Cablegate: Special Representative Mermoud's July 21 Visit To

VZCZCXYZ0000
PP RUEHWEB

DE RUEHMO #2269/01 2181356
ZNR UUUUU ZZH
P 051356Z AUG 08 ZDK
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 9320
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS MOSCOW 002269

SIPDIS
SENSITIVE

STATE FOR EUR/RUS, EEB/CBA
DOC FOR 4231/IEP/EUR/JBROUGHER
NSC FOR WARLICK

E.O. 12958: N/A
TAGS: ECON ETTC ENRG RS
SUBJECT: SPECIAL REPRESENTATIVE MERMOUD'S JULY 21 VISIT TO
MOSCOW

-------
Summary
-------

1. (SBU) The main themes of Special Representative for
Commercial and Business Affairs J. Frank Mermoud's visit to
Moscow on July 21 were development of Russia's high-tech
sectors and opportunities for official as well as informal
exchanges. Chairman of the Onexim Group investment fund
Mikhail Prokhorov offered a frank assessment of the country's
prospects for becoming a global leader in technological
innovation. He also outlined his own vision for regaining
the country's competitive edge. Presidential Administration
Advisor Arkadiy Dvorkovich presented an overview of the
government's plans for making nanotechnology-related
investments domestically and abroad. Speaking of the
administration's broader goals, Dvorkovich suggested that a
wider array of business and educational exchanges could
multiply Russia's judicial and economic reform efforts. He
also acknowledged Russia's delayed response to the U.S.
proposal on the business-to-business dialogue. Rosatom
Deputy Director-General Nikolai Spasskiy expressed his
support for close cooperation with the U.S. on nuclear energy
issues. He recommended a bold approach in bilateral
cooperation, suggesting that capturing each government's
imagination would be the key to sustaining a mutually
beneficial partnership. End Summary.

----------------------
Prokhorov on High-Tech
----------------------

2. (SBU) Special Representative Mermoud met with former
Norilsk Nickel CEO Mikhail Prokhorov to discuss his support
for the development of high technologies, particularly
nanotechnology, in Russia. Forbes ranks Prokhorov the
world's 24th richest person. In 2007, he launched the
private investment fund Onexim Group with USD 25 billion in
assets, focusing on high-tech investments. He is also a
member of the Government Council for Nanotechnologies.
Despite Onexim's focus on high-tech, Prokhorov is cynical
about Russia's chances to become a world leader. He reported
that during his tenure at Norilsk Nickel, he conducted a
thorough inventory of the scientists working at Russia's
far-flung science institutes, and found only about 300
capable of working on new, marketable technologies. He said
most Russian inventors are very old or very young and have
little or no idea how to bring a product to market,
especially the older inventors. His goal over the next 2-3
years is to bring the 300 scientists he has identified
together in Moscow to work on marketable projects. Prokhorov
warned, however, that Russia has no national market for new
technologies, so innovations must be geared for the world
market.

3. (SBU) Prokhorov was particularly skeptical about the
GOR's plans for Rosnanotech, the state corporation that
received $5 billion to serve as a venture capital fund for
Russian nano companies. Prokhorov said that the GOR "doesn't
get it," and that their goals for Rosnanotech are "patriotic,
not realistic." He thinks it would be necessary for Russia
to capture 5-10 percent of the world market in nanotech to be
competitive, and that this would cost USD 30 billion, six
times what the GOR has invested. He also noted that he had
"heard rumors" that Rosnanotech Director General Leonid
Melamed, who just returned from an official visit to the
U.S., will soon be replaced.

4. (SBU) Prokhorov reported that in 3-4 months he will talk
to Prime Minister Putin to ask about his high tech
development strategy. If the Prime Minister does not have
one, Prokhorov will "create his own." He said the focus of
that strategy will depend on whether the Prime Minister plans
to develop a Russian market, or produce for the world market.
He noted that he considers Russia to have a competitive
advantage vis-a-vis the world market in only a few areas,
such as fuel cells. He added that ecology could be another
area, if Russia's laws weren't so poor in this area.
Regarding U.S.-Russia cooperation in the sector, Prokhorov's
view is Russia "isn't ready." He said that Russia lacks
infrastructure, and is still too closed and concerned about
revealing secrets. He advised that cooperative ventures
should start small, and completely avoid any sensitive
sectors.

------------------------------------

Dvorkovich on Investments, Exchanges
------------------------------------

5. (SBU) Presidential Administration Advisor Arkadiy
Dvorkovich said the nano-technology fund was starting
operations and looking for places to invest not just in
Russia but globally, including in the United States. He
noted that more broadly, Russian companies were looking to
invest in the U.S. and other countries and that one of the
new governments principal economic tasks was to support these
companies overseas. He also highlighted the GOR's interest
in making Moscow an international financial center.

6. (SBU) Dvorkovich explained that the new government's
principal economic reform focus was on judicial reform and
fighting corruption. The GOR would release its plan in the
fall and introduce needed legislation in the Duma. Mermoud
responded that we would look for ways to be helpful.
Dvorkovich said Russia no longer needed financial or even
technical assistance but was interested in the two
governments' facilitating greater private sector Russian and
American interaction, for example, company-to-company or
university-to-university. He was personally involved in
setting up a university partnership between Duke's Fuqua
Business School, of which he was an alumnus, and a business
school in Russia.

7. (SBU) On the U.S-Russia business-to-business dialogue,
Dvorkovich acknowledged that the ball was in Russia's court
but said that the government reorganization was slowing a
response to the U.S. proposal as was the GOR's unfamiliarity
with the proposed format. Russia preferred Intergovernmental
Commissions (IGCs), which it had with many other countries.
Mermoud noted that Commerce had the lead in the USG on this
issue and expressed hope that Dvorkovich would find time to
visit the U.S. in the fall.

---------------------------------
Rosatom's Spasskiy on Cooperation
---------------------------------

8. (SBU) Rosatom Deputy Director General Nikolai Spasskiy
spoke at length on his priorities and his vision for future
cooperation between the U.S. and Russia. He said that there
was "no alternative to working together" and that Russia had
a genuine interest in working with the U.S. nuclear industry,
while maintaining both nonproliferation and security goals.
Spasskiy visualized three bases for cooperation. The first
was a "political dovetailing" based on the St. Petersburg,
Kennebunkport and Sochi meetings between Presidents Bush and
Putin. The second, a "proper legal foundation," which he
defined as the finalizing and approval of the 123 agreement
between the US and Russia. The third was a "business
component," which Spasskiy adamantly declared must be based
on a full-fledged bilateral arrangement between the U.S. and
Russia.

9. (SBU) Spasskiy said that Russia could be of assistance
if the nuclear renaissance actually takes off because, as he
described it, the US would have a deficit in enrichment
capacity to support the new reactors. He also allowed that
Russia could provide new designs for reactors and turbines
and peripheral equipment. But to do this, the 123 agreement
was required. He then made a short statement on the Rosatom
reorganization, basically saying that it was not a finished
product and much remained to be worked out in terms of how
the organization will manage its assets.

10. (SBU) Spasskiy then broached a completely new line of
thought. He said that the key to the future cooperation
between the U.S. and Russia was to start with a "big
project," something that would catch the attention of the
public in both nations as well as their respective
governments. Spasskiy said that it had to be something "big,
attractive economically and feasible." He was quite clear
that "starting small is not the way." He suggested to
Special Representative Mermoud that it might be useful to
compare our visions on what this big project might be at a
meeting in the late summer or fall.

11. (U) This message has been cleared by Special
Representative Mermoud's office.
RUBIN

© Scoop Media