VZCZCXRO3392
OO RUEHDBU
DE RUEHKB #0327/01 0601332
ZNY CCCCC ZZH
O 011332Z MAR 06
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9757
INFO RUCNCIS/CIS COLLECTIVE IMMEDIATE
RUCNMEM/EU MEMBER STATES COLLECTIVE IMMEDIATE
RUEKJCS/SECDEF WASHDC IMMEDIATE
RUEKJCS/JOINT STAFF WASHDC IMMEDIATE
RHMFISS/CDR USEUCOM VAIHINGEN GE//ECJ5-E// IMMEDIATE
RHMFISS/CDR USCENTCOM MACDILL AFB FL IMMEDIATE
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RUEKDIA/DIA WASHDC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE

C O N F I D E N T I A L SECTION 01 OF 03 BAKU 000327 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EUR/SNEC AND EB/ESC 
USDOE FOR FE - SWIFT AND OS - WILLIAMSON 
 
E.O. 12958: DECL: 03/01/2016 
TAGS: ENRG ECON EPET AJ KZ GG TR RU IR
SUBJECT: BEYOND BTC - AZERBAIJAN SEEKS FURTHER ROLE FOR 
CASPIAN ENERGY IN EUROPE 
 
REF: BAKU 305 
 
Classified By: Ambassador Reno L. Harnish, III, reasons 1.5 (b), (d) an 
d (e). 
 
¶1. (C) SUMMARY. Azerbaijan's MFA, in cooperation with State 
Oil Company SOCAR, sponsored a "High-Level Meeting on the 
Issues of Energy Security of Europe" on February 24. 
Representatives of several European countries, the European 
Commission, and Iran attended.  Although the subject matter 
was not new to Baku-based energy experts, the conference 
showed Azerbaijan, Georgia and Ukraine interest in bringing 
about new transportation corridors for Caspian energy to 
Europe besides the BTC oil pipeline and the SCP gas pipeline. 
 Potential European customers and the European Commission 
delegate expressed positive interest.  The next step, and the 
challenge, will be to bring industry into this discussion and 
move to practical work.  The GOAJ indicated its interest in 
following up with another meeting during the Caspian Oil and 
Gas Show in June.  END SUMMARY. 
 
--------- 
ATTENDEES 
--------- 
 
¶2. (C) Azerbaijan's MFA, in cooperation with State Oil 
Company SOCAR, sponsored a "High-Level Meeting on the Issues 
of Energy Security of Europe" on February 24.  The 
representatives at the conference, several at the deputy 
minister level, were from Austria, Bulgaria, France, Georgia, 
Germany, Greece, Iran, Italy, Kazakhstan, Moldova, Poland, 
Romania, Turkey, the United Kingdom, Ukraine and the United 
States.  A European Commission representative was also 
present.  The Kazakhstan delegation included several 
representatives from KazMunaiGaz (KMG) and KMG's executive 
director, Kayirgeldy Kabyldin.  The Greek representative was 
accompanied by two officials from DEPA, the Public Gas 
Corporation of Greece.  The Georgian, Ukrainian and Moldovan 
delegations included members of the Energy Ministries of 
those countries, and Austria was represented by a department 
head from the MFA (the Austrian representative did not 
indicate if he was attending in Austria's EU capacity). 
Turkmenistan was invited but declined to atte 
nd.  Deputy Foreign Minister Araz Azimov and senior SOCAR 
official Elshan Nazirov chaired the conference. 
 
¶3. (C) The two Iranian representatives were silent throughout 
the conference.  One of them occasionally photographed the 
screen on which the conference's PowerPoint presentations 
were being projected.  The Greek DCM later said that, when 
she had asked the GOAJ why the Iranians had been invited, the 
GOAJ had pleaded a need for "balance."  According to the 
British Ambassador, an earlier invitation list for this 
conference had excluded the United States, Britain and most 
of the EU members.  The Greek DCM said that the guest list 
was changed after the EU and others complained, on the 
grounds that they are the markets Caspian energy is trying to 
reach.  The British Ambassador reported a similar interaction. 
 
--------------------------- 
ALL URGE DIVERSIFICATION... 
--------------------------- 
 
¶4. (C) The conference began with both the MFA and SOCAR 
giving short presentations emphasizing the oil and gas 
reserves of the Caspian region in general and of Azerbaijan 
in particular.  The presentations did not include any new 
information.  The floor was then given to KMG executive 
Kabyldin who gave a presentation on Kazakhstan.  Kabyldin 
listed several energy projects in which Kazakhstan is 
involved, including CPC and the oil pipeline to China, but 
provided few details.  Interestingly, the Kashagan-BTC and 
Tengiz-BTC projects were lumped together under the obsolete 
name "Aktau-BTC," even though the Kashagan project has long 
since selected Kurik, not Aktau, as its port.  Kabyldin said 
that the cross-Caspian Inter-Governmental Agreement (IGA) for 
this project had already been negotiated, although post 
understands that Azerbaijan was just presented with a new 
draft IGA that is elicting diverse opinion among Baku policy 
makers.  Interestingly, Kabyldin said that KMG's vision for 
 
BAKU 00000327  002 OF 003 
 
 
the future is to transport both 
oil and gas to international markets, although his only 
specific mention of gas was when he noted that Kazakhstan 
might send gas to China. 
 
¶5. (C) The Ukrainian delegate stressed the importance of 
Caspian and Central Asian energy resources and argued for 
both diversity of supplies and of transit routes.  This was 
the general theme of everyone who spoke:  the Brody-Odessa, 
AMBO (Albania-Macedonia-Bulgaria), Burgas-Alexandroupolis, 
Nabucco and Samsun-Ceyhan pipeline projects were all briefly 
mentioned.  In all cases, the sentiment seemed to be not to 
favor one pipeline over another but to try to build as many 
of them as possible to support diversity of transit routes. 
"Everyone wants multiple corridors," said the Ukrainian 
delegate. 
 
--------------------------------------- 
...U.S. AND U.K. ALSO STRESS GOVERNANCE 
--------------------------------------- 
 
¶6. (C) Ambassador stressed that the United States supports 
diversification of Europe's energy supplies and transit 
routes, noting the USG's support for the BTC and SCP 
projects.  Demand in Europe will only increase and cannot be 
met by domestic supplies, he added.  Markets will carry the 
main burden of justifying any energy transportation projects, 
but governments need to help, for example by facilitating 
IGAs, HGAs, and conditions that minimize political risk. 
Ambassador noted that some policies, like the EU's 
anti-monopoly policy that may end up effectively barring the 
import of Shah Deniz gas, need to be examined carefully. 
Ambassador also pointed out that good governance and revenue 
management are key. 
 
¶7. (C) The British Ambassador emphasized similar themes, 
adding that Britain is a consumer, transporter and producer 
of energy and looks at the issue from all three perspectives. 
 The British Ambassador argued that energy security means 
both security of supply and security of demand.  He noted the 
participation of Azebraijan in EITI and said that effective 
management of energy revenues is the long-term way to manage 
political risk. 
 
------------------------------- 
AUSTRIA, EU RECEIVE THE MESSAGE 
------------------------------- 
 
¶8. (C) The Austrian delegate cited the need for a new energy 
policy for Europe, explicitly mentioning Ukraine's 
difficulties with Russia and quoting Churchill's famous 
remark that "safety and certainty in oil lie in variety 
alone."  He said that Europe needs links to the Caspian.  The 
European Commission representative echoed this and said that 
the EU is now "very aware" of Caspian energy resources.  The 
EU is developing a comprehensive energy policy and will 
likely present it in March. 
 
¶9. (C) At the end of the program, the MFA presented a 
"concept paper" which restated most of what was said during 
the conference: that European demand for energy is growing, 
that the Caspian region has energy resources, and that there 
is an opportunity for Caspian energy resources to be part of 
the diversification of European energy supplies.  Deputy 
Foreign Minister Azimov suggested that the group meet again 
during the Caspian Oil and Gas Show (COGS) in Baku in June, 
and that there be another session in Kazakhstan in November. 
Although a session had been scheduled for the next morning, 
by mutual consensus it was canceled. The political statement 
initially included in the agenda was not discussed. 
 
------- 
COMMENT 
------- 
 
¶10. (C) Industry was almost entirely absent.  However, the 
conference showed that despite Azerbaijan's perceived 
inaction on energy policy (reftel), at least some elements of 
the GOAJ are continuing to push the idea of bringing Caspian 
energy to European and world markets beyond the current plans 
 
BAKU 00000327  003 OF 003 
 
 
for the BTC oil pipeline and the SCP gas pipeline. 
Privately, Araz Azimov noted that he had hoped a reminder 
about Caspian energy would resonate at this moment, when 
Europe is dealing with the aftermath of Ukraine's problems 
with Gazprom.  The reactions of the Austrian and EC 
representatives would seem to indicate some success.  We 
should encourage Azerbaijan to follow up with this during 
COGS 2006 and to reach out to industry. 
HARNISH