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RR RUEHAG RUEHDBU RUEHDF RUEHIK RUEHKW RUEHLN RUEHLZ RUEHPOD RUEHROV
RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHMO #1958/01 2111127
ZNR UUUUU ZZH
R 301127Z JUL 09
FM AMEMBASSY MOSCOW
TO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/SECSTATE WASHDC 4401
INFO RUCNCIS/CIS COLLECTIVE
RUEHXE/EASTERN EUROPEAN POSTS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RHEHAAA/WHITE HOUSE WASHDC
RUEHGV/USMISSION GENEVA 5347

UNCLAS SECTION 01 OF 04 MOSCOW 001958 
 
SENSITIVE 
SIPDIS 
 
WHITE HOUSE FOR NSC:MMCFAUL/HSOLOMON 
WHITE HOUSE PASS USTR:CWILSON/MRODHE 
GENEVA FOR USTR MISSION 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN RS
SUBJECT: SECRETARY OF COMMERCE LOCKE'S MEETING WITH RUSSIAN 
MINISTER OF ECONOMIC DEVELOPMENT NABIULLINA 
 
 ¶1. (SBU) Summary.  During a meeting with Russian Minister of 
Economic Development Elvira Nabiullina on July 7 in Moscow, 
Secretary of Commerce Gary Locke stressed U.S. support for 
continued Russian integration into the world economy, 
including WTO accession, and raised several trade issues. 
Minister Nabiullina said that Russia would work in parallel 
on WTO accession and its customs union with Belarus and 
Kazakhstan.  (Note: Two days later, after Secretary Locke had 
mentioned her remarks to a reporter, Minister Nabiullina 
insisted to a reporter that the Russian government's decision 
was to accede to the WTO in a customs union.  However, 
President Medvedev stated at a press conference at the end of 
the same week that acceding separately to the WTO would, in 
his view, be more simple and realistic than seeking to accede 
as a customs union.  End note.)  Secretary Locke and Minister 
Nabiullina looked forward to co-chairing the new U.S.-Russia 
Presidential Commission's Business Development and Economic 
Relations Working Group, and they agreed that each would 
appoint a person to lead this work.  End Summary. 
 
Summit Opens Doors for Further Trade and Investment 
--------------------------------------------- ------ 
 
¶2. (SBU) Russian Minister of Economic Development Nabiullina 
welcomed Secretary Locke on his first visit to Moscow as 
Commerce Secretary and noted their brief conversation the day 
before at the Kremlin.  Minister Nabiullina said that Russia 
values very highly its economic relations with the United 
States.  She noted that trade and investment had expanded 
during recent years but both remained far below their full 
potential.  Trade will be lower in 2009 because of the 
economic crisis and the decline of Russian exports.  She 
expressed the hope that this trend would not continue and 
said that both governments should use this Presidential 
Summit opportunity to further economic cooperation.  Noting 
that Russian companies had recently invested in the United 
States (particularly production ventures), she said that 
Russia now seeks to expand two-way investment.  She admitted 
that Russian investment in the United States was not on a par 
with the volume of U.S. investment in Russia.  She emphasized 
that Russia is interested in joint projects, especially in 
high-tech.  Also, Russian policy is to emphasize innovation 
in technology, and President Medvedev has created a 
commission for investment in innovation, including in energy 
efficiency, aerospace technology, medical and biotechnology, 
information technology and energy--areas in which Russia 
would be interested in developing cooperation. 
 
¶3. (SBU) Secretary Locke expressed his desire to discuss the 
expansion of trade and investment, and he added that 
President Obama and President Medvedev were holding both 
public and private meetings in support of this objective. 
The Secretary stressed (1) that President Obama places 
importance on establishing good relations with Russia and (2) 
that economic cooperation can create stronger political 
relations.  He remarked that Russian companies have excellent 
opportunities to invest in the United States, where there are 
very few restrictions on foreign investment; the United 
States welcomes increased Russian investment.  Many U.S. 
companies are doing business in Russia, a win-win situation 
for people and governments on both sides.  He explained that 
U.S. companies are employing tens of thousands of workers in 
Russia, creating both jobs and a better quality of life. 
Bringing advanced new technologies to market helps Russian 
companies, too.  He recounted a recent conversation with a 
representative of U.S. agribusiness company Cargill, who had 
described the firm's business in processing crops from 
Russian farms for supply to Russian consumers.  Secretary 
Locke expressed satisfaction with the success of U.S. 
companies in Russia, but noted that some are encountering 
tariff, customs and regulatory problems that restrict their 
ability to expand.  He said that to help increase bilateral 
commercial activity, both Presidents asked him and Minister 
Nabiullina to co-chair an intergovernmental Working Group on 
Business Development and Economic Relations that would, in 
part, examine recommendation from U.S. and Russian business 
leaders. 
 
Locke:"Uncertainty Over Russia's Position on WTO" 
--------------------------------------------- --- 
 
 
MOSCOW 00001958  002 OF 004 
 
 
¶4. (SBU) Citing President Obama's Kremlin remarks, Secretary 
Locke said that the United States remains very supportive of 
Russia's accession to the WTO, and looks forward to Russia 
joining by the end of the year.  Referring to Minister 
Nabiullina's St. Petersburg meeting with U.S. Trade 
Representative Kirk, the Secretary expressed the belief that 
accession could bring substantial benefits to Russia, as well 
as to its trade partners. However, Prime Minister Putin's 
June 9 statement had created uncertainty about the path 
forward.  Secretary Locke added that a customs union 
approach, which Russia has indicated its intention to follow, 
would very likely delay things. 
 
Trade Irritants from the U.S. Side 
---------------------------------- 
 
¶5. (SBU) Secretary Locke commented on specific market access 
issues which concern us, including high Russian tariffs on 
farm equipment and off-highway trucks.  He added that a lack 
of access to subsidized bank financing also is hurting sales 
of U.S. agricultural equipment.  He cited Russian 
restrictions on U.S. meat that have been imposed in reaction 
to the H1N1 virus.  He also reminded Nabiullina of Russia's 
commitment to streamline import procedures for information 
technology products that contain encryption capability, 
noting that such products are updated so rapidly that they 
can become outmoded in the time currently required for import 
approvals.  Regarding intellectual property rights (IPR), the 
Secretary said that data for pharmaceutical products must be 
protected.  In the Secretary's discussions with U.S. 
companies in Moscow, they had emphasized progress in 
transparency, but noted that more is needed.  These company 
representatives had expressed their appreciation for Minister 
Nabiullina's help and that of her ministry. 
 
Nabiullina:Parallel Negotiations for WTO and Customs Union 
--------------------------------------------- ------------- 
 
¶6. (SBU) Regarding WTO accession, Minister Nabiullina said 
that Russia's strategic aim had not changed, and that it is a 
priority for Russia to be within the WTO framework.  The 
accession process had dragged out, however, and in Russian 
eyes, the reasons for this were "not in the commercial 
sphere."  She contended that Russia had made a "huge" effort 
to accede, and that its legislation needed for WTO-conformity 
is complete.  She said that it remains Russia's intention to 
accede as soon as possible, and that formation of a customs 
union would proceed in parallel.  In early June, there had 
been significant progress on this front, with Russia, 
Kazakhstan and Belarus agreeing to implement the customs 
union by January 1, 2010.  This task had been established by 
the Prime Minister working together with the President. 
Russia wants to integrate these two goals, she explained. 
President Medvedev had noted during the Kremlin meeting that 
there were two approaches for WTO negotiations, and a search 
is underway for the best way.  She stated that Russia wants 
the quickest way into the WTO, and wants to retain agreements 
already reached with the WTO membership.  Although Russia is 
the only large economy outside the WTO, it si already living 
by the rules of the WTO, she commented. 
 
Economic Crisis Leads to Protectionism Regarding Tariffs 
--------------------------------------------- ----------- 
 
¶7. (SBU) Nabiullina remarked that the economic crisis is 
leading to government steps to support the economy; for 
example, there are "Buy American" measures in the United 
States.  She characterized Russia's steps as quite moderate, 
and said that unlike some other countries, Russia has taken 
no measures regarding investment. (Note: It was not clear 
what Nabiullina may have been referring to here.  End Note.) 
She also said that Russia has taken only limited steps 
regarding tariffs, primarily with automobiles.  Moreover, she 
asserted that these measures are temporary (for only nine 
months) and are justified by the fact that many imports are 
subsidized.  The automobile market in Russia is open, with 
more than fifty percent of demand satisfied by imports. 
Regarding agricultural equipment and off-highway trucks, 
Nabiullina admitted that the GOR is motivated by a desire to 
establish competitive production in Russia.  Many foreign 
companies enter the Russian market through investment, she 
 
MOSCOW 00001958  003 OF 004 
 
 
said, and Russia is interested in having U.S. firms enter the 
market in agricultural machinery and road construction 
equipment production ventures. 
 
Agricultural Machinery Financing is for Manufacturers 
--------------------------------------------- -------- 
 
¶8. (SBU) Regarding state-backed loans for agricultural 
machinery, Minister Nabiullina asserted that the loans in 
question were not government-guaranteed loans to end-users 
(such as farmers), but rather, loans extended by Russian 
banks to Russian equipment manufacturers (who presumably then 
pass along savings to end-users in the form of a lower 
purchase price). 
 
Russian Position on Plant Certifications 
---------------------------------------- 
 
¶9. (SBU) On the subject of the H1N1 virus, Minister 
Nabiullina characterized recent GOR bans on U.S. meat as a 
natural response to protect the health of its citizens.  She 
then called upon Russian veterinary and food surveillance 
service chief Sergey Dankvert.  He noted that Russian food 
imports had grown from 2006 through 2008, a trend which he 
argued shows that Russia's market is not becoming more 
restrictive.  He believes results of U.S.-Russian cooperation 
are smaller than they could be, and cited several reasons. 
One was a lack of integration of U.S. government services; 
there are "three or four agencies" involved in food 
regulation, but an absence of any one person who can be 
responsible for decisions.  He said that he had told the U.S. 
Ambassador that his (Dankvert's) office had better relations 
with U.S. industry than with USG agencies.  Dankvert pointed 
out that at a recent roundtable in Paris, Russian government 
representatives had come to a good understanding with U.S. 
industry, but U.S. government representatives were less open 
to discussion.  Regarding pork, Dankvert asserted that Russia 
has made greater efforts to resolve the issue than the United 
States. 
 
Nabiullina:Legislation on Data Exclusivity 
------------------------------------------ 
 
¶10. (SBU) Responding to Secretary Locke's comments on 
pharmaceutical data protection, Minister Nabiullina said that 
legislation was being prepared that would be adopted and make 
protection of data more effective.  (Note: this was 
notwithstanding her previous comment that Russia's 
WTO-related legislation was complete. End note.) In reference 
to an earlier mention by the Secretary that imported cellular 
phones were being held up at customs, Minster Nabiullina said 
that she had not been aware of the problem but would look 
into it and consider it in the context of WTO discussions. 
 
Irritants from the Russian Side: Anti-Dumping Cases 
--------------------------------------------- ------ 
 
¶11. (SBU) Minister Nabiullina raised two ongoing U.S. 
anti-dumping cases.  First, she said that Russia wanted to 
amend the ammonium nitrate suspension agreement for which the 
Russians felt they had an understanding with the previous 
U.S. administration to resolve this question.  Secretary 
Locke replied that there had been a change in market 
conditions.  Given this, he added, the Commerce Department is 
reaching out to U.S. industry to look for mutually 
satisfactory courses of action. 
 
¶12. (SBU) Second, Minister Nabiullina raised the magnesium 
suspension agreement, noting that the Russian company, 
VSMPO-AVISMA (known as Avisma) is a partner of Boeing.  The 
Secretary stated that, unfortunately, the Russian respondent 
Avisma did not submit the necessary information and, in fact, 
withdrew itself from the case.  Accordingly, we are concerned 
and are at an impasse.  Minister Nabiullina replied that, as 
far as she knew, the information requested of Avisma touched 
on commercially sensitive information that Avisma felt was 
"beyond the framework of usual requirements" for 
transaction-related information.  Secretary Locke said that 
the Commerce Department follows open and transparent 
procedures, and that if Avisma feels that it is being 
required to submit sensitive, non-typical information, the 
 
MOSCOW 00001958  004 OF 004 
 
 
Department would be prepared to discuss the concern. 
Minister Nabiullina requested that a meeting be held before 
the end of July.  (Follow-up: As of July 24, Commerce's 
Import Administration has tentatively scheduled a meeting 
with Russian Ministry of Economic Development representatives 
for August 4 in Washington.) 
 
Science Should Determine Food Safety Decisions 
--------------------------------------------- - 
 
¶13. (SBU) Secretary Locke returned to the subject of food 
standards, commenting that, as the parent of three children, 
he is very concerned about food safety.  He recognized the 
responsibility of each country to have its own food safety 
rules and regulations. In the case of "swine flu," scientific 
studies show no connection between H1N1 and eating pork.  He 
added that the United States appreciates Russia's recent 
removal of restrictions from four U.S. states, and that we 
would be providing additional documentation.  Minister 
Nabiullina said that she agreed that all decisions should be 
based on scientific work.  She had read carefully 
international reports, noting that several countries (i.e., 
not only Russia) still have significant import restrictions 
in place.  Nevertheless, as the process moves forward and 
more information is made available, Russia will review the 
restrictions.  Director Dankvert added that he had received 
about eighty pages of information in English and will try to 
read them, even though a month for translation would normally 
be required. 
 
Next Steps for Working Group 
---------------------------- 
 
¶14. (SBU) Secretary Locke sought Minister Nabiullina's ideas 
about how to move forward after the Business Summit presents 
recommendations.  She expressed hope that the Business Summit 
would be useful and lead to a business dialogue that will 
form part of an "integrated framework."  Her understanding 
was that the U.S. side wanted to include the business 
community in the work of the Business Development and 
Economic Relations Working Group.  Secretary Locke suggested 
that the Working Group should consider the recommendations of 
the U.S. and Russian CEOs who were at the Moscow Business 
Summit.  Nabiullina noted that Russia was planning an 
exhibition in Chicago in the fall, which could serve as an 
occasion for a business dialogue session.  The Secretary 
asked whether Minister Nabiullina wished to designate a 
person to lead Russia's work on the Working Group; she 
suggested Elena Danilova of the Ministry's Department for the 
Americas.  Secretary Locke responded that he was designating 
Acting Commerce Under Secretary for International Trade 
Michelle O'Neill as the U.S. contact point. 
 
¶15. (U) This cable has been cleared by Commerce Headquarters. 
 
 
AGNEW