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Cablegate: Russia: Pending Changes Cast Rosatom As Corporation

VZCZCXYZ0021
OO RUEHWEB

DE RUEHMO #2879/01 1661522
ZNR UUUUU ZZH
O 151522Z JUN 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1265
INFO RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY

UNCLAS MOSCOW 002879

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT ALSO FOR EUR/RUS AND ISN

E.O. 12958: N/A
TAGS: ENRG KNNP TRGY RS
SUBJECT: RUSSIA: PENDING CHANGES CAST ROSATOM AS CORPORATION

REF: 05 MOSCOW 014309

SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY. NOT FOR
INTERNET DISTRIBUTION.

1. (U) SUMMARY. Over the past year and a half, Russia has been
working to restructure its nuclear industry. In a June 8 meeting
with EST, Natalya Klishina, head of the Bilateral Relations Division
in Rosatom's Department of International Relations, clarified what
these changes mean and what other changes are expected. Klishina
said that the laws and decrees that have been passed thus far, such
as the February 5, 2007 "Tunnel Law" and the recent Putin decree on
April 27, are actually phases required to implement one law -- a law
that both makes some fundamental changes to nuclear material
handling and ownership within Russia and sets the agenda for
follow-on changes that must be made to other laws. This cable
reviews the typical phases of Russian lawmaking, discusses this
process in terms of the changes being made within the nuclear
industry, and gives the Rosatom perspective on these changes,
including the intention to convert Rosatom from a government agency
to a state-owned corporation. END SUMMARY.
.
------------------------
Lawmaking, Russian Style
------------------------
.
2. (U) There are three phases to fully implementing a law within
Russia.

-- The parliament is comprised of the Duma (lower house) and the
Federation Council (upper house). The law must pass through three
readings in the Duma, with most negotiation and changes occurring
between the first and the second readings; the third reading is
typically a formality. The Federation Council must then pass it.
It is very rare that the Federation Council would refuse to do so.
The president must then sign it, thereby making the passed bill an
official law. The law's effective date is specified in the
legislation.

-- Next, the Russian president must issue a decree stating that the
new law will be implemented.

-- Finally, the executive branch, also known as the "Federal
Government" or the "Government," issues a resolution outlining a
detailed implementation plan. (NOTE: Not all laws need implementing
instructions or decrees, but there are many laws that are general in
nature -- such as the law on restructuring the nuclear industry --
that require further decrees by either the President or the
government stipulating the details.)

3. (U) This process is already at work in the case of the current
Russian effort to reorganize the nuclear industry. On January 19,
2007, the legislature -- the lower and upper houses together --
passed the bill "On the Restructuring of the Nuclear Industry,"
commonly referred to as the "Tunnel Law," outlining the future legal
changes that are necessary in order to achieve the overall
restructuring, as well as creating the legal basis for the
vertically-integrated holding company Atomniy Energopromyshlennyi
Kompleks (AEK) -- popularly known as "Atomenergoprom" or even
"Atomprom" -- that will act as an umbrella organization bringing
together the various entities involved in the civilian nuclear
sector. The bill was then passed to the president for his
signature. On February 5, President Putin signed the bill that the
legislature passed, thereby making it an official federal law.
Putin issued the Presidential decree "On Restructuring the Nuclear
and Energy Industry Complex of the Russian Federation" outlining
presidential approval on April 23. On May 26, the Federal
Government issued a resolution resolving to implement the
Presidential decree.

4. (U) According to Klishina, the new law stipulates that changes to
parts of at least twelve other laws are expected, although some of
these changes may be relatively minor. She explained that sometimes
when a new law is created, changes need to be made to existing laws,
such as the law allowing the import of spent nuclear fuel; this
required a parallel adjustment to the Nuclear Energy Law to allow
importation to Russia of spent nuclear fuel. The existing laws to
which changes are expected include: Education, Closed Cities, Civil
Code of the Russian Federation, Nuclear Energy, Privatization,
Licensing, Registration of Entities, Law on Land Development, Law on
Privatization of State Ownership, Environmental Protection, Law on
Electrical Energy, and Law on Shareholding Companies. (COMMENT: We
expect that these would follow the same general pattern noted above
of Legislative approval, Presidential decree, and Executive
resolution. END COMMENT)

----------------------------------------
Restructuring: Past, Present, and Future
----------------------------------------
.
5. (U) Klishina said that she does not know who precisely is behind
all the current changes but that the general idea of a restructuring
has been around for years, going back as far as the days when
Rosatom was the Ministry of Medium Machine Building (REFTEL). She
said, however, that it is actually good that reorganization is only
happening now, implying that she thought that such care would not
have been taken if the idea had found traction previously.

6. (U) Klishina said that in the near future, it is expected that
Rosatom as a federal agency will be "going away" and will be
replaced by a 100 percent state-owned "non-profit" company called
Rosatom Corporation. Rosatom Corporation would be the managing
company on behalf of the state. (COMMENT: This is the first time
that a Russian government official has discussed this with Embassy
officials. END COMMENT)

7. (U) Klishina said that the reason behind the restructuring -- in
particular creation of the Atomenergoprom holding company and the
Rosatom Corporation -- is to allow for more flexibility to manage
and conduct business activities, which is not possible when an
entity is a government agency with a long chain of command. She
explained further, however, that there would still be tight control
by the state. Key decisions and commercial contracts will be
subject to government approval and sometimes even approval by the
President. In addition, the federal accounting of nuclear material
and IAEA obligations would still be managed by the Rosatom
Corporation. Finally, Klishina said that Rosatom Corporation will
be held to the obligations of international agreements that have
already been signed by Rosatom as a federal agency.

8. (SBU) As an aside, Klishina commented that it was her personal
opinion that not only should the civilian not be separated from the
nuclear weapons complex, but that it should be preserved as one
entity and remain a federal entity.

9. (U) There have been -- and will continue to be -- a number of big
structural adjustments within Rosatom due to the changes that have
occurred already. The Atomic Energy department (which dealt with
nuclear power plants) and the Fuel Cycle department have now been
combined into one. Three other departments -- Radiation, Spent
Nuclear Fuel, and Decommissioning -- have also been consolidated
into one department.

10. (U) Klishina then outlined the expected chronology for
completing the creation of Atomenergoprom. By July 4,
Atomenergoprom must be created and operative. By autumn, the draft
law on the Creation of Rosatom Corporation will be passed to the
Duma for consideration and should be signed by the end of the year.
The expectation is that by the beginning of next year, the company
Rosatom Corporation will fully exist, and Rosatom as a governmental
agency will cease. She said that all basic decisions will be made
before the election.

BURNS

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