cultural acts to 
show his support for Moscow's newest protectorates and the 
decision to recognize the Georgian regions as independent 
states. 
 
¶6. (SBU) Morozov appears to be a man of contradictions.  He 
took special care to support civil society development during 
his first years in office and has directed that his top 
administrators learn to speak at least some English (although 
our host joked that this had yet to be realized). At the same 
time, he has strengthened control over the regional media, 
according to a regional source, and carefully manages the 
political process in the region.  That tendency toward 
micro-management was evident even in the planning of the 
visit, as the administration insisted on approving even the 
list of Open World alumni for a meet-and-greet with the 
Ambassador and Congressman. Indeed, the visit was arranged 
carefully to focus attention on the positive developments in 
the regional economy with little discussion about the 
increasing problems of unemployment (or underemployment) and 
falling salaries. 
 
Comment 
------- 
 
¶7. (SBU) The delegation's trip to Ulyanovsk underscored the 
importance of U.S. and other foreign investment, outside of 
the sometimes scandalous happenings in the more lucrative and 
politically important energy and resource extraction sectors. 
 Ulyanovsk, lacking the natural resources to support those 
types of industries, has focused on attracting industry and 
technology -- with some success.  The care in which the 
administration managed the trip suggests that there is 
certainly more going on in the region, both economically and 
politically, beyond the quick glimpse that the Ambassador's 
and Congressman's daytrip provided, some of which will be 
discussed SEPTEL.  End Comment. 
 
¶8.  (U) Representative Rogers cleared on this message. 
BEYRLE