Cablegate: U.S.-Russia Business Front and Center at Sochi

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TAGS: EINV PREL ECON RS
SUBJECT: U.S.-RUSSIA BUSINESS FRONT AND CENTER AT SOCHI
FORUM

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1. (SBU) Summary: During his trip to Sochi on September 16-18
Ambassador Beyrle attended the Eighth International Sochi
Investment Forum (the Forum) where he led a delegation of
U.S. executives at a meeting with the Krasnodar Region and
Sochi officials. He also visited the main venues and for the
2014 Winter Olympics and he met with the rector and students
of the Russian State University of Tourism and Service
(RSUTS). President Obama's message of U.S. interest in
partnership with a strong and prosperous Russia, underlined
by a significant U.S. corporate representation at the Forum,
was well received by the Russian side and met with assurances
from the Governor's office that the Krasnodar region is very
interested in strong partners such as U.S. businesses. This
active interest came as no surprise, given the daunting
infrastructure and development challenges the region faces to
be ready for the Olympics. End summary

2. (SBU) The Ambassador visited Sochi September 16-18 to
attend the Eighth International Sochi Investment Forum,
visited Olympic sites, and met with the Krasnodar Region and
Sochi government administrations, as well as senior
executives of the U.S. companies attending the Forum. During
these meetings the Ambassador reiterated President Obama's
message from the July Summit that the U.S. is seeking an
effective partnership with a strong and prosperous Russia and
stressed the importance and potential of the Russian-American
economic partnership represented by a large U.S. corporate
presence at the Forum this year.

2009 Sochi Investment Forum Highlights
--------------------------------------

3. (U) The Forum in Sochi, held annually and supported by the
Russian Government, is Russia's largest regional event to
present the investment potential of Russian regions. Since
2007, when Sochi won a bid to host the Winter Olympics in
2014, the infrastructure and Olympic construction projects in
Sochi have been a special focus of the Forum.

4. (SBU) This year the plenary session - the central event of
the Forum attended by Prime Minister Putin - focused on
Russia's post-crisis investment strategy and featured an
exclusively U.S.-Russian panel of speakers that included top
Russian officials and senior executives of the largest
Russian and U.S. companies. Sberbank and Avtovaz represented
Russian business at the panel while Morgan Stanley, General
Electric (GE), Texas Pacific Group (TPG) and
PricewaterhouseCoopers spoke on behalf of U.S. business. GE
CEO Jeff Immelt and Morgan Stanley CEO John Mack flew in
specially to attend the Forum.

5. (U) Addressing the plenary session PM Putin said that
Russia was open for foreign investment and attached special
importance to investment projects involving a transfer of
technology to Russia. He singled out the following priority
sectors and projects for foreign investment: 1) development
of transport and energy infrastructure; 2)
telecommunications; 3) digital TV; 4) large regional
infrastructure projects such as the preparation of
Vladivostok and Kazan for the APEC summit in 2012 and the
2013 Summer Universiade; and 5) energy-efficiency projects.

6. (U) PM Putin praised President Obama's decision to scrap
plans for a missile defense shield in Poland and the Czech
Republic and said that it gave him hope that the U.S. would
cancel Cold War-era restrictions on trade with Russia,
including restrictions on the transfer of high technology and
the Jackson-Vanik amendment, as well as assist Russia,
Kazakhstan and Belarus in joining the World Trade
Organization.

7. (U) Despite remaining challenges ranging from transparency
to traffic jams, and the fact that Russia's GDP is forecasted
to fall this year because of the crisis, U.S. business
leaders were upbeat about the prospects of Russia's
resource-rich economy. TPG expressed cautious optimism about
Russia as the fund is looking for opportunities for some $30
billion in uninvested capital, and GE listed Russia among its
priorities confirming its strong interest in partnering with
a leading Russian company in a strategic sector.

U.S. Business Seen as Strong Partner
------------------------------------

8. (SBU) The Ambassador led a group of ten U.S. executives at
a meeting with First Vice-Governor of the Krasnodar Region
Dzhambulat Khatuov, Sochi Mayor Anatoly Pakhomov & Chairman
of the local legislature Vladimir Beketov. The U.S.

MOSCOW 00002520 002.2 OF 002

delegation which included representatives of AmCham, Ernst &
Young, Honeywell, General Electric Energy and Healthcare,
Microsoft, PepsiCo, Science-Technique-Security, Coca-Cola,
and Wal-Mart, expressed a strong interest in exploring
cooperation and partnership opportunities in both Olympic
Sochi and the Krasnodar region, receiving assurances from the
Russian side that the Krasnodar region would like to have
strong partners such as U.S. businesses.

Olympic Challenges
------------------

9. (SBU) An official from the Representative office of the
Sochi 2014 Organizing Committee accompanied the Ambassador on
a visit to Olympic sites on the coast and in the mountains.
Although infrastructure and some venue construction has been
launched in both the coastal and the mountain clusters, it is
obvious that finishing all venues and holding "test" events
by 2012 will be a serious challenge. At a meeting with the
Ambassador, Russian State University of Tourism and Service
Rector Alexander Fedulin echoed such concerns, pointing out a
severe shortage of hospitality industry personnel and hotels
that meet the International Olympic Committee standards.

10. (SBU) Comment: Both the large U.S. corporate presence at
the Forum this year, and the remarkable fact that the plenary
session turned into an entirely U.S.-Russian bilateral
affair, are clear signs of a rebound in the U.S.-Russian
relationship. With its strategic location on the Black and
Azov Seas, its main city - Sochi - hosting the 2014 Winter
Olympic Games, and the administration eager for more foreign
investment, the Krasnodar Region presents enormous business
opportunities for U.S. companies. Given that Russia's
leadership has enormous prestige riding on the Olympics,
active U.S. cooperation and assistance with the project could
solve a host of problems for regional officials, given the
daunting infrastructure and development challenges they face
in the run-up to the Olympics. End Comment.
Beyrle

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