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Cablegate: Russia: Cautiously Biting at the Bit

VZCZCXYZ0006
PP RUEHWEB

DE RUEHMO #5210 3040726
ZNR UUUUU ZZH
P 310726Z OCT 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 4929
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS MOSCOW 005210

SIPDIS

SENSITIVE
SIPDIS

EUR/RUS; EB/IFD/OIA
NSC DPRICE, WARLICK
DEPT PASS TO USTR FOR VERONEAU AND HAFFNER

E.O. 12958: N/A
TAGS: ECON EINV RS
SUBJECT: RUSSIA: CAUTIOUSLY BITING AT THE BIT

1. (SBU) Summary: In recent meetings with Deputy Trade
Representative Ambassador John Veroneau and NSC Senior
Director for Russia Mary Warlick, GOR officials expressed
support in principle for starting Bilateral Investment Treaty
(BIT) Negotiations. In her address to the USRBC October 23,
Trade Minister Nabiullina also expressed support for a BIT.
End Summary.

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D/USTR Veroneau's Meetings and Nabiullina's Public Support
--------------------------------------------- -------------

2. (SBU) D/USTR Veroneau visited Moscow October 22-24 to give
the closing address at the U.S. Russia Business Council's
(USRBC) annual meeting. In October 22-23 meetings with
Deputy Finance Minister Sergey Shatalov and Deputy Trade
Minister Kirill Androsov, Veroneau raised U.S. interest in
negotiating a BIT with Russia. (N.B. A previous BIT was
signed in 1993, but never ratified by the Duma.) Both
Shatalov and Androsov indicated that a BIT would be
attractive to investors from both countries and that the
Russian government was prepared to begin negotiations.
Shatalov added that the old model BITs were no longer
applicable since they did not reflect changes in the Russian
economy over the past decade, e.g., Russia's full currency
liberalization and lifting of capital controls, and a new
treaty would need to be negotiated from scratch.

3. (SBU) In her October 23 remarks to the USRBC, Minister for
Economic Development and Trade Elvira Nabiullina expressed
public support for a BIT. Nabiullina said the U.S. was one
of the few major economies with which Russia did not have
such an agreement and expressed hope that one would be
completed soon.

--------------------------------------------- ------------
NSC Warlick's Meetings: Yes to Negotiations but WTO First
--------------------------------------------- ------------

4. (SBU) During her October 12-14 visit to Moscow, NSC Senior
Director for Russia Warlick raised with senior Russian
officials the possibility of negotiating a Bilateral
Investment Treaty (BIT). Arkady Dvorkovich, Head of the
Experts' Department in the Presidential Administration,
responded that he saw no problem with starting BIT
negotiations. Dvorkovich said that Russia had many such
agreements already and was negotiating still more. That said,
no additional BITs would be concluded until after WTO
accession was complete. He added that the primary
responsibility for BIT negotiations would fall to the
Minister of Trade and Economic Development (MEDT).

5. (SBU) Warlick subsequently met with Max Medvedkov,
Russia's lead WTO negotiator, at MEDT. Medvedkov confirmed
that Russia was prepared to start negotiations on a BIT and
that his office would have the lead. He also confirmed that
it would not be possible to conclude any such agreements
until WTO accession was complete but noted that this was a
policy decision rather than a question of resources. In
fact, as WTO negotiations had progressed he had been able to
reassign personnel to other duties, including OECD accession.
Medvedkov added that Russia had its own model BIT and that
reconciling the U.S. and Russian versions could be
complicated.

-------
Comment
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6. (SBU) The GOR appears ready to resume negotiations on a
BIT, though completion of a WTO agreement is paramount for
the GOR. We recommend that Washington move to the next step
and formally propose such a resumption.
Burns

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