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DE RUEHBW #1813/01 3071429
ZNR UUUUU ZZH
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FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 9693
INFO RUEHPS/USOFFICE PRISTINA 3567

UNCLAS BELGRADE 001813 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV ENRG ECON SR YI UNMIK
SUBJECT:  SERBIA'S ELECTRICITY OFFER TO KOSOVO 
 
 
SUMMARY 
------- 
¶1. (SBU) The Working Group on Energy Cooperation met in 
Belgrade on October 26.  As a result of the meeting, Serbia 
sent a formal proposal of an electricity donation for Kosovo 
on October 27 to Jolly Dixon, Chairman of the Working Group. 
The offer, considered to be a donation to avert a potential 
humanitarian crisis this winter, is the same as last year's: 
50 million GWh of electricity per month benefiting those 
Serbian enclaves experiencing the greatest electrical 
outages.  However, the offer appears to drop other conditions 
which Serbia had tried to include last year, including 
employment conditions and a request to establish its own 
power distribution company. However, econoff was told 
privately by UNMIK that an arrangement has already been 
reached between state-owned Elektroprivrede Srbije (EPS) and 
the Kosovo Energy Corporation (KEK) to supply free 
electricity, but the arrangement lacks the political cover a 
formal agreement would provide. END SUMMARY. 
 
SERBIA'S OFFER OF ELECTRICITY WITH ONE CONDITION 
--------------------------------------------- --- 
¶2. (SBU) The Working Group on Energy Cooperation met on 
October 26 in Belgrade to discuss Serbia's offer of free 
electricity to Kosovo among other things.  The meeting 
concluded with Serbia committing to send a detailed offer for 
the electricity donation by Friday, October 27.  The Pristina 
delegation would not commit to a timeframe by which they 
would respond.  Jolly Dixon, UNMIK Chairman of the Working 
Group, strongly urged Pristina to respond to Belgrade's offer 
within five days. 
 
¶3. (SBU) Econoff obtained a copy of the October 30 letter 
signed by Nenad Popovic, Vice President of the Coordination 
Center of Serbia for Kosovo and Metohija (CCKM) and team 
leader of the Economic Team for Kosovo and Metohija and for 
the South of Serbia, and Miroslav Kukobat, Serbia's point 
person on Kosovo electricity issues, and dispatched to Jolly 
Dixon (full text in para 12).  The Serb's offer 50 million 
GWh/month of electricity which, according to Kukobat, is 
equivalent to 5 percent of the total capacity needed and can 
supply electricity to some 30,000 people.  The only condition 
would be a guarantee from UNMIK that the Serbian enclaves 
receive reliable electricity as a result of the donation to 
the extent it is possible.  As a donor for a humanitarian 
crisis, Serbia believes it is justified in specifying how the 
donation would be used. 
 
¶4. (SBU) In a meeting with econoffs on October 23, Miroslav 
Kukobat emphasized that it is not Serbia's intent to 
discriminate on an ethnic basis.  Rather, the donation will 
go to assist the Kosovar Serbs who are the most vulnerable to 
electricity disruption without freedom of movement, 
employment and income to pay for electricity consumption.  If 
Albanians also benefit from electricity being sent to these 
Serbian enclaves, Serbia has no problem with that.  He was 
dismayed at UNMK's outright rejection of Serbia's offer last 
yer before it even looked at whether or not it wastechnically fesible. He believes that it would bereasonable 
for UNMIK to accept an offer that willease the capacity 
stress on the system and sbsequently benefit other areas as 
well. 
 
¶5. (SBU) Kukobat also said that Kosovar Serbs have no 
confidence in public institutions in Kosovo, and this 
adversely impacts the collection rate.  Serbia is offering to 
establish a mechanism to facilitate better collection rates 
in Serbia areas, as much as an estimated 30 percent. 
However, Kukobat stressed that this is not a condition to the 
electricity offer.  Rather, Serbia is offering this 
separately to help the situation. 
 
SECRET DEAL REACHED? 
 
SIPDIS 
-------------------- 
¶6. (SBU) Econoff met with Paul Mecklenburg, Political Advisor 
for the United Nations Office in Belgrade on October 25 to 
discuss efforts by Nenad Popovic, Serbia's head of the 
Economic Team for Kosovo and Metohija, to broker a deal 
between the EPS and KEK that would allow the transmission of 
free electricity to these Serbian enclaves while benefiting 
others in those areas.  Mecklenburg says that while formal 
talks continue to founder over Serb conditions, in practice 
it appears that EPS has begun to provide power through the 
Serbian grid.  While Popovic, IC personnel in Kosovo and 
local Albanian officials in KEK have confirmed this initial 
delivery, it appears to be quite limited in scope and no one 
-- either in UNMIK or KEK -- appears to be willing or able to 
confirm the details of this arrangement. 
 
¶7. (SBU) There was no mention of a deal at the meeting of the 
Working Group on Energy Cooperation in Belgrade on October 
¶26.  Econoff privately asked UNMIK and GOS participants 
separately if a deal had been reached, and all said that they 
knew nothing about such a deal. 
 
¶8. (SBU) The Working Group concluded with Serbia committing 
to send a formal offer for the electricity donation by 
Friday, October 27.  The Pristina delegation would not commit 
to a timeframe by which they would respond.  Jolly Dixon, 
UNMIK Chairman of the Working Group, strongly urged Pristina 
to respond to Belgrade's offer within five days. 
 
EMS NOT SHOWING FAVORITISM 
-------------------------- 
¶9. (SBU) UNMIK has accused Serbia's transmission system and 
market operator, EMS, of not providing transit of electricity 
from neighboring countries to Kosovo in a fair and 
transparent manner.  On October 23, Fayez Risheg, UNMIK Head 
of Office in Belgrade, told econoff that as an example, EMS 
refused to transmit electricity already purchased from 
Bulgaria because it was not given proper notification. 
However, at another time when electricity was purchased from 
a Serbian supplier at twice the price and with the same 
notification time, EMS allegedly transmitted the electricity 
without any problems. 
 
¶10. (SBU) Kukobat refuted these accusations, stating that 
documentation had been provided to the European Commission 
providing proof that EMS's transmission of electricity is 
done fairly and transparently.  He cited a recent letter that 
Minister of Energy Radomir Naumov sent to the Andris 
Piebalgs, European Commissioner for Energy, in which Naumov 
also refuted these accusations by referring to the 
significant documentation submitted to EU representatives. 
The letter also appealed to the EU for their help in 
mediating the offer to export electricity to Kosovo.  Kukobat 
believes that only the U.S. or the EU can help break the 
current stalemate that exists in the discussions. 
 
¶11. (SBU) When Econoffs asked about the September 1 letter 
from Prime Minister Kostunica to EU Commission Solana 
offering power for Kosovo on an unconditional basis, Kukovat 
threw his hands in the air (figuratively) and said that the 
Ministry of Energy had not been consulted on that letter. 
However, the new offer is an effort to be as responsive as 
possible to humanitarian needs, he said. 
 
¶12. (SBU) The following is the text of the October 30 letter 
from Nenad Popovic to Jolly Dixon regarding the Serbian offer 
of electricity: 
 
Dear Mr. Dixon, 
 
As you are well aware, from 1999, Kosovo and Metohija has 
been ruled by UNMIK in accordance with the UN Security 
Council Resolution 1244.  Ever since, the electricity supply 
in Kosovo and Metohija (K-M) is very ineffective, reaching 
now very critical point.  Our electricity companies, EPS and 
EMS, have not been allowed to operate on the territory of 
province.  Serbia has no authority at all on the territory of 
the Province.  In this respect, there is no responsibility of 
Serbian Government concerning the extremely bad energy 
situation in the Province. 
 
Due to very bad condition of power facilities in the 
Province, all the population living in it has serious 
problems concerning the quality and regularity of electricity 
supply.  Areas of the province mainly inhabited with the 
Serbian population are in the worst position.  Almost every 
day, the Serbian population in K-M has no electricity for up 
to 20 hours per day, which is completely unacceptable in 
Europe, at the beginning of the 21st century.  These 
electricity shortages during the most critical winter days 
instigated the real humanitarian disasters during the last 
two years.  We would like to prevent these humanitarian 
disasters to repeat for the third year in a row, in view of 
which, we would like to once again offer a donation in 
electricity for the areas K-M predominantly inhabited by the 
Serbian population. 
 
The Government of the Republic of Serbia is ready to provide 
humanitarian assistance in electricity for K-M (50 GWh/month) 
for the winter season 2006/2007, for the areas predominantly 
inhabited by the Serb population (and also including the 
minority Albanian population in the areas), because these 
areas are considered as the most vulnerable and socially 
jeopardized.  The guarantees of UNMIK that these areas will 
be provided with the electricity based on the delivered 
humanitarian electricity i.e. that these areas will temporary 
(sic) fall under the consumer category A, for the winter 
period 2006/2007, fully justify the basic fact that the 
donation should be targeted to the most vulnerable areas. 
 
The most important is that UNMIK fully cooperates with us, in 
order to make our proposal technically feasible.  This 
cooperation implies a readiness for the prompt start of 
talks, and for reaching a common understanding on highly 
technical, expert level, primarily concerning the power 
network exploitation, removal of the bottlenecks, and 
monitoring of the donation implementation.  Only such 
approach could make our proposal really and timely 
implemented. 
 
END TEXT. 
 
COMMENT 
------- 
¶13. (SBU) Serbia followed through with its commitment to 
offer the donation without all of the strings attached to 
last year's proposal.  UNMIK had told us that they were 
initially amenable to the offer last year until the other 
conditions were placed upon it.  This current offer provides 
two immediate benefits - Kosovar Serbs receive needed 
electricity while easing the stress on the grid and improving 
system integrity.  It also would provide a tangible signal 
that increasing cooperation could co-exist with Kosovo final 
status; we believe that UNMIK should grab this offer and work 
to establish other areas of concrete cooperation. 
 
POLT