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Cablegate: Russia's Accession to the Oecd

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R 080818Z JAN 10 ZDS
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 8021
RUEHSS/OECD POSTS COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 2148
RUEHTV/AMEMBASSY TEL AVIV 0312
RUEHTL/AMEMBASSY TALLINN 0014
RUEHLJ/AMEMBASSY LJUBLJANA 0562
RUEHNE/AMEMBASSY NEW DELHI 1340
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RUEHSA/AMEMBASSY PRETORIA 1970
RUEHSG/AMEMBASSY SANTIAGO 0007
RUEHSL/AMEMBASSY BRATISLAVA 0016
RUEHGV/USMISSION GENEVA 3070

UNCLAS SECTION 01 OF 03 PARIS 000022

C O R R E C T E D F O R ADDITION OF COUNTRY TAG (RS)

SENSITIVE

SENT FROM US MISSION TO OECD

SIPDIS

12958: N/A
TAGS: ECON ETRD EFIN PREL OECD XG XH RS
SUBJECT: Russia's Accession to the OECD

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REFTEL: 08 State 99736

1. (SBU) Summary: The slow pace of Russia's accession to the
Organization for Economic Cooperation and Development (OECD)
reflects poor internal coordination by the Russian Government and
the significant hurdles that Russia faces in demonstrating
consistency with the OECD's open market principles. Russia's
continued non-membership in the WTO is also a major obstacle. As a
result, the timetable for OECD internal review is likely to be
extended to late 2011 and early 2012. Russia's interest in OECD
membership provides unique leverage points for encouraging Russia to
make domestic reforms and become a more responsible international
actor. Post recommends that the USG use the U.S-Russia Bilateral
Presidential Commission as a vehicle to encourage Russia to stay on
track with the accession process. Guidance is requested on questions
of timing for Committee reviews in areas which would be impacted by
eventual WTO membership. End Summary

RUSSIA LAGS BEHIND OTHER ACCESSION COUNTRIES
---------------------------------------------

2. (SBU) In May 2007 the OECD Council of Member State Ambassadors
invited Russia, Estonia, Slovenia, Israel and Chile to begin the
accession process to become members of the OECD based on a "Roadmap"
which laid out the criteria by which the OECD Council would
eventually asses the countries' willingness and ability to assume
the obligations of OECD membership. The Russian Roadmap (as with
the other accession countries) includes acceptance of the
established body of OECD instruments, standards and benchmarks and a
commitment to fundamental values which include pluralistic democracy
based on the rule of law and the respect of human rights and
adherence to open and transparent market economic principles. In
the case of Russia, the Road Map also stipulates that World Trade
Organization (WTO) membership is considered essential for becoming
an OECD member. (All current OECD members are also members of the
WTO.) Chile completed the accession process in December 2009;
Israel, Estonia and Slovenia are expected to complete the process by
late spring 2010. Russia, however, only submitted its Initial
Memorandum - the first step in the process -- in June 2009.

3. (SBU) In its Initial Memorandum (a 249 page document), Russia
either took a reservation to, requested an unspecified transition
period or refused to adopt certain OECD legal instruments in areas
such as anti-bribery, liberalization of capital markets,
co-production of films, control of trans-border movement of waste,
environment and tourism, tax, fisheries, governance of
multi-national enterprises, national treatment on access to local
bank credit and shipbuilding. (Russia's reservations are discussed
in more detail in septel.) OECD accession candidates (similarly to
OECD members) are permitted to take reservations to most OECD
instruments, but these reservations must be accepted by the
respective OECD subject matter committees - and ultimately by the
OECD Council. The Roadmap notes that rejections and reservations to
OECD instruments should be used as "sparingly as possible."
Transition periods are permitted, but under the same terms - that
they must not nullify the country's willingness and ability to
assume the obligations of OECD membership.

PART OF THE PROBLEM: LACK OF GOR COORDINATION
---------------------------------------------

4. (SBU) Following the presentation of the Initial Memorandum, OECD
committees commenced review of Russia's application, supplementing
the information contained in the Initial Memorandum with extensive
committee-specific questionnaires which Russian authorities were
requested to complete. To date only 5 out of 22 OECD bodies have
done an initial review (see septel for committee-by-committee
analysis) and Russian responses continue to be slow and incomplete -
despite the high-level affirmations of political will. Russia's
Ministry of Economic Development nominally acts as Russia's OECD
accession coordinating authority along with the Ministry of Foreign
Affairs. However, OECD staff members have noticed that the line
ministries - Finance, Health, Environment, etc., ignore requests for
information from their lateral counterparts in Economic Development.
The OECD Secretariat is unsure whether Russia's lackluster
engagement is a result of a lack of capacity or simply reflects
disinterest among the ministries receiving the questionnaires.
Based on experience with other accession countries, the OECD

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Secretariat believes that a better mechanism would be a central
coordinating authority in the Office of the Prime Minister or Deputy
Prime Minister Shuvalov.

WTO MEMBERSHIP - AND OTHER HURDLES
--------------------------------------------- ----

5. (SBU) WTO Membership: The Accession Roadmap calls WTO membership
essential to OECD accession. Given the status of Russia's WTO
accession negotiations, the OECD Secretariat is also becoming
increasingly concerned about the ability of the OECD accession
process to proceed beyond a certain point in certain committees.
This view is shared by members, including the United States. USDels
to the OECD Trade Committee Working Party in December 2009 delivered
the message that the U.S. was not in a position to provide
substantive comments on a market openness review until Russia's WTO
accession process advances. The issue is likely to come up in other
committees such as agriculture, insurance and private pensions, and
possibly banking and finance.

6. (SBU) "Core Values:" While the OECD invitation to commence the
accession process states that invited countries are expected to
share OECD "core values," this can be reviewed at any time during
the accession process (and Russia's respect for core values will be
part of the final evaluation conducted by the OECD Council.) By way
of example, the Russian invasion of Georgia in 2008 was seen by the
USG as calling into question Russia's adherence to OECD norms and
values. The U.S. Delegation was instructed at the time (reftel) to
request that OECD desist from high-level contacts with the GOR
(while continuing with working-level contacts). On Rule of Law
issues, the Secretariat reports that Russia has been sending all the
right signals with regard to adoption of the OECD's Anti-Bribery
Convention, but that it is unlikely to make the March 2010 deadline
for its preliminary review by the OECD's Working Group on Bribery.
At a recent bilateral meeting in Paris (septel) between Russian
First Vice Minister of Justice Aleksander Fedorov and Department of
Commerce General Council Cameron Kerry, Fedorov indicated that the
lead on anti-bribery efforts had recently been transferred to the
Ministry of Justice -- it is unclear whether this will lead to an
improvement in Russia's ability to meet deadlines.

NEXT STEPS
----------

7. (SBU) According to the OECD Legal Directorate, in February, the
Secretary General intends to ask the OECD Council to take stock of
the pace and quality of Russian accession. The Secretary General is
likely to pose three scenarios in an attempt to solicit reactions
from member states: 1) to allow the process to continue at its
current pace; 2) to begin consideration of suspension of the
accession process if Russia does not start responding more quickly
and thoroughly, allowing Russia to pick the process back up when it
is ready; or, 3) to set a future deadline to withdraw from the
process with Russia, if the situation does not change. Scenarios
two and three if posed by the Secretary General would likely be
framed as "worst case" given the political difficulties that either
would cause.

COMMENT AND GUIDANCE REQUESTED
------------------------------

8. (SBU) Moving the process forward: Russian accession is very much
in the U.S. interest, and the process itself provides important
leverage points. (Among other things, Russia will only become
eligible for membership in the International Energy Agency (IEA) - a
USG priority - after it accedes to the OECD.) The recently
established U.S.-Russia bilateral Presidential Commission could be a
useful vehicle for the U.S. to encourage Russia to consider how it
is handling the OECD accession process, and suggest that a
higher-level coordination unit may be useful. Russian responses on
sectoral issues, such as health (which we understand has been
lagging) can be encouraged as well by U.S. sectoral counterparts

9. (SBU) Active participation in OECD Committees: As an accession
candidate, Russia has carte blanche to attend most OECD Committee
meetings. However, Russian participation has been spotty (with the
exception of participation in the Competition and Employment
Committees) and is often a Paris Embassy observer, rather than a

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technical expert. We recommend USG encouragement of more active
Russian participation in additional committees such as Environment,
Financial Markets, Fiscal Affairs, Insurance and Private Pensions
and Investment

10. (SBU) Working in tandem with other OECD members: Other OECD
member states can provide the same encouragement and support. This
issue could be raised with EU and APEC partners.

REQUEST FOR GUIDANCE
-------------------

11. (SBU) The United States will need to respond to the Secretary
General's proposals concerning the pace of accession. In Post's
view we should continue the accession process (option 1) and not
support suspension. At the same time, we note that Committee
accession reviews normally result in lengthy and detailed reports.
Preparation of these reviews consumes considerable Secretariat
resources, including travel by staff to Russia, and extensive legal
review before dissemination to member states. In our view, given
the demand on resources that these reviews take, it might be best to
signal that the U.S. does not support advancement in some potential
problem areas: such as trade, agriculture, insurance and private
pensions, and possibly banking and finance, until WTO accession
negotiations reach an advanced state where Russia's concessions are
known.

Monroe

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