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Cablegate: Sibbiopharm Agrees in Principle to Commence Ndf Bw Facility

VZCZCXYZ0002
RR RUEHWEB

DE RUEHMO #0829/01 0590628
ZNR UUUUU ZZH
R 280628Z FEB 07
FM AMEMBASSY MOSCOW
TO SECSTATE WASHDC 7743

UNCLAS MOSCOW 000829

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR EUR/RUS, EUR/PRA, AND ISN

E.O. 12958: N/A
TAGS: PARM TBIO RS
SUBJECT: SIBBIOPHARM AGREES IN PRINCIPLE TO COMMENCE NDF BW FACILITY
ELIMINATION PROJECT


THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT
ACCORDINGLY.

1. (SBU) SUMMARY: On February 26-27 a State/Nonproliferation and
Disarmament Fund (NDF) delegation met with Sibbiopharm
representatives to establish the scope and ground rules for an NDF
project to eliminate former biological weapons (BW) building and
equipment at Sibbiopharm's Berdsk facility. The sides agreed to
move ahead with work on buildings 32 and 34. Sibbiopharm officials
said that the firm would need either to retain the production
capacity of Building 33 for future commercial needs or to receive
assistance to expand capabilities at its current production
facility. They offered to provide a preliminary estimate of their
needs during a meeting in Washington March 26. End Summary.

INTRODUCTION
------------

2. (SBU) NDF Senior Adviser Smith began by noting that the NDF is
prepared to proceed with demolishing Building 32, and eliminating
the specialized dual-use equipment in Building 34 and the fermenters
in Building 33. Sibbiopharm agreed in principle to green-field
Building 32 and eliminate the dual-use equipment in Building 34, but
noted that they were not prepared yet to take a decision on Building
33. Smith noted that the NDF believes that it has sufficient funds
to complete work on all three buildings and wants, for reasons of
cost effectiveness, to reach agreement to commence work on all of
them simultaneously.

BUILDINGS 32 AND 34
-------------------

3. (SBU) Sibbiopharm Executive Director Nadezhda Orlova stated that,
while Sibbiopharm is prepared to proceed with work on Buildings 32
and 34, there remain a number of technical problems. Orlova noted
that Sibbiopharm wanted no debris to remain at the site after
Building 32 is demolished that would hinder or raise the cost of
building future infrastructure on the site. She noted that
Controlled Demolition, Incorporated (CDI) (the elimination
specialists which the NDF intends to hire as prime contractor for
this project) would not be familiar with Russian law and regulation.
Further, Sibbiopharm insists that the demolition technology
employed be environmentally friendly. For Building 34, Orlova
required that the non-dual use equipment in the building (i.e. the
electricity, water, and sewage) not be affected by the elimination
project.

4. (SBU) Smith noted that it would principally be CDI's
responsibility to meet local requirements. CDI normally discusses
these requirements with all interested parties, including the
proposed subcontractors and our international partner (e.g.
Sibbiopharm.) He stated that CDI was also responsible for providing
the NDF with the lowest cost concomitant with effective work. He
stated that the two sides should agree in principle that CDI will
have the right to solicit competitive bids from multiple Russian
subcontractors. While Orlova warned that only contractors in the
vicinity of Berdsk and Novosibirsk would be cost-effective, the
Sibbiopharm reps agreed with this principle. Smith pointed out that
any requirements based in Russian law or regulation that would raise
project costs would have to be documented.

BUILDING 33 (AND BUILDING 36)
-----------------------------

5. (SBU) Orlova noted that Sibbiopharm had not considered Building
33 as an object for elimination under the NDF project. Sibbiopharm
currently intended to use Building 33's fermentation capacity for
commercial purposes. Orlova noted that Sibbiopharm's sales enjoyed
30-40 percent growth in recent years. Sibbiopharm currently
produced its products (enzymes for animal feed and food) using
fermentation capacity in Building 36, whose capacity is identical to
that of Building 33. (COMMENT: This was the first discussion of
Building 36 between Sibbiopharm and the NDF. End Comment.)
Sibbiopharm also intended to expand its product line into bioethanol
production. Sibbiopharm currently uses about 56-57 percent of
Building 36's capacity, but at current rates of expansion will
require use of Building 33's capacity in approximately two to three
years. Orlova said that Sibbiopharm could agree to destruction of
the production capacity of Building 33 only if it received
assistance in expanding capacity at Building 36 to meet anticipated
needs.

6. (SBU) Smith noted that the NDF did not have the authority to
provide Sibbiopharm with additional fermentation capability. Orlova
asked whether other State Department resources could address this
problem. Smith stated that, if Sibbiopharm developed a proposal
outlining their commercial requirements, the NDF would look into
whether there is any Department interest in pursuing such a parallel
project. Smith reiterated that, for reasons of cost, the U.S. would
like to eliminate the equipment in Building 33 simultaneously with

the work done in Buildings 32 and 34. Sibbiopharm requested that
CDI provide a detailed description of its proposed destruction
methodology prior to its visit as a basis for soliciting bids from
Russian firms. She noted that previous discussions between CDI and
a proposed Russian firm had foundered because the Russian firm did
not understand CDI's proposed destruction method.

NEXT STEPS
----------

7. (SBU) All participants agreed that the NDF will request CDI to
come to Russia with the objective of seeking bids from Russian firms
for work on Buildings 32, 34, and 33. Recognizing that no decision
has been taken on Building 33, CDI will provide two estimates for
Building 33; one estimate for the work done as part of a project
including Buildings 32 and 34; the second estimate for the work done
on Building 33 as a separate project. Sibbiopharm agreed to review
its commercial requirements for Building 33, and provide by March 26
a preliminary proposal to the NDF as to how it can address its
commercial requirements while going forward with elimination work in
33.

PARTICIPANTS
------------

8. (U) The participant list follows:

U.S. Delegation

Raymond Smith, Senior Negotiator, ISN/NDF
John Conlon, Foreign Affairs Officer, ISN/NDF
Aaron Fishman, Health Officer, Office of Environment, Science, and
Technology, U.S. Embassy to the Russian Federation
Olga Borisova, Health Specialist, Office of Environment, Science,
and Technology, U.S. Embassy to the Russian Federation

Sibbiopharm Delegation

Aleksandr Nikolayevich Krichevskiy, General Director
Nadezhda V. Orlova, Executive Director
Maksim S. Benevolenskiy, Technical Director

This cable was cleared by the delegation prior to departure.

BURNS

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