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Cablegate: Commerce Secretary Gutierrez in St. Peteresburg,

VZCZCXRO9124
RR RUEHLN
DE RUEHMO #1894/01 1851041
ZNR UUUUU ZZH
R 031041Z JUL 08
FM AMEMBASSY MOSCOW
TO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/SECSTATE WASHDC 8868
INFO RUEHLN/AMCONSUL ST PETERSBURG 4998
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 MOSCOW 001894

SENSITIVE
SIPDIS

STATE FOR EUR/RUS
STATE PASS TO USTR
STATE PASS TO EXIMBANK
COMMERCE FOR 1000/OFFICE OF SECRETARY
COMMERCE FOR 4000/MAC AS
COMMERCE FOR 420O/MAC FOR EUR DAS DYCK
COMMERCE FOR 4231/MAC/ORUE/BROUGHER/EDWARDS
NSC FOR MWARLICK

E.O. 12958: N/A
TAGS: BEXP ETRD RS
SUBJECT: COMMERCE SECRETARY GUTIERREZ IN ST. PETERESBURG,
RUSSIA, JUNE 5-6, 2008

1. (U) On June 6 and 7 in St. Petersburg, Secretary of
Commerce Carlos Gutierrez delivered remarks at the opening
plenary session of the annual International Economic Forum as
well as a U.S.-Russia CEO roundtable, held talks with
Russia's leading economic officials, and led a President's
Export Council delegation in a series of meetings to assess
the Russian market.

2. (U) Responding to the Forum plenary session topic of
"National Economic Interests vs. Global Governance
Institutions", Secretary Gutierrez commented that the
challenge is not globalization vs. national interests.
Instead, he asserted, globalization is in national interests.
If an economy has sustained growth, then
anything is possible. A policy of growth, he said, requires
active participation in the global economy, adding that he
could not think of a single economy that has been able to
grow and create prosperity and jobs through self sufficiency.
He cited estimates that a good Doha Round agreement could
lift 500 million people out of poverty. Noting President
Medvedev's emphasis on innovation, institutions, investment
and infrastructure, he agreed that they are key ingredients
of a growing economy. In conclusion, the Secretary suggested
to the international audience that they have the challenge of
creating opportunity and providing education to enable people
to compete in the international economy.

3. (SBU) In bilateral meetings with First Deputy Prime
Minister Igor Shuvalov, Deputy Prime Minister Aleksei Kudrin,
Deputy Prime Minister Alexander Zhukov, Minister of Economy
Elvira Nabiullina and First Deputy Foreign Minister Andrey
Denisov, the Secretary stressed the openness of the U.S.
market to Russian investors as well as the significant
contributions that American companies are making in the
Russian market. He advocated for progress on Russia's WTO
accession, including completion of Russian commitments under
the bilateral market access agreement regarding data
protection and import licensing of products with encryption.
The Russian officials participating in the Forum all
described plans for completing accession, claiming that all
requirements would be met. Several stressed that Russia could
not solve its problem with Georgia by itself and would need
U.S. support.

4. (SBU) During a briefing for the Secretary and the PEC,
former economic minister and current Sberbank Chairman German
Gref spoke strongly in favor of WTO accession, but also noted
the existence of significant opposition in Russia. He said
that the Ministries of Industry and Agriculture, which were
part of the lobby against WTO accession, had stepped in to
grab trade away from the Ministry of Economy and transfer it
to the Ministry of Industry. Gref had gone to the Prime
Minister and the President, and the decision to move WTO
responsibility had been suspended, although only until the
end of the year.

5. (SBU) Secretary Gutierrez and Minister of Economy
Nabiullina discussed and agreed on most aspects of
establishment of a business dialogue pursuant to the Sochi
Strategic Framework Declaration, including the desirability
of having CEOs meet by September and develop recommendations
that could be presented to ministers at a first meeting of
the Business Dialogue in October in Russia. Assistant
Secretary David Bohigian and Deputy Minister Andrey Belousov
were assigned to complete a joint statement that could be
used to announce the Dialogue during the St. Petersburg
Forum. Bohigan conducted extensive consultations on June 6
and 7, but the Russians were not prepared to agree to a
designation providing accountability on the part of
government officials for hearing and acting upon a business
dialogue's recommendations. During a subsequent meeting,
First Deputy Prime Minister Shuvalov agreed with the
Secretary's position and said he would speak with Minister
Nabiullina, the Prime Minister and the President. (Comment:
As of July 3, it has not been possible to confirm that a
Shuvalov-Nabiullina conversation had taken place, nor had the
Russian side agreed to language that would provide for
accountability by government officials.)

6. (U) Through discussion with Sberbank Chairman Gref,

MOSCOW 00001894 002 OF 002


Secretary Gutierrez and the PEC delegation gained insight
into prospects for Russia's WTO accession as well as plans
for further development of Russia's largest bank. Gref
asserted that, while some Russian banks were affected by the
financial crisis in the United States and had suffered losses
in the first quarter of 2008, Sberbank had earned a profit of
1 billion Euros. He said that Sberbank's capital is now $85
billion, but should reach more than $200 billion by 2014.

7. (U) Secretary Gutierrez and the PEC delegation were
briefed on the new Russian Government by U.S. Embassy
Moscow Charge Dan Russell, and heard St. Petersburg governor
Valentina Matvienko describe her plans for further
development of Russia's second largest city. The PEC
delegation attended the Forum's U.S.-Russia CEO Roundtable
hosted by Russian Union of Industrialists and Entrepreneurs
President Alexander Shokhin, and attended a reception in
their honor with American and Russian CEOs. In a meeting
with Deputy Prime Minister Alexander Zhukov, Secretary
Gutierrez emphasized the capabilities of U.S. companies for
support of preparations for the Sochi Olympics and was
assured by Zhukov that Russia was completely open to
investment and supply of facilities, including for skating
and other events.

8. (SBU) In a briefing organized by the American Chamber of
Commerce in Russia, more than 25 U.S. company
representatives reported impressive growth in the Russian
market. For example, Alcoa Chairman Belda said that his
company's operation should reach profitability by next year,
when sales in Russia would account for 60% of the business.
Conoco's Wallette said that his company had $10 billion
invested in Russia and revenue of $1.8 billion in 2007, or
about 15% of the company's earnings. P&G's Price said that
his company's business in Russia is now equivalent to about
90% of its business in China. Microsoft's Steen said that
Russia was the fastest growing market globally, increasing by
a factor of 9 over 2 years. GM's Gubney reported sales of $3
billion in 2007. Boeing's Kravchenko said that his company
had successfully faced the challenge of showing in Russia
that interdependence is good by pioneering the export of
intellectual property from Russia, including unique software.


9. (SBU) In private conversations with Russian officials,
Secretary Gutierrez raised issues encountered in Russia by
Bank of New York Mellon and TNK-BP. He also met with TNK-BP
President Bob Dudley. Amcham President Andrew Somers told
the Secretary that he found the TNK-BP dispute "disturbing"
and believed that, if the problems were not solved, this
would be the biggest blow to the investment environment since
the Yukos Affair. Secretary Gutierrez was quoted in Russia
media in regards to a solution to the TNK-BP dispute as
saying that the "world community is interested in a
transparent way, free of violations." The Secretary was
accompanied in meetings with Russian officials by Charge
Russell and Assistant Secretary Bohigian.

10. (U) This cable was cleared by Commerce traveling party.
RUSSELL

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