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Cablegate: Russkiy Island -- They Will Build It, They Will Come, Then

INFO LOG-00 EEB-00 AID-00 AMAD-00 CA-00 CIAE-00 COME-00
INL-00 DODE-00 DOEE-00 DOTE-00 DS-00 FAAE-00 FBIE-00
UTED-00 VCI-00 H-00 TEDE-00 INR-00 IO-00 LAB-01
L-00 MOFM-00 MOF-00 VCIE-00 NSAE-00 ISN-00 OES-00
NIMA-00 EPAU-00 MA-00 ISNE-00 SP-00 SSO-00 SS-00
TRSE-00 NCTC-00 FMP-00 R-00 EPAE-00 SHEM-00 DSCC-00
PRM-00 DRL-00 G-00 NFAT-00 SAS-00 FA-00 SWCI-00
SNKP-00 SEEE-00 SANA-00 /001W

P 160724Z FEB 10


E.O. 12958: N/A

REF: 2009 Vladivostok 0087

1. Summary: Many were surprised when in 2007, then President
Vladimir Putin announced that the 2012 APEC summit would be held
on Russkiy Island, an empty, undeveloped island just South of
Vladivostok. On February 5, 2010, Consular Officer and USAID
Representative visited the island, taking the ferry from
Vladivostok. Construction has commenced, and due to the work we
saw, and the construction standards they are building to, we
believe that the construction on the island will be completed in
time for the APEC summit in autumn 2012 (Note that there is
discussion about moving up the date of the summit two months
from November to September due to the harsh winter weather).

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They Will Build It and They Will Come

2. Russkiy Island was a closed, military island, little more
than a place for camping or a good picnic in summer or ice
fishing in winter. When it was announced that the 2012 APEC
summit would be held on Russkiy Island, there was a lot of
concern about the cost of the project, especially since Russkiy
Island had no infrastructure. Everything for APEC would have
had to have been built from scratch. The island lacked water
and power, and the roads were only gravel. Actually, the roads
were so treacherous and impassable at places that we were forced
to turn around at one point and even assisted another car stuck
in the snow.

3. On our drive around the island we were struck by the
enduring aesthetic beauty of the well constructed brick and
stone buildings dating from the czarist times. The island is
also home to several distinctly unattractive Soviet era
officers' residential apartment buildings that are the common
concrete panel construction. There are two old forts and large
artillery batteries that attest to the significant defensive
role the island played in protecting Vladivostok during WWII.
Governor Darkin maintains an impressive dacha on the island as
does the President of Russia. There are no stores, gas
stations, restaurants, or other amenities on the island. The
few year-round residents rely on the ferry to the mainland for
all their shopping needs.

4. Even though the weather was below freezing (-20 C), the
construction was ongoing and a great deal of progress has
already been made. The site preparations are being accomplished
quickly as hundreds of hectares of forests are being or have
already been clear-cut. The felled trees are being pushed aside
into enormous piles by bulldozers. As there are no remaining
obstacles to land leveling for foundation slabs, massive earth
moving equipment is able to rapidly carve and reshape the
natural rolling hills to accelerate construction. We did not
see any evidence of erosion mitigation barriers in place,
raising doubts about how well protected the marine environment
will be around the island. Roads to and from the work sites
from the dock yards have been constructed and several have
already been paved with asphalt. The road substrates are typical
for Russia - a mixture of course, ungraded, slate, rock, and
dirt. No compression is applied to the substrates and only a
thin layer of gravel is spread prior to paving.

5. The contractor is using relatively simple construction
techniques for the buildings. The superstructure of all the
buildings is steel I-beams with floors being poured in place on
galvanized steel. Exterior walls are concrete blocks and
mortar. The use of drop ceilings will permit the quick interior
fit outs with ventilation and electrical wiring. This is
essentially the construction form used for parking garages and
shopping centers and is typical of the Tvoi Dom and Crokus City,
and the Crocus-Expo International Exposition Center; Moscow
facilities built, owned and operated by the billionaire Aras
Agalarov, President of the Crokus Group and the general
contractor for the Russkiy Island development project. This
construction facades will be formed from glass, tile, metal or
glass panels providing architectural detail and variety to the
otherwise uninspired uniform rectangular blocks.

6. The water and sewage infrastructure seems to be being built
to a higher standard than many other facets of the project.
The contractor is using advanced double walled PVC pipes (not
steel) and poured-in-place juncture housing for manhole access.
Vladivostok itself has no sewage treatment facilities. We
noticed that of the several manufacturers of excavation and land
moving equipment are represented at the site; the vast majority
of the equipment was Hitachi. We saw only one Caterpillar
bulldozer and no Liebherr equipment so common on Sakhalin. A
very large and elaborate "oceanarium" (ocean aquarium) is also
under construction and should become an attractive tourist
destination. Unfortunately, access to the aquarium construction
site is restricted so we were unable to inspect it or get a
close-up view.

7. Most of the thousands of construction workers appeared to be
from Central Asia, although we heard that many nationalities are
represented, including laborers from Mexico. There are several
large camps for the laborers who are bussed to and from the
construction sites on busses with Moscow license plates series
`199 RUS', presumably because they are registered to Crocus, the
Moscow based general contractor.

8. While we took a ferry, construction on the two large bridges
that will connect the island to the mainland appears to be
proceeding apace. Since the bridge is the most important part
of the project (and at US$1.5 billion, the most expensive), the
public believes that it is being constructed to international
standards. As safety and quality are being taken into
consideration for the bridge, this part of the project will
likely pose the greatest challenge in meeting the deadline for
the APEC summit. The general contractor for the bridge
construction is a local company from Ussurisk that has no
previous experience building bridges. We learned that the sand
for the bridge's massive concrete trusses is being shipped by
barges from North Korea.

9. While impressive progress is being made on the island's
construction projects, it is apparent that speed is the top
priority and environmental concerns, aesthetics, and perhaps
quality are all to be sacrificed in order to ensure that the
ambitious deadline is met.

Then What?

10. The 2012 APEC summit is meant to be the core of the greater
Far East Development Program that will help develop the Russian
Far East (RFE). Federal funding for numerous projects
associated with APEC preparations is estimated to be $10
billion. One optimistic economist, specializing in municipal
and regional strategic planning, expressed the opinion that that
figure will be matched by private investment. However, a random
survey of Vladivostok's taxi drivers reflected a more
pessimistic belief that the project will attract no private
investment and that at least half of the $10 billion from the
GOR will be stolen. It is said that seven percent of all
contracts will be given to the President's Office and the
consensus seems to be that the entire project was conceived to
facilitate the misappropriation of "budget" funds.

11. The plan is to locate a new Far Eastern Federal University
(FEFU), a combination of all universities in the Vladivostok
area, at the APEC site on Russkiy Island. The inconvenient
location is creating a lot of concern among university students.
FEFU will create a strong knowledge base and there is talk
about creating an investment zone on Russkiy Island complete
with business incubators for high-tech start-ups. However,
while the recently adopted federal strategic plan for the
development of the RFE through the year 2025 emphasizes the need
to diversify the region's economy through the commercialization
of innovative technologies, doubts remain about the ability of
the region to compete in the technology sphere with its Asian

12. If all goes well, preparations for the 2012 APEC summit
will leave the Vladivostok area with a developed island, new
bridges, an updated transportation system, renovated airport,
opera house, "oceanarium", sports stadium, and many improvements
to the city itself. There will be a residual effect for the
citizens of Vladivostok as the city is expected to receive a new
sewage treatment facility, installation of natural gas
connections to residents throughout the city, and moving oil
tanks from the downtown area. But the real test is whether
Russia decides, and makes clear to its neighbors, that it is
indeed open for business and welcomes new investment and joint
ventures. That "improvement" could account for more foreign
investment than all the shiny new projects combined.


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