VZCZCXRO9438
RR RUEHCHI RUEHDBU RUEHFK RUEHHM RUEHKSO RUEHLN RUEHNAG RUEHPB RUEHPOD
RUEHYG
DE RUEHVK #0053/01 1170739
ZNR UUUUU ZZH
R 270739Z APR 09
FM AMCONSUL VLADIVOSTOK
TO RUEHC/SECSTATE WASHDC 1126
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION COLLECTIVE
RUEHVK/AMCONSUL VLADIVOSTOK 1229

UNCLAS SECTION 01 OF 02 VLADIVOSTOK 000053 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PGOV RS
SUBJECT: JAPANESE CARS: FIFTEEN YEARS OF MOSCOW/FAR EAST 
DISAGREEMENT 
 
VLADIVOSTO 00000053  001.2 OF 002 
 
 
¶1.  Summary.  The subject of imported Japanese vehicles has come 
to the forefront in recent months, but it is not a new issue. 
The conflict between Far East residents and Moscow over the 
right-hand drive used cars dates back over fifteen years, and 
has consistently been one of the few social issues that can 
reliably draw protestors in the Far East.  The issue comes to 
the forefront every few years, with authorities framing 
disapproval of Japanese imports in various ways.  The residents 
of the Russian Far East hold steadfastly to their conviction 
that the imports are less expensive and much more reliable than 
Russian-made alternatives and readily take to the streets when 
Moscow makes importing autos more difficult.  The following is a 
brief overview of the decade-and-a-half disagreement over 
imported used cars from Japan. 
 
Legitimizing the Trade 
---------------------- 
 
¶2.  The problem dates back to 1993, when the Kremlin first made 
the decision to ban the import and use of right-hand drive 
Japanese vehicles.  The import business at that time was fairly 
new, and organized crime has muscled aside most of the 
legitimate dealers.  The Kremlin framed the ban as a crackdown 
on organized crime.  When residents throughout the Russian Far 
East staged protests against the ban, the federal government 
reversed its decision.  That was an uneasy time for Russian 
President Boris Yeltsin, who was busy dealing with numerous 
economic, political, and social problems.  The burst of social 
unrest in the Russian Far East apparently was extra trouble the 
Kremlin did not want on its plate at the time. 
 
¶3.  By the early 2000s, the business was mostly legitimate and 
organized crime had largely lost its role in importing Japanese 
cars, and Moscow's efforts to ban the trade needed a new spin. 
Science and Industry Minister Ilya Klebanov revisited the issue, 
stressing what he called the inherent danger of right-wheeled 
vehicles in right-side traffic.  Primorye Duma deputies sent a 
petition to President Vladimir Putin supporting constituents' 
right to use the more affordable and reliable used cars from 
Japan.  For a second time, the Kremlin decided not to press the 
issue, and the motion to ban the autos was put on hold. 
 
¶4.  In 2005, the federal government initiated the development of 
an amended federal road safety statute which specified 
configuration standards for all automobiles used in Russia.  The 
proposed legislation was comprehensive and dealt with many 
aspects of automobile regulation, including licensing and 
registration.  Critics pointed out the fact that it also 
mandated left-side steering wheels -- a clause that would 
effectively abolish Japanese imports.  Authorities also 
announced an increase in import tariffs for foreign vehicles. 
Again, the reaction of RFE residents was to organize a series of 
protests, and the government backed down on the restrictions and 
tariff increases. 
 
Governor's Death -- Blame the Japanese Car 
------------------------------------------ 
 
¶5.  The matter resurfaced just a year later after the death of 
Altai Governor Mikhail Yevdokimov in an automobile accident. 
Federal authorities placed the blame on the driver of a Japanese 
car, pointing out the supposed lack of safety inherent in the 
import.  Many observers voiced the opinion that the driver and 
car were being used as a scapegoat and pointed out that the 
governor's Mercedes had been traveling at 120 miles per hour. 
The new group Svoboda Vybora (Freedom of Choice) organized 
several protests in support of the driver and right-hand drive 
automobiles. 
 
Plans to Bolster Domestic Production 
------------------------------------ 
 
¶6.  It was during those protests that President Putin first 
announced plans to establish foreign auto assembly plants in 
Russia, and attempted to drum up investor support for Lada 
producer AVTOVAZ.  Toyota had been to Primorye in 2003 looking 
into the possibility of establishing a plant there, but 
eventually cancelled the project, saying the Russian Far East's 
market was too small to be profitable.  Several plants were 
eventually set up in Western Russia, but no foreign automobile 
manufacturer took the plunge in the East.  To show their support 
for the Japanese autos, Far East residents organized a campaign 
to collect donations for the purchase of a right-hand drive 
Toyota to be presented to the President as a gift.  The plan was 
to drive the car from Vladivostok to Moscow as a demonstration 
of its reliability, though fundraising proved insufficient for 
the purchase and the idea was never implemented. 
 
Largest Protests Yet 
-------------------- 
 
 
VLADIVOSTO 00000053  002.2 OF 002 
 
 
¶7.  The latest round of protests began in late 2008, when the 
federal government announced its decision to increase tariffs 
for imported cars five years and older by 35 percent. 
Authorities insist that new increases will be in effect for only 
nine months, but few residents believe they will be rolled back 
in October as planned.  Though the tariffs apply to all imports, 
the move in fact serves as a practical ban on Japanese used 
cars.  Motorists and car dealers staged numerous rallies to 
protest the decision, which have now been taking place for 
several months.  The December 21 rally turned violent and 
resulted in large-scale detentions by OMON forces sent in from 
Moscow.  The federal government has pointed fingers at several 
supposed instigators of the unrest, ranging from the CIA to the 
Soros Fund and the Rotary Club.  A government contact recently 
confided to Poloff, however, that "no one actually believes 
that." 
 
¶8.  In response, Prime Minister Putin announced a program aimed 
at replacing demand for Japanese used cars with new cars 
assembled in Russia.  The program includes a federal government 
loan interest subsidy to buyers of new domestically-produced 
vehicles and a 2 million-ruble subsidy to Russian Railroads to 
deliver such cars to the Far East.  Despite the financial 
incentives, RFE buyers remain largely indifferent to the 
Russian-made Ladas, Fords, Chevrolets, KIAs, and Renaults.  So 
far only 20 Ladas -- reportedly for official use by 
municipalities -- have been delivered to the Russian Far East, 
and banks are hesitant to grant loans for new car purchases. 
The Kremlin has also announced plans to establish assembly 
plants in the Russian Far East.  The immediate outcome of the 
recent tariff increase and resulting drop in imports has been 
that, according to local analysts, over 100,000 RFE residents 
involved businesses related to dealing, transporting, and 
servicing Japanese cars have lost their jobs. 
 
Comment 
------- 
 
¶9.  Though Moscow has backed down in the past on its efforts to 
stem the flow of Japanese imports, it is clear that the Kremlin 
does not plan to negotiate on the issue now.  Moscow will likely 
continue its tolerance of protests in the RFE, but will not back 
down.  The project of assembling trucks, vans, and buses in 
Primorye has met with little enthusiasm with locals, and 
Russian-made cars -- even Western brands -- have a bad image 
regarding quality.  If the government does decide to ease up on 
its fight against Japanese cars, it will likely save face by 
allowing the tariffs to expire in October, but not sooner. 
MMILLER