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Cablegate: Far Eastern International Economic Forum Blamed U.S. For

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C O R R E C T E D C O P Y - CHANGE TO PARA 7

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TAGS: ECON EINV ETRD ELTN PGOV PREL TSPA RS CH
SUBJECT: FAR EASTERN INTERNATIONAL ECONOMIC FORUM BLAMED U.S. FOR
PRESENT, LOOKS FORWARD TO FUTURE

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1. (SBU) Summary: Over 500 people from 13 countries and 16
Russian regions attended the Fourth Far Eastern International
Economic Forum. Few high-ranking GOR officials attended. The
low turnout was blamed on the financial crisis. Much of the
forum, entitled, "Russian Far East Development Strategy:
Anti-Recession Guidelines and New Approaches," was devoted to
the bright future for the RFE regions in 15-20 years. During
the forum, the U.S. was blamed for starting the world financial
crisis. While many participants said they heard few new ideas
at the forum, they were nevertheless optimistic for the regions
economic prospects. The Khabarovsk Governor offered to postpone
planned export tariffs on timber products. The Governor of Amur
Region said his region was increasing its gold production and
moving forward with plans for the Vostochniy Cosmodrome. New
markets for Siberian coal in Asia, as well as the damage to the
coal industry caused by the unpredictability of energy prices
were discussed. Transportation infrastructure improvements and
Russia's prospects after the financial crisis ended were also
discussed. Chinese officials urged more cross border investment
and derided corrupt customs officials. One lone protestor was
briefly present at the forum. End summary.

----------------------------------
Economic Crisis Reduces Attendance
----------------------------------

2. (U) Khabarovsk hosted the Fourth Far Eastern International
Economic Forum on September 8-9. Approximately 546 participants
from 13 countries and 16 of Russia's regions attended the forum.
About a quarter of the guests were foreigners. Overall, this
is a decrease from the more than 700 participants who attended
in 2008. Many observers blamed the poor attendance on the
financial crisis. The highest-ranking GOR officials were Deputy
Ministers and Deputy Chairmen of the State Duma, although both
Medvedev and Putin issued statements of support.

----------------------------------
U.S. To Blame For the World's Woes
----------------------------------

3. (U) While speakers at last year's forum blamed the U.S. for
the conflict in Georgia, this year Aleksandr Nekipelov,
Vice-president of the Russian Academy of Sciences, blamed the
U.S. for the world financial crisis. During his 20-minute
speech he discussed the history of the world financial crisis,
arguing "the roots of the economic crisis are in the U.S.
mortgage crisis."

4. (U) Nekipelov traced the history of the financial crisis in
Russia, arguing that the fall of 2008 was the most difficult
time for the Russian economy due to the dramatic decline of oil
prices. The Russian government, he said, did its best to
stabilize the banking sector and continue paying benefits to the
unemployed and retired.

5. (U) Nekipelov posited that Russia's ability to counteract the
financial crisis was underestimated. The ruble's further
devaluation was a risk, as a long term devaluation would likely
result in a capital outflow from Russia. He argued the Russian
economy should be modernized or many economic sectors will be
ruined completely. Nekipelov suggested a moratorium for capital
outflow and other serious changes in Russian policy may be
required. Russia, he said, needed to innovate its economy or it
would continue to rely on the extraction of natural resources.

------------------------
Export Tariffs Postponed
------------------------

6. (U) Khabarovsk Governor Vyacheslav Shport offered to postpone
export tariffs on timber, originally planned to take effect in
2010, for three years for companies involved in timber
processing projects. Shport emphasized that this measure will
stimulate timber processing and increase the stability of the
timber products' regional markets. He also said it was
necessary to coordinate export policy affecting regional timber
companies if effective trade and revenue increases were to be
achieved. Some conference participants pointed out that this
was "too little, too late," as the threat of export tariffs had
already forced many companies to go bankrupt.

------------------
Space Is the Place
------------------

7. (U) Amur Governor Oleg Kozhemyako discussed the bright
perspectives for his region's gold mining, agriculture, and
energy sectors, as well as plans for space launch facilities.

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Currently Amur Region is the fourth largest producer of gold
in Russia, producing 18 tons of gold in 2008. He forecasted
Amur Region would produce 20 tons of gold in 2009 and over 25
tons by 2012. This would make Amur Region Russia's third
largest producer of gold. He also gave a progress report on the
proposed Vostochniy Cosmodrome, saying 18 Russian regions have
expressed their interest to take part in site construction and
infrastructure development.

------------------------------------------
High Interest Rates Damaging Coal Industry
------------------------------------------

8. (U) General Director of Siberian Coal and Energy Company
(SUEK) Vladimir Rashevskiy complained that high interests
charged by banks were an obstacle for the industry's
development. He complained that prices for energy usage charged
by the Federal Energy Commission were not "predictable and
balanced." Rashevskiy also mentioned that SUEK has turned to
Asia to find new markets, as the European market for Siberian
coal has dwindled. Because SUEK can ship coal to Asia only via
rail, the unpredictability of rail shipping prices was also a
problem, he said.

--------------------------------------------
Transportation Infrastructure to Be Improved
--------------------------------------------

9. (U) Deputy Transport Minister Nikolay Lyamov said the GOR
would complete construction of a new line of the Transiberian
Railroad from Berkakit to Yakutia, as well as a new highway from
Yakutsk to Magadan before 2015. From 2016 to 2030 a new
railroad from Yakutsk to Magadan, and from there to Chukotka as
well as Kamchatcka, would be constructed as well. Head of the
Russian Far East Railroad Department Mikhail Zaichenko added
that all railroad infrastructure problems would be solved by
2016.

---------------------------------
Chinese Offer Greater Cooperation
---------------------------------

10. (U) Le Zhanshu, Governor of the Chinese province of
Heilongjiang, said he wanted to see a broadening of investment
cooperation, especially in road and rail construction in the
Russian Far East. He also called for border trading centers and
more cooperation in various forest projects. He also argued
"grey (i.e. corrupt) customs clearance" processes were hurting
cross-border trade.

------------------
Post-Crisis Russia
------------------

11. (U) Director of the National Economy Forecasting Institute
Viktor Ivanter was open in his vision of Russia in the
post-crisis period, arguing that "only devil knows how Russia
will look like when the crisis is over." Ivanter pointed out
that the Russian government took some proper steps and made
correct statements on the crisis, but overall reacted too
slowly. He argued that Russia needed to revise its fiscal
policies, including continuing subsidies for the automobile
industry. Russia's financial institutions want Western money so
they can reinvest in to Western economies because they fear that
money will be stolen in Russia, he argued. According to
Ivanter, the sectors of the economy poised for economic growth
were housing construction, aircraft and rail car construction,
agriculture, the defense industry, and medicine.

--------------------------------------------- --
Excellent Future Will Not Be Ruined By Protests
--------------------------------------------- --

12. (SBU) As forum participants were leaving the conference
center to go to lunch on September 8, a lone man protested
outside by wearing a sandwich board that read "corrupted power
kills me." Plainclothes individuals, presumably police,
relieved the protestor of his placard and forced him to vacate
the conference venue.

--------------------------------------------- -----
Attendees Optimistic, but Have Heard It All Before
--------------------------------------------- -----

13. (SBU) Many participants, including General Director of Regio
Bank Sergey Grebeniuk, said they heard little that was new this
year. Many of the proposed infrastructure improvements and
calls for greater international cooperation were discussed at

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previous fora. Participants nevertheless seemed optimistic that
the worst of the financial crisis was over and economic growth
would improve their lives and business prospects.
ARMBRUSTER

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