US embassy cable - 05THEHAGUE3055

C O N F I D E N T I A L SECTION 01 OF 03 THE HAGUE 003055 
 
SIPDIS 
 
STATE FOR EUR/RUS AND EUR/UBI 
 
E.O. 12958: DECL: 11/08/2015 
TAGS: ECON, ETRD, EINV, PREL, PGOV, PHUM, NL, RS 
SUBJECT: NETHERLANDS/RUSSIA: PUTIN VISIT FOCUSES ON ENERGY 
AND HUMAN RIGHTS 
 
REF: THE HAGUE 2942 
 
Classified By: ACTING DCM ANDREW SCHOFER, REASONS 1.4 (B) AND (D) 
 
1.  (C)  SUMMARY.  A handful of substantive exchanges 
punctuated Russian President Vladimir Putin's November 1-2 
state visit to the Netherlands, which otherwise was dominated 
by protocol.  Putin's meetings with PM Balkenende, Dutch 
Parliamentary leaders, senior government officials and 
industry and business leaders yielded a number of tangible 
results:  Putin and Balkenende voiced joint support for 
linking the Netherlands to the new gas pipeline to be 
constructed between Russia and Germany.  The Russians signed 
two agreements with the Dutch Foreign Ministry calling for 
cooperation in fields including education, economic affairs, 
transport, environment, and defense as well as 
industry-specific agreements on export credit insurance and 
nanotechnology, aerospace, agriculture, and biomedics.  The 
Mayor of Amsterdam invited a Russian trade delegation to 
visit the Netherlands' capital and Rotterdam in 2006. 
Balkenende enjoyed an "open dialogue" with Putin about human 
rights in Chechnya, a topic reportedly also discussed during 
the Russian President's meetings with Dutch Parliamentarians. 
 Putin reportedly did not share Balkenende's positive view of 
the Chechnya discussion, and may have withdrawn an earlier 
offer to return a disputed art collection to the Netherlands 
from Russia in response.  END SUMMARY. 
 
2.  (U)  As anticipated reftel, Russian President Vladimir 
Putin's November 1-2 state visit to the Netherlands was 
primarily a protocol affair, including a state banquet hosted 
by Queen Beatrix at Noordeinde Palace in The Hague, a 
traditional wreath laying at the World War II monument at Dam 
square in Amsterdam, and a visit to the house in Zaandam in 
which Peter the Great resided during his years in the 
Netherlands.  On the substantive side, the visit included a 
bilateral meeting with Prime Minister Jan Peter Balkenende, 
discussions with Parliamentary leaders, an informal gathering 
hosted by Amsterdam Mayor Job Cohen with senior government 
and Dutch industry and business leaders, and a separate 
meeting with Royal Dutch Shell representatives. 
 
ENERGY TOPS AGENDA 
------------------ 
 
3.  (C)  According to Dutch Economic Ministry (MEA) 
officials, Putin raised with Shell CEO Jeroen van der Veer 
the company's Russian investments, including the beleaguered 
Sakhalin II exploration venture.  Van der Veer reportedly 
urged Putin to accept a revision of the current profit 
sharing agreement (PSA), in light of the project's schedule 
delays and UDD 10 billion cost overrun.  MEA officials 
described Putin as cordial but noncommittal.  Putin 
apparently noted that other companies in the region were not 
experiencing similar setbacks and suggested that discussions 
on the issue should continue.  According to media reports, 
Putin also urged Shell to reach agreement with Russian 
company Gazprom on its recent share swap.  (NOTE:  In July, 
Shell traded Gazprom 25 percent ownership of Sakhalin II for 
a 50 percent stake in Gazprom's Zapoliyarnoye gas field. 
Gazprom now asserts that, because of Sakhalin's problems, the 
trade is no longer equal.  END NOTE.)  Van der Veer told the 
press that Shell would continue to seek a solution. 
 
4.  (U)  During a joint press conference, Putin and 
Balkenende both indicated support for the linking of the 
Netherlands to the West European pipeline system that Russia 
and Germany have agreed to construct under the Baltic Sea. 
Gas from this pipeline could be distributed via the 
Netherlands to other countries, including the UK. 
 
PUSHING TRADE AND INVESTMENT 
---------------------------- 
 
5.  (SBU)  During a roundtable discussion at the residence of 
Amsterdam Mayor Cohen,  Putin expressed hope that his visit 
would result in increased trade and investment between the 
two countries.  Dutch businesses represented at the meeting 
included Royal Dutch Shell, ABN Amro, Rabobank, Unilever, 
Nederlandse Gasunie, Stork, KLM, DSM, and Akzo Nobel.  Other 
participants included Minister of Economic Affairs Laurens 
Brinkhorst, Crown Prince Willem-Alexander, and VNO-NCW 
(employers association) Chairman Bernard Wientjes.  Putin 
later told the press that Dutch-Russian trade in 2004 totaled 
$16.5 billion, making the Netherlands Russia's second-largest 
trading partner after Germany.  (NOTE:  According to official 
government statistics, Dutch exports to Russia in 2004 
totaled $3.76 billion, while imports totaled $7.12.  The 
higher Russian trade figures probably reflect goods that are 
exported to the Netherlands and then shipped further to other 
destinations in Europe.  Total accumulated Dutch investment 
in Russia was estimated at $6.1 billion in 2004, with Russian 
investment in the Netherlands at about $153 million.  END 
NOTE.) 
 
6.  (U)  Prior to the meeting, Mayor Cohen announced that he 
had extended via Putin an invitation for a Russian trade 
delegation to visit Amsterdam and Rotterdam next year. 
Brinkhorst also announced the establishment of Dutch-Russian 
"Business Councils" to promote further trade between the two 
countries.  VNO-NCW Chairman Wientjes told Charge in a 
November 8 meeting that he was very impressed with Putin, and 
that while the roundtable discussion focused on energy 
issues, there was also considerable Dutch interest in 
investment in the agriculture sector in Russia.  Despite 
participation by ING CEO Michel Tilmant and Philips Smits, 
Chairman of the Board of the Aalsmeer Flower Auction, the 
roundtable reportedly did not include any discussion of ING 
financial losses following the GOR's dismantling of the 
Russian oil company Yukos and Russia's temporary ban last 
year of Dutch flower imports. 
 
7.  (C)  Brinkhorst remarked to the press after the 
roundtable that "a country with a president like Putin can 
only be viewed as a reliable trading partner."  Dutch Foreign 
Ministry officials were less effusive, however.  While many 
international businesses, including Russian ones, incorporate 
in the Netherlands, this process does not always include the 
investment of Dutch funds.  That said, these officials 
acknowledged that Dutch investment in Russia was growing. 
They expected that this trend would continue.  Russia was not 
a "easy market" but access was improving.  Putin's visit had 
shown that Russia was working to facilitate better access to 
its markets, especially for medium-sized businesses. 
COOPERATIVE AGREEMENTS SIGNED 
----------------------------- 
 
8.  (U)  During the visit, Dutch Foreign Minister Bernard Bot 
and his Russian counterpart Sergey Lavrov signed two 
agreements: a "Common Action Program" for 2005-2007 and 
cooperation accord on education.  The "Common Action Program" 
calls for cooperation in the area of technological and 
natural disasters, the fight against infectious diseases such 
as HIV/AIDS, and the exchange of information on 
counter-terrorism efforts.  The program also calls for 
collaboration in the areas of political dialogue, economic 
affairs, transport, environment, taxes and customs, judiciary 
and police, defense, social affairs, education and culture. 
Other industry-specific agreements included an accord signed 
between the Russian Sberbank and Atradius Dutch State 
Business (DSB) on export credit insurance and a separate 
accord signed between the Russian Academy of Sciences and the 
Netherlands Organization for Applied Research (TNO) in the 
area of nanotechnology, aerospace, agriculture, and 
biomedics. 
 
FRANK TALKS ON CHECHNYA 
----------------------- 
 
9.  (C)  Despite Putin's legendary prickliness regarding 
Chechnya -- he once threatened to circumcise a journalist 
critical of his policy -- the Dutch raised concerns about 
human rights in Chechnya during talks with the Russian 
president.  At the joint press conference, Balkenende said he 
conveyed Dutch concern about reports of disappearances and 
heavy-handed treatment of Chechnyan human rights activists, 
but tempered his remarks by acknowledging the necessity to 
strike a balance with counter-terrorism efforts.  Putin added 
that he and Balkenende discussed coordinating Russian 
counter-terrorism activities with those undertaken by the EU 
and the Netherlands.  Balkenende approvingly characterized 
the discussion with Putin as "open and honest," adding that 
he raised the Council of Europe's Special Representative for 
Human Rights Gil-Robles' recommendations regarding Chechnya. 
 
10.  (C)  Though MFA counterparts praised Balkenende's 
measured criticism, some Parliamentarians complained it was 
overly restrained.  Parliamentary leaders reportedly 
discussed Chechnya with Putin during separate meetings. 
 
KOENIGS COLLECTION 
------------------ 
 
11.  (C)  A Ministry of Culture contact confirmed to Econoff 
that recuperation of the Koenigs Art Collection was raised 
briefly during Putin's meeting with Balkenende.  (See reftel 
for background on the case.)  This contact said that Putin 
stated he was in favor of returning the collection.  However, 
Putin, apparently angered by the tone of the questioning on 
Chechnya during the press conference with Balkenende and in 
talks with Dutch parliamentarians, later sent his personal 
assistant to inform the Prime Minister's office that a return 
of the collection now was "not so likely."  The Dutch 
Ministry of Culture had sent an official letter requesting 
the return of the collection and had expected a reply from 
the GOR as early as November 15.  This contact said the GONL 
now was not optimistic about receiving a positive response. 
 
 
COMMENT 
------- 
 
12. (C) As a state visit, Putin's trip predictably addressed 
matters more of protocol than of substance.  With regard to 
the latter, the visit may be considered some steps forward 
and a little stumble backward in terms of Russian relations 
with the Netherlands.  The visit yielded a number of 
promising agreements, but Putin's apparent revocation of his 
offer to return the Koenigs Collection in response to mild 
scolding over Chechnya will do little to improve cultural or 
political relations. 
 
13. (C) On the economic side, the visit underscored the 
increasingly important role played by Dutch investors in 
opening Russian markets for businesses from the West.  Over 
the past year, Dutch business leaders have repeatedly told us 
of their serious concerns over the operating environment for 
business in Russia, while simultaneously indicating that they 
see it as a market they cannot ignore.  Growing Dutch 
dependence on imported natural gas, as its own gas fields are 
depleted, means that the Dutch will have to look to Russia as 
an important energy supplier in the years ahead. 
BLAKEMAN