Opinion Editorials & Interviews
Interview with Pavel Bykov of Ekspert Magazine
William J. Burns, U.S. Ambassador to Russia
Ekspert, December 11, 2006
The WTO Agreement is an example of how Russia and the U.S. can effectively cooperate. However, the U.S. Ambassador to Russia believes the potential of the bilateral relationship is not limited only to trade.
After difficult long-term negotiations, Moscow and Washington signed an agreement on Russian accession to the World Trade Organization. It was expected that the agreement would be signed last summer during the G-8 Summit in St. Petersburg, but the partners could not overcome their disagreements by that "deadline." After this failure, no one expected a fast completion of the Russian-American talks. However, in November, literally right after the Mid-term elections for the U.S. Congress, the parties unexpectedly managed to come to a compromise. U.S. Ambassador to Russia William Burns answers Expert's questions about how and why it was possible to reach an agreement and on the prospects of the Russian-American relations.
BYKOV: What actually happened after the St. Petersburg summit in the summer? Why couldn't Russia join WTO then, but it can now?
AMBASSADOR BURNS: The bilateral agreement on WTO between the United States and Russia is the biggest single achievement in economic relations between our two countries in more than a decade. It is a good agreement for both of our countries. As you remember, we were very close to an agreement last July in St. Petersburg. Our two Presidents recognized that and instructed both sets of negotiators to make a maximum effort to finish the agreement by the beginning of November. Our negotiators deserve enormous credit.
In agriculture, the Russian side wanted to have more time so that Russian teams of inspectors could visit American meat packing plants and reassure themselves that the practices at those plants met international health standards. That was an understandable concern in the interests of Russian consumers and we worked hard together to resolve that question successfully. We did the same thing in regards to the protection of intellectual property rights, again in the interests of both our countries. On a third question, financial services, we reached a good compromise: the United States agreed to defer the implementation of branches for banks and we agreed to a phased implementation of branching for insurance companies.
This is a very important achievement that is good for both our countries and is especially important for Russia as it seeks to diversify its economy.
BYKOV: What impact did the letter sent to President Bush by the CEOs of 13 major corporations have on the progress of the WTO negotiations?
AMBASSADOR BURNS: The role of business is always very important in any trade negotiation. The letter you mentioned, in which some leading American business figures called upon both President Bush and President Putin to try and reach, as quickly as possible, a commercially sound agreement, did play a helpful role. It is important to remember that American investment in Russia grew by almost 50% last year. There is a growing interest on the part not only of American business, but of Russian business, in the kind of trade agreement that we achieved.
BYKOV: Many people believe that the agreement is not going to be ratified because Jackson-Vanik still exists. Do you think that Congress is going to ratify it eventually?
AMBASSADOR BURNS: I expect that there will be a serious and intense debate in the Congress. I cannot speak for the Congress, but I think there is a good prospect that the Congress will also regard this as a strong trade agreement.
BYKOV: Let's hope that American business is going to support the agreement as well.
AMBASSADOR BURNS: American business will have many opportunities to emphasize its own views on the value of this agreement.
BYKOV: Over the past few years much was said about the emergence a U.S.-Russian Energy Partnership. Why was it never implemented?
AMBASSADOR BURNS: The rhetoric surrounding the U.S.-Russian Energy Partnership a few years ago has not been completely realized. There clearly have been some disappointments along the way, but the fact remains that Russia is largest producers of oil and gas today, and the United States remains the world's largest consumer of oil and gas. American companies have a level of technology and of capital that can contribute a lot to Russia realizing the full potential of its energy industry. Beneath the rhetoric there exists a very solid, practical basis for partnership. I would simply add two examples: One is the partnerships between Lukoil and ConocoPhillips. It is genuine two-way street. ConocoPhillips now owns approximately 20% of Lukoil. Lukoil owns a very successful retail chain in the United States. I've filled up my car with gasoline at Lukoil gas stations. There is lot that Lukoil and ConocoPhillips do that benefits one another. The exchange of professionals and executives between the two companies in just one example.
A second good example is the partnership between ExxonMobil and Rosneft in Sakhalin-1. Despite over all the controversy around Sakhalin in recent weeks, ExxonMobil and Rosneft have worked very well together. Last month the first tanker full of oil left a Russian port from Sakhalin-1 and ExxonMobil and Rosneft expect that in the very near future they will be producing 250,000 barrels of oil a day. Those are just two examples and much more is possible in the months and years ahead.
BYKOV: Concerning Shtokman, how do you evaluate its prospects?
AMBASSADOR BURNS: The North American market in liquefied natural gas is natural target for Russia to consider. It's an area where the United States is doing its part in the sense of building new liquefied natural gas terminals and infrastructure in North America. It's an area where some of the big American companies have a much offer in terms of their technical experience, in addition to what a huge company like Gazprom already has to offer. There are still opportunities in the LNG market for Shtokman aimed at North America.
Another good example is Chevron's work. Chevron is a major player in the Caspian Pipeline Consortium. It's also interested in the Burgas-Alexandroupolis bypass pipeline. It's in the interests of both Russia and America to have multiple bypasses coming out of the Black Sea. That's why we've publicly supported Burgas-Alexandroupolis, but it's also why the expansion of the Caspian pipeline would benefit Russia.
BYKOV: There has been much discussion about the "excessive dependence" of Europe on Russian oil and gas. Matt Bryza mentioned it as a threat and it was said that Condoleezza Rice warned Greece not to conclude the extension of the Blue Stream pipeline. What do you think?
AMBASSADOR BURNS: Europe is a very important market for Russian gas and Russia is a very important supplier for Europe. That's going to remain the case. Both Europe and Russia have an interest in diversification. For Europe it is sensible to look – in addition to Russian gas – at additional sources and additional transit routes. And for Russia it is equally sensible to look – in addition to the European market – at additional consumers, whether it's in Asia or in North America. That's why Russia's infrastructure plan, such as the pipeline to the Pacific to serve China and Japan, seems to us to be a very sensible step.
We believe that multiple bypasses and multiple transit routes coming out of the Black Sea region makes sense for all of us. We've publicly supported the plan to build the Burgas-Alexandroupolis bypass and we think it is also sensible to look at other routes, like expansion of the Caspian pipeline. This is an area where there is bound to be competition, but where there is common interest.
BYKOV: Besides energy, what sectors show the most promise in terms of the development of economic engagement between Russia and the U.S.?
AMBASSADOR BURNS: American investment in Russia grew by nearly 50% last year. Much of that growth occurred outside the energy sector and outside Moscow.
In the technology sector, an area in which Russia has enormous potential, Boeing has a very active and impressive design center in Moscow. It employs more than 1,300 very skilled Russian designers and engineers. They have done a great deal of successful work on Boeing's new 787 aircraft. Also in the technology sector, Intel has designs centers in both Nizhniy Novgorod and Novosibirsk. It was interesting when Bill Gates, the Chairman of Microsoft, visited Moscow two weeks ago, he emphasized the potential of Russia's technology sector, especially because of the very well educated and skilled workforce that exists in Russia.
Another example would include aviation. Here again, Boeing and Sukhoy have worked very well together in developing a regional jet program. A third area is in processing – processing in the sense of taking raw materials and producing finished products. Alcoa, for example, has a successful operation in Samara. International Paper now has a successful operation in Svetogorsk and it is talking about a very significant expansion of its operations in Russia, along with a Russian partner.
The auto industry is another area where American companies have done well. General Motors is building a new plant to assemble automobiles in St. Petersburg. Ford already has a successful operation in Leningrad oblast.
There are many other examples. Petrochemicals is one – also a processing industry, where again Russia has the potential to be far more than just an exporter of raw materials – of oil and gas – it has the potential to develop its own processing industries and expand them. Dow Chemical is also looking seriously at doing more work in that field here.
And last in the retail market, many American companies are doing very well. This is one of Coca Cola's fastest growing markets in the world. Proctor & Gamble now employs more than 20,000 Russians. In fact, Proctor & Gambles' business in Russia is now 80% the size of its business in China.
Sorry for giving such a long list of examples, but what is interesting to me – because I travel a lot around Russia – is to see the opportunities that are emerging outside of Moscow.
BYKOV: In regards to high-tech production and development, what do you think about the creation of international nuclear centers to enrich uranium for countries who would like to develop their nuclear programs?
AMBASSADOR BURNS: I think it's an excellent idea. It's very similar to an idea that President Bush has also suggested – something that he has called the Global Nuclear Energy Partnership. Presidents Bush and Putin talked about this issue during their two recent meeting at Vnukovo and in Hanoi. They talked about how we can combine our efforts with the object of working together to develop civilian nuclear technology and make it available to developing countries in a way that guards against the proliferation of nuclear weapons. Our two counties, the United States and Russia, are also in the process of negotiating, for the first time, an agreement on peaceful nuclear cooperation.
BYKOV: Is this sufficient to deal with the issues of non-proliferation, for example like the Iranian problem?
AMBASSADOR BURNS: It is one part of the answer. Obviously there are other steps that we can and should take together, because the nuclear field is one area where the United States and Russia have both unique capabilities, but also a unique historical responsibility. Among the other steps that we can take together are the following: we can work together to strengthen the existing regimes against proliferation, the NPT, the work of the IAEA. We do need to continue to work together on specific challenges like Iran and North Korea. We are working together now in a new initiative, that the United States and Russia are leading, against nuclear terrorism. The first meeting of this new group took place in Morocco last month. More broadly there is also a very important role for the United States and Russia to play in setting a good example for the rest of the world in how we manage our own remaining nuclear arsenals, especially in ensuring the safety and security of our own nuclear facilities in the United States and Russia.
BYKOV: On nuclear energy cooperation, recently there was an article published by the Head of Carnegie Center, who wrote that in order to enhance nuclear non-proliferation the United States and Russia should decrease the size of their own nuclear weapons arsenals.
AMBASSADOR BURNS: It's a fair question. It is important for the United States and Russia to talk seriously about what steps we might take after the expiration of the START Treaty in 2009. Not only in terms of the size of our arsenals, but also how we manage them. How we operate mutual systems of verification. As part of an effort that only the United States and Russia can lead to set a good example for the rest of the world.
BYKOV: Thank you.
AMBASSADOR BURNS: Thank you.
END INTERVIEW