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Cablegate: Istc Governing Board Meeting in Moscow

VZCZCXRO2548
RR RUEHAST
DE RUEHMO #2093/01 2031415
ZNR UUUUU ZZH
R 211415Z JUL 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 9110
INFO RUEHTA/AMEMBASSY ASTANA 0176
RUEHEK/AMEMBASSY BISHKEK 2588
RUEHDBU/AMEMBASSY DUSHANBE 0071
RUEHKV/AMEMBASSY KYIV 0272
RUEHVL/AMEMBASSY VILNIUS 3152
RUEHNY/AMEMBASSY OSLO 1728
RUEHOT/AMEMBASSY OTTAWA 2106
RUEHUL/AMEMBASSY SEOUL 2740
RUEHSI/AMEMBASSY TBILISI 3871
RUEHKO/AMEMBASSY TOKYO 4184
RUEHYE/AMEMBASSY YEREVAN 0514
RUEHBS/USEU BRUSSELS
RUEHAST/USO ALMATY 0005
RUEKJCS/SECDEF WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHDC

UNCLAS SECTION 01 OF 02 MOSCOW 002093

SIPDIS

DEPARTMENT FOR ISN/CTR

VILNIUS PLEASE PASS TO EMBASSY MINSK

E.O. 12958: N/A
TAGS: KNNP PARM TSPL RS
SUBJECT: ISTC Governing Board Meeting in Moscow

1. SUMMARY: At the International Science and Technology Center
(ISTC) Coordinating Committee (CC) and Governing Board (GB) meetings
held in Moscow July 16-17, 2008, the GB approved funding for the
first pilot institute self-sustainability plan. This marked an
important milestone in ensuring that priority Weapons of Mass
Destruction (WMD) institutes become financially self-sustainable.
All parties agreed to press for the Russian Federation to confirm
the tax-free status of the ISTC. Many long-standing issues were
also resolved as the parties worked together to reach agreement on
documents relating to export control, value-added tax (VAT)
repayment, tax exemption, daily rates paid to scientists on regular
projects, and procurement. During the Executive Session
discussions, the parties agreed to begin negotiations on a plan to
gain Russian financial contributions to the Center at the next
Governing Board meeting in December. END SUMMARY.

2. Tax Issue: The parties discussed the issue of Russian repayment
of VAT to the ISTC and the recent Russian decree listing
organizations exempt from tax payments on grants. The GB agreed to
send a letter to the Russian Federation on the issue. The ISTC will
continue to attempt to reclaim VAT paid in recent years and will
explore taking legal action against the Russian Federation if VAT is
not repaid in a reasonable amount of time.

3. Russian Contributions: The U.S. Party, with the strong support
of the Japanese and Canadians, stressed the importance of host-state
(Russian) co-funding to ensure continuing support for the ISTC from
funding parties. The U.S. explained that its Congressional hearings
on the Department of Energy's scientist redirection program had been
very clear on the need for increased cost sharing. The Japanese,
Canadian, and the European Union (EU) delegation also expressed
support for increased Russian contributions. The EU noted that the
Russian Academy of Sciences has recently expressed interest in joint
funding in the EU Framework Program. The Russian Party repeated its
previous position that it makes in-kind contributions by providing
the ISTC building and general support for the Russian institutes at
which the vast majority of ISTC projects are conducted. (COMMENT:
While the funding parties agree that these in-kind contributions
should be counted towards any cost-sharing agreement, the USG view
is that a significantly larger financial contribution is required to
make Russia a true partner and to ensure the Center's long-term
success. The ISTC's annual budget is approximately $100 million
and, at most, these Russian in-kind contributions amount to less
than $4 million. END COMMENT) The parties agreed that the issue
would be formally discussed at the next GB and that the ISTC
Secretariat would prepare a paper on the issue.

4. Institute Self-Sustainability: The funding parties agreed to
provide $500,000 to fund the first pilot institute
self-sustainability plan at the V. G. Khlopin Radium Institute. The
parties discussed the correct maximum size of sustainability plans,
but there was no consensus on U.S. and Japanese proposals to cap
self-sustainability plans at $500,000.

5. Daily Rates: The parties agreed to raise the daily rates paid to
scientists on projects both in Russia and the Commonwealth of
Independent States (CIS) countries, with the maximum daily rate of
$70 for project managers. The new daily rates will be applied to
projects funded at future Governing Board funding sessions.

6. Export Control: After a discussion that included a senior Russian
representative from the Federal Service for Technical and Export
Controls, it was agreed that the Secretariat and the Russian
Federation would continue bilateral discussions before proposing
another document for GB approval on export control, including the
issue of assurances from end users of technology developed during
the course of ISTC-funded projects. The parties also agreed that
all ISTC activities should strictly conform to Russian and
international export control laws.

7. Procurement: In response to Deloitte & Touche's recommendations
for improving procurement practices at the Center, the Secretariat
had submitted a set of procurement rules to the CC meeting. The

MOSCOW 00002093 002 OF 002


funding parties finally reached agreement on procurement rules after
a year of discussions and asked that these new rules be applied to
the procurement of equipment, materials, and services beginning
August 1, 2008.

8. Project Funding: The U.S. committed $168,000 in regular project
co-funding for ISTC Regular Project No. 3849 "Low-Waste
Decontamination."

9. Other Items: The GB approved the nomination of Ms. Anneli Pauli
as the new EU Governing Board Member. The GB welcomed the new
Japanese Deputy Executive Director Mr. Yasuhiro Yukimatsu. Also,
this GB is the first for Adriaan van der Meer as ISTC Executive
Director.

10. Next GB Meeting: The next GB meeting will be held in Moscow on
11 December 2008.

BEYRLE

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