Cablegate: Russia's Accession to the Oecd - Chronology and Standards

VZCZCXRO4533
RR RUEHRN
DE RUEHFR #0026/01 0110836
ZNR UUUUU ZZH
R 110836Z JAN 10
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 8030
RUEHSS/OECD POSTS COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 2153
RUEHTV/AMEMBASSY TEL AVIV 0315
RUEHTL/AMEMBASSY TALLINN 0017
RUEHLJ/AMEMBASSY LJUBLJANA 0565
RUEHNE/AMEMBASSY NEW DELHI 1345
RUEHJA/AMEMBASSY JAKARTA 0742
RUEHSA/AMEMBASSY PRETORIA 1975
RUEHSG/AMEMBASSY SANTIAGO 0012
RUEHSL/AMEMBASSY BRATISLAVA 0021
RUEHGV/USMISSION GENEVA 3073

UNCLAS SECTION 01 OF 06 PARIS 000026

SENSITIVE

SIPDIS

SENT FROM USOECD

12958: N/A
TAGS: ECON ETRD EFIN PREL OECD XG XH
SUBJECT: Russia's Accession to the OECD - Chronology and Standards
of Review

PARIS 00000026 001.2 OF 006

REFTEL: PARIS 22

1. (U) Summary: This cable is part two of a two-part series. Part I
(Reftel) outlined the broader challenges that Russia faces during
the accession process to the Organization for Economic Cooperation
and Development. This cable provides details on the chronology and
the status of the accession examination to date. End Summary

Standards of Review for Accession
---------------------------------

2. (U) "The Roadmap for the Accession of the Russian Federation to
the OECD Convention" (OECD Document C(2007)103/FINAL) outlines the
criteria by which the OECD Council will eventually asses Russia's
willingness and ability to assume the obligations of OECD
membership. The Roadmap includes acceptance of the established body
of OECD instruments, standards and benchmarks, coherence with OECD
policy recommendations and a commitment to fundamental values. The
Roadmap also stipulates that World Trade Organization (WTO)
membership is considered essential for becoming an OECD member.

3. (U) Fundamental Values: Candidate countries are expected to
share a core set of fundamental values held by current OECD members.
The Roadmap delineates these as: "a commitment to pluralist
democracy based on the rule of law and the respect for human rights,
adherence to open and transparent market economy principle and a
shared goal of sustainable development" which form the foundation of
OECD membership and when taken together show "like-mindedness" with
other OECD members. Fundamental values include a commitment to
improving policies in both the national and international context.
During the accession process OECD members may review a candidate
country's progress towards these fundamental values at any time, but
there is no specific committee or time frame stipulated for such a
review.

4. (U) Willingness and Ability: In addition to meeting the
like-mindedness criteria, Russia must "position itself" vis a vis
all OECD instruments in force at the time of accession. There are
more than 200 current instruments, including Conventions (e.g.
Anti-Bribery), Decisions (e.g. PCBs), Recommendations (e.g.
Broadband development), Guidelines (e.g. Multi-National Enterprises,
Consumer Protection), Principles (Corporate Governance), rules,
standards and benchmarks (e.g. positions on major multilateral
environmental agreements). If any new instruments are added prior
to Accession, then Russia must position itself vis a vis these as
well. Russia may refuse certain Acts, make declarations about,
and/or take reservations to OECD legal instruments and/or policies.
However, the Roadmap stipulates that such decisions by candidate
countries should only occur "sparingly." Committees and ultimately
Council will examine the Russian position vis a vis these
instruments to determine whether Russia's position is consistent
with the obligations of OECD membership.

5. (U) Coherence: Russian domestic policy will also be examined for
its "degree of coherence" with certain common OECD policies by the
"sectoral" committees (Health, Statistics, Trade, Public Governance,
etc). These Committees cover areas for which there are generally no
OECD legal instruments, but for which there are accepted standards.
For example, the Public Governance Committee has a set of "Building
Blocks and Guiding elements for Public Governance" which are used as
a framework and benchmark tool to examine budget practices and
procedures, human resource management, integrity in the public
sector, transparency and accountability, etc.

THE PROCESS
------------

6. (U) In June 2009 Russia submitted its 249 page Initial Memorandum
which laid out in preliminary terms its position vis a vis over 200
OECD instruments. In the Memorandum, Russia either took a
reservation to, requested an unspecified transition period or
refused to adopt a certain number of 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. Following the Initial Memorandum, the

PARIS 00000026 002.2 OF 006

Secretariat drew up a calendar for review by each of OECD's twenty
two committees. Each committee has sent Russia a detailed
questionnaire which supplements the information provided in the
initial memorandum. Committee review requires extensive Secretariat
resources, including travel by staff to Russia, and extensive legal
review before dissemination to member states. Committees were
instructed not to go beyond either "preliminary" or "first round"
discussion with a view to providing information for the Secretary
General's report on Russia Accession at the Ministerial Council
Meeting, May 27-28, 2010.

COMMITTEE REVIEWS
-----------------

7. (SBU) Following is a status report on the preliminary or first
round discussions in OECD Committees.

--Committee for Agriculture: (Coherence) In its initial Memorandum,
Russia declared that it shares the principles and objectives of the
Committee and agreed to abide by its principles. The Committee has
not scheduled a review for Russian Accession (which indicates that
the information requested from Russia was not received, or was
incomplete.)

--Working Group on Bribery: (Willingness and Ability) In its Initial
Memorandum, Russia expressed its commitment to abide by the
principles of the Working Group, but requested an unspecified
transition period for implementation. Russian First Deputy Minister
of Justice Aleksander Fedorov led a delegation to the OECD in
December 2009 and informed OECD officials that Russia was interested
to begin the process of joining the Convention on Anti-Bribery.
Officials from the OECD office of the Legal Advisor flew to Russia
the following week, of December 14, 2009, to do an initial
assessment of Russia's legal structure. The OECD Legal Advisor
reports that Russians thought their laws met the requirements of the
OECD Anti-Bribery Convention, but that this was not the case. In
particular, the Legal Adviser notes Russia would need to pass a law
criminalizing bribes to foreign officials. While OECD staff have
praised the transfer of responsibility for anti-bribery to the
Justice Ministry and view Fedorov as a serious interlocutor, they
note Russia has not made progress as quickly as they had hoped. In
October, the Secretariat had delivered an extremely negative report
on Russia's progress, explaining that the Russian response to the
accession questionnaire was incomplete and sloppy. As a result, the
Russian accession preliminary review was moved back from December to
March 2010. Despite the interest expressed, the Secretariat has
informed USDel that the Russian Ministry of Justice is unlikely to
have completed the necessary work for the March 2010 review, which
will thereby result in further delays. A delegation of OECD staff
(led by Deputy Secretary General Richard Boucher) will travel to
Russia in February, to discuss this and other accession issues.

--Chemicals Committee: (Willingness and Ability) In its Initial
Memorandum, Russia declared it shared the principles and aims of the
Committee but requested a unspecified transition period for
implementation. The Committee will hold its First Round of
discussions in February 2010. One of the issues likely to be
discussed is the need to provide a specific time frame for the
transition period.
-- Competition Committee: (Willingness and Ability) Russia has been
an active member of the Competition Committee for more than ten
years. In its Initial Memorandum Russia agreed to abide by the
Committee's principles with a reservation with regard to invisible
transactions, liberalization of capital movement, and the OECD's
Declaration on Multinational Companies. At its meeting in October,
the Competition Committee (CC) held its First Round of discussions
and the Russian delegation gave a well received presentation. The
CC had additional questions regarding Russia's experience with the
2009 amendments to the anti-monopoly law; the "cartel" cases that
are being brought under the anticompetitive agreements provisions
(the concern is that many are not truly cartels); special state
entities that have been created in recent years and seem immune from
the competition law (the concern is that many are "national
champions" - large state-owned companies that could act as
monopolist forces with impunity; and Russia's position on the new
Council Recommendation on Competition Assessment. These need to be
answered by Russia before the Competition Committee's scheduled

PARIS 00000026 003.2 OF 006

interim discussions in February 2010.
-- Consumer Policy Committee: (Willingness and Ability) In its
Initial Memorandum, Russia agreed to abide by the Committee's
policies and declarations. The Committee is scheduled to hold its
First Round of discussions in April 2010.

-- Development Assistance Committee: (Coherence) In its Initial
Memorandum, Russia committed to abide by the principles of this
Committee, but requested an unspecified transition period to come
into compliance. The Committee does not currently have a schedule
for Russia Accession review.

--Education: (Coherence) In its Initial Memorandum, Russia refused
to accept the Committee's Guidelines for Quality Provision in
Cross-Border higher Education. The Committee does not currently have
a schedule for Russia Accession review.

--Employment, Labor and Social Affairs Committee: (Coherence) In
its Initial Memorandum, Russia agreed to abide by the Committee's
principles. The Committee is scheduled to hold its First Round of
discussions in April, 2010.

--Environment: (Willingness and Ability) In its Initial Memorandum,
Russia declared it shared the principles and aims of the Committee
but requested a unspecified transition period for implementation.
The Committee plans to have the First Discussions on Russia at its
meeting in April, 2010 pending Russia's provision of its "Brief Note
on Russia's Environmental Policy and Institutional Framework" - a
background document for discussion. The Russians have also promised
to make a presentation on the same topic at the meeting. The First
Review is planned for the Committee meeting in 2011 (delayed from
June 2010) and will focus on reviewing Russia's positions with
regard to OECD legal instruments related to environment. The
Russian Federation will officially begin its Accession-related
presentations for the Committee's Working Group on Waste Prevention
and Recycling at the next meeting in October 2010.

The Committee has asked Russia to revise its Initial Memorandum to
indicate more clearly how many years they may need in order to
comply with the OECD requirements and also to identify the actions
that they plan to carry out during that period. OECD Secretariat
staff report that Russia's institutional framework on environment
and chemicals is very complex and there is very little coordination
between the different ministries and agencies. During an OECD
mission to Russia by Environmental Directorate staff in early
December, it was reported that the Ministry of Natural Resources and
Environment finally showed some commitment and interest in the
accession process.

--Committee on Financial Markets: (Willingness and Ability) In its
Initial Memorandum, Russia expressed a readiness to follow the
Committee's principles. However, Russia took a reservation to the
Council Recommendation on Disclosure Requirements and Procedures
applicable to public securities, with regard to consultation with
foreign individuals. Russia also took a reservation to the Code on
capital market liberalization and the Code on current invisible
operations liberalization. The Committee is scheduled to meet in
April. If Russian responses are received in time, an initial review
could be added to the agenda.

--Fiscal Affairs: (Willingness and Ability) In its Initial
Memorandum, Russia took a considerable number of reservations and
requested unspecified transition periods to bring its system into
compliance with the Committee. The Committee's Working Parties 1,
8, and 6, 9, and 2, and its Forum on Harmful Tax Practices held
their preliminary discussion in September, October, and November
respectively. In Working Party 1, Russia indicated that it would
drop the reservation it signaled in its Initial Memorandum to retain
the right to include payments for technical services in a separate
article as no other OECD nation had a similar reservation. Working
Party 8's preliminary review raised concerns about Russia's tax
codes, in particular aspects concerning foreign currency
transactions. The U.S. delegation expressed concern regarding the
lack of confidentiality for tax information (tax id numbers,
violations of tax rules, and investigative information). Working
Parties 1, and 8 and 9 will hold their First Rounds in February and
April 2010 respectively.

PARIS 00000026 004.2 OF 006

--Fisheries Committee: (Coherence) In it is Initial Memorandum, the
Russian Federation declined to accept the Committee's Guidelines for
the Design and Implementation of Decommissioning Schemes in the
Fishing Sector. The Committee has not schedule accession
discussions.

--Health: (Coherence) In its Initial Memorandum, as there are no
instruments in this field, the Russian Federation made no
declarations about its position with respect to Health policy. The
Health Committee was unable to hold its preliminary discussion in
July due to the unresponsiveness to its inquiries by the Russian
Ministry of Health. The Committee Chair wrote to the Russian
Government in July to express the Committee's disappointment but
affirmed the Health Committee's willingness to continue to cooperate
with Russia. When the Committee met in early December, the Director
of the Employment, Labor and Social Affairs Directorate reported
that the Committee still has not received any official reaction from
Russia to the Committee's "Draft Review." A representative of the
Russian government was present during the Director's presentation.
The Director anticipates that the Committee will not be able to send
its final recommendation on Russian accession until late 2011 or
early 2012, given the current pace of the review.

--Committee for Information, Computer and Communications Policy:
(Willingness and Ability) In its Initial Memorandum, Russia
expressed its readiness to follow the Committee's principles,
however it requested a transition period in the Electronic Commerce
arena. Preliminary Discussion scheduled for March, 2010.

--Insurance and Private Pensions: (Willingness and Ability) In its
Initial Memorandum, Russia rejected the Council's recommendation on
Common Classifications of the Classes of Insurance. Additionally,
the Russian Federation requested an unspecified transition period
for other Committee policies. At the Working Party on Insurance and
Private Pensions meeting in November, the Committee held its
preliminary discussions and heard a presentation from the Russian
Government. Work is progressing slowly as Russia's system of
regulating insurance and private pensions is complex. Russia also
has inflation challenges, e.g., corporate and government bonds seem
not to have kept up with inflation over the past half dozen years
which may create liquidity problems in the future. US Delegates
requested additional information about Russia's foreign equity cap
rules, licensing processes, and Federal oversight of the sector.
The First Round of discussions are tentatively scheduled for July
2010.

--Investment Committee: (Willingness and Ability)In it is Initial
Memorandum, Russia agreed to recommend that multinational enterprise
doing business in Russia would follow the Provisions of Attachment 1
of the Guidelines on Multinational Enterprises. Russia also
requested a transition period to establish a National Contact Point,
a requirement of the Guidelines. Russia also agreed to abide in
general by the Committees rules on National Treatment and agreed to
take into account the Committees recommendation and attempt to
eliminate or minimize conflicting requirements. Russia requested an
unspecified transition period to meet the OECD Benchmark Definition
of Direct Foreign Investment's requirements. The Committee has
scheduled its First Round of discussions for March 2010.

--Public Governance Committee/Regulatory Policy Committee:
(Coherence) In its Initial Memorandum, Russia expressed a
willingness to abide by the council recommendation for "Enhancing
Integrity in Public Procurement" and the OECD "Guidelines for
Managing Conflict of Interest in the Public Service" and other
Committee policy principles. The First Round is scheduled for April
2010, with a more detailed assessment in the fall. In its
preparatory work for the April meetings, the Committees are
struggling a bit with the Russian responses to its initial
questionnaires which are incomplete and in some cases contradictory.
The Committees are also facing a further complication in that the
questionnaire responses do not site the source within the Russian
government-- making clarification extremely difficult.

--Committee on Scientific Technological Policy: (Willingness and
Ability) In it is Initial Memorandum, the Russian Federation agreed
to abide by the Committee's principles. The Committee is scheduled

PARIS 00000026 005 OF 006

to hold its First Round in March 2010.

--Shipbuilding and Maritime Transport: (Coherence) In its Initial
Memorandum, the Russian Federation expressed a willingness to follow
the Committee's principles, but took several exceptions and
requested an unspecified transition period to adapt Russian
legislation to certain principles.

--Committee on Statistics: (Coherence) First round of discussions
tentatively scheduled for June 2010.

--Steel Committee: (Coherence) First Round tentatively scheduled for
May 2010.

--Trade Committee: (Coherence) In its Initial Memorandum, Russia
requested a transition period to implement the recommendations on
Common Approaches on the Environment and Officially supported Export
Credits, Procedures for Labeling Pharmaceutical Specialties, and the
Administrative and Technical Regulations which Hamper the Expansion
of Trade. At the December 2009, Trade Committee meeting, all
members that spoke indicated support for Russia's accession to the
OECD. They, along with the OECD Legal Division, also noted the
requirement for WTO accession as a pre-condition to OECD accession.
The EU outlined a long list of areas where information in the review
lacks sufficient detail. Several members noted that Russia has
recently implemented a number of protectionist measures in response
to the economic crisis. Others noted that implementation of legal
frameworks is very important. The U.S. noted that we were not yet
in a position to comment on this draft review and were looking to
see advances in Russia's accession to the WTO before we could
provide comments.

--Tourism Committee: (Coherence) In its Initial Memorandum, the
Russian Federation took exceptions to the OECD recommendations on
duty free entry and requested an unspecified transition period to
implement the recommendation on Protection of Tourists who use Air
Package Tours. There is no information on when this Committee will
conduct its Russia accession reviews.

--Economic Development Review Committee: Russia's accession review
is tentatively scheduled for April 11, 2010.

--Steering Group on Corporate Governance: There is no information on
when this Committee will conduct its Russia accession reviews.

Accession Chronology
--------------------

8. (SBU) In November 2007, the OECD Council adopted the Russia's
Roadmap for Accession. The initial assumption by the Secretariat
was that Accession for all the invitees (Chile, Estonia, Israel,
Russia and Slovenia) would be a two year processes concluding in
late 2009 or early 2010.

June 2009 - Russia transmitted its initial memorandum detailing its
position on more than 200 OECD legal instruments, more than one year
after the other candidate countries. Additionally, the document was
in Russian, not English or French as required, and it was
incomplete. This marked the formal starting point for the technical
review's of Russia's adherence to the Roadmap's requirements for
accession.

July 2009 - The Secretary General led a mission to Russia. The OECD
team met with the Russian Ministry of Economic Development,
(Russia's Accession Coordinating ministry), and answered questions
on next steps. The OECD also requested designated technical points
of contact for each OECD Committee within the appropriate line
ministries (Health, Environment, Finance, Education, etc). (Note:
The Public Governance and Consumer Policy committees still do not
have official POCs) Additionally, OECD staff met with the Russian
ministries of investment, corporate governance, fiscal affairs,
environment and anti-corruption.

July-September 2009 - Committees began preparation of their Draft
Initial Reviews and issued questionnaires to the Russian Government.

PARIS 00000026 006.2 OF 006

September 2009 - The Secretary General's office transmitted Russia's
initial memorandum to member states

October 2009 - The Secretary General sent a letter to the First
Deputy Prime Minister, Igor Shuvalov, which drew attention to the
difficulties being encountered by a number of committees to receive
information from the Russian Government.

October - December 2009 some committees received "initial" responses
from the Russian Government; most were late and incomplete. The
Competition Committee held its First Round of discussions with the
Russian Government.

October - December 2009 - the Committee on Fiscal Affairs, Private
Pensions and Insurance and Trade Committees held preliminary
discussions on Russia to determine what additional information is
required.

January 2010 - May 2010 - The Secretariat had tentatively scheduled
all remaining preliminary and subsequent First Round of reviews
prior to the Ministerial Council Meeting (MCM) in May 2010. As it
is clear that the schedule will not hold, the Secretary General will
bring the matter to the attention of members in the February Council
session and propose a new time-table with consideration pushed out
into 2011 and 2012 (reftel).

Monroe

© Scoop Media