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DE RUEHPG #0313/01 0821427
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O 231427Z MAR 07
FM AMEMBASSY PRAGUE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8789
INFO RHEHNSC/NSC WASHDC IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE

C O N F I D E N T I A L PRAGUE 000313 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
STATE FOR EUR/FO, EUR/NCE, EUR/ERA, EB/FO, EB/ESC 
COMMERCE FOR 4232/ITA/MAC/MROGERS 
NSC FOR MCKIBBEN 
 
E.O. 12958: DECL: 03/22/2017 
TAGS: ENRG ECON EFIN ETRD PGOV CZ RU
SUBJECT: CZECH AMBASSADOR FOR ENERGY SECURITY'S TRIP TO 
WASHINGTON 
 
REF: A. PRAGUE 206 
     ¶B. STATE 09854 
     ¶C. PRAGUE 77 
     ¶D. PRAGUE 33 
     ¶E. 06 PRAGUE 1402 
 
Classified By: Political-Economic Counselor Michael J. Dodman 
for reasons 1.4 B & D 
 
¶1. (C) SUMMARY AND COMMENT:  This is Vaclav Bartuska's first 
trip to the U.S. in his capacity as Czech Ambassador-at-Large 
for Energy Security.  He was appointed to this position last 
winter because the MFA saw the need for closer scrutiny and 
high level interagency coordination to develop a coherent 
energy policy that reflects the country's national security 
interests.  Although a political-scientist by training, 
Bartuska has grown into his job and become quite 
knowledgeable on the energy security issue.  He has traveled 
extensively in the region to engage in direct dialogue with 
key government officials and commercial decision makers in 
the Visegrad countries and Germany.  Bartuska is also a 
former dissident and a specialist on Russia.  END SUMMARY AND 
COMMENT. 
 
------------------ 
TRIP TO WASHINGTON 
------------------ 
 
¶2. (C/NF) Econoff met March 22 with Czech Ambassador-at-Large 
for Energy Security Vaclav Bartuska to preview his visit to 
Washington the week of March 26.  The purpose of his trip is 
to lay the groundwork on energy security issues for the April 
20 visit by Foreign Minister Schwarzenberg to Washington. 
Specifically, Bartuska's mission is to determine how much the 
USG is willing to get involved to ward off Russian "energy 
imperialism" in this region, including in the current bid by 
Lukoil to purchase ConocoPhillip's minority stake in the 
Czech Oil Refinery (Ceska Rafinerska -- CRC) (ref B). 
Bartuska believes the USG has enough economic leverage with 
Russia to have influence in the outcome of the encroaching 
Russian interests in the European energy sector, and that it 
is a matter of political will. 
 
--------------------------------------------- ------ 
NEXT STEPS ON CZECH ENERGY SECURITY RECOMMENDATIONS 
--------------------------------------------- ------ 
 
¶3. (C/NF)  Bartuska informed that the Czech Energy Security 
Working Group of the Czech National Security Council met 
March 22 to discuss revisions to the Czech Energy Concept 
Paper submitted to the EU.  He said that the Ministry of 
Industry and Trade (MPO) was unwilling to redraft the paper 
because they believe doing so would open up a Pandora's Box 
for the Greens to hijack the paper. (NOTE: The Greens do not 
want any additional nuclear power plants built in the Czech 
Republic but others in the coalition government do not see 
how the Czech Republic can fulfill its future domestic energy 
needs without it. END NOTE)  Arguing that the content does 
not need re-drafting since it was last done in 2004, MPO 
simply wants to make some cosmetic changes.  Bartuska is 
fighting this, as the current content of the paper is 
"fiction," based on what the Czech Republic has told the EU 
it will strive for as opposed to what has been done and can 
be done in reality. 
 
¶4. (C) Bartuska must submit by June 2007 an assessment of 
priority issues for Czech energy security, which he previewed 
with econoff.  He has decided to limit the focus to one 
priority issue per energy source -- electricity, gas, oil, 
and nuclear fuel. 
 
-- On electricity, the focus will be on whether the Czech 
Republic will  have enough electricity to export and/or be 
self-sufficient starting 2015.  The validity of this claim 
will dictate what government policy will be on nuclear energy 
and coal mining policies. 
 
-- On gas, the priority is the need to reassess what the 
European gas network will look like in 15 years.  Bartuska 
believes that Russia will move forward with its North Stream 
and Blue Stream pipeline projects no matter what, and that 
the Czech Republic will likely lose it protected status as a 
transit country for gas deliveries to Germany.  This will not 
only mean decrease in revenue for the Czech government and 
decreased in the value of Czech RWE Transgas pipelines, but 
the Czech Republic will also fall lower on the "pecking 
 
order" for gas delivery from Russia. 
 
-- On oil, the priority issue is whether Russia has enough 
oil to export in 2020.  Bartuska believes that Russia has 
over-committed itself in terms of future oil contracts. 
 
-- On nuclear fuel, Bartuska informed that CEZ was seeking to 
move up the calendar on when it will switch from the current 
supplier Westinghouse to Russian Tvel by one year.  If 
successful, the Czech Republic would become 100% dependent on 
Russia for nuclear fuel starting in 2009 rather than 2010, 
which is when the current contract with Westinghouse expires. 
 Nuclear fuel currently supplied 36% of Czech electricity. 
 
------------------------------ 
REGIONAL PIPELINE DEVELOPMENTS 
------------------------------ 
 
¶5. (C/NF) SLOVAKIA'S TRANSPETROL: Bartuska confirmed that 
Czech Minister of Industry and Trade Martin Riman met with 
his Slovak counterpart on March 15, accompanied by the Czech 
state-owned oil pipeline company MERO.  MERO made a pitch to 
buy the 49% share of Transpetrol with 100% managerial rights. 
 Bartuska said that MERO fully realizes that Russia is likely 
to get this share, but wanted to try anyways based on its 
historical ties and privileged relationship with Transpetrol 
(NOTE: MERO and Transpetrol were one company before 
Czechoslovakia split up. END NOTE) and because it would make 
commercial sense for MERO. 
 
¶6. (C/NF) HUNGARY'S DECISION ON BLUE STREAM:  Bartuska said 
he was not/not surprised that Hungary decided to go with 
Russia's Blue Stream gas pipeline project vice the EU's 
Nabucco pipeline.  Bartuska believes Nabucco is "dead" since 
a pipeline without a viable source is meaningless.  His view 
is based on the belief that the Azeris do not have sufficient 
supplies of gas, Turkmenistan is firmly under Russia's hands, 
and while Iran has vast supplies, it remains untapped and 
need much investment to do so. 
 
-------------------------------------- 
WHY IS GOVERNMENT SELLING MORE OF CEZ? 
-------------------------------------- 
 
¶7. (C/NF) On March 20, the government approved the sale of 
approximately 7% of its 67% share in the Czech electricity 
monopoly and cash cow CEZ by floating it on the Czech stock 
market, which will bring the government share to 60.61%  The 
Ministry of Finance expects the share will being over CZK 35 
billion.  All government ministers voted in favor with the 
exception of the Greens, who abstained.  On March 23, the 
media reported that CEZ was seeking to float only "bulk 
shares" in hopes to allow CEZ itself to buy the government 
shares.  One media source questioned the wisdom of this move 
given that CEZ has sufficient dividends available for the 
government to tap to plug the deficit.  The same source 
speculated that the answer was in the money trail and alluded 
to government corruption.  Another element of these 
developments at CEZ is that in early March, CEZ management 
proposed changes to the status to limit the power of the 
supervisory board (and strengthen the power of the management 
board), which the government has thus far resisted. 
GRABER