VZCZCXYZ0018
OO RUEHWEB

DE RUEHRO #2317/01 3131707
ZNY CCCCC ZZH
O 091707Z NOV 07
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9375
RHEBAAA/DEPT OF ENERGY WASHDC IMMEDIATE

C O N F I D E N T I A L ROME 002317 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
DEPARTMENT OF ENERGY PASS TO SECRETARY BODMAN 
DEPARTMENT PASS TO DEPARTMENT OF ENERGY A/S HARBERT 
 
E.O. 12958: DECL: 11/08/2017 
TAGS: ECON ENRG EPRT PREL PGOV IT
SUBJECT: SCENESETTER FOR ENERGY SECRETARY BODMAN'S NOVEMBER 
13-14 MEETINGS IN ROME 
 
 
Classified By: Ecmin Tom Delare for reasons 1.4 (b) and (d) 
 
POLITICAL BACKDROP 
------------------ 
 
¶1.  (C/NF) As you visit Italy, the Italian government will be 
once again dealing with the instability that has 
characterized political life here during most the post-war 
period. The coalition government of Romano Prodi holds on to 
power in Italy's parliamentary system by a very thin margin. 
The government is in fact a coalition that includes many 
small parties, several of which are on the far left of the 
Italian political spectrum.  The loss of support of one or 
more of these parties could result in a vote of no-confidence 
and the fall of the government. Obviously the need to keep 
all these small parties happy makes government action quite 
difficult.  Many here (including former Prime Minister Silvio 
Berlusconi) believe that the Prodi government's fall from 
power is imminent, and may occur in mid-November.  The 
parliament is currently focused on the government budget 
bill.  Key votes will be held next week. There is a chance 
that these votes could bring the government down, but this 
week the government appears to have enough support to 
survive.   If the government does fall, it could be replaced 
by a temporary caretaker government, or the Italian President 
could call for new elections. (The only portion of your 
schedule that would be affected by a government crisis would 
obviously be your call on Minister Bersani.) 
 
Italian Energy and Energy Security Policy 
----------------------------------------- 
 
¶2.  (U) Since 2005, the GOI has sought to increase the use of 
natural gas to meet Italy's winter heating needs.  This 
policy was driven by the desire to minimize exposure to high 
oil prices and to lower Italian carbon dioxide emission in 
order to comply with Italy's Kyoto Protocol obligations. 
Over one million homes have been switched from oil to natural 
gas heating.  The GOI has also increased the use of natural 
gas in power generation -- in the summer of 2005 alone, 6,000 
megawatt hours (MwH) of natural gas-fired plants came 
on-line.  An additional 15,000 MwH of natural gas-fired power 
plants are under construction, with an additional 9,000 MwH 
authorized.  The potential for wind and solar energy in Italy 
is limited due to the lack of available land for solar 
installation and irregular winds. 
 
¶3.  (U) Italian energy security policy has two goals: (i) 
increasing Italian access to existing natural gas sources by 
constructing new natural gas pipelines, and (ii) encouraging 
the formation of a common EU energy policy. 
 
¶4.  (U) After natural gas shortages in January 2006, caused 
by Gazprom's decision to cut off gas exports via pipelines 
transiting Ukraine, the GOI has supported construction of 
pipelines linking Italy to natural gas fields in Russia, 
Algeria, and the Caspian Basin.  Ministry of Foreign Affairs 
officials have said the GOI will support "any project that 
will bring natural gas to Italy."  Most recently, GOI efforts 
helped ensure EU approval of the Turkey-Greece-Italy (TGI) 
pipeline, which will connect Italian gas consumers to natural 
gas fields in Azerbaijan.  The GOI has also offered 
rhetorical support for the construction of LNG regasification 
facilities, but has not intervened forcefully to help gas 
companies, including ExxonMobil and British Gas, overcome 
opposition at the regional and city/town levels. 
 
¶5.  (U) The GOI also supports formulation of an EU energy 
policy, as it sees a unified EU position on energy as a 
counterweight to Gazprom's dominance of the EU natural gas 
market.  Gazprom supplies 24% of EU's the natural gas 
supplies.  Discussions of an EU energy policy have begun in 
Brussels, but have not made much progress.  Among the issues 
that will have to be decided upon is the role of nuclear 
power, which advocates tout as a "zero emissions" power 
source insofar as carbon dioxide is concerned.  Opponents of 
nuclear energy argue that the question of nuclear waste 
disposal must be addressed before nuclear energy production 
in Europe is expanded. 
 
Your Meeting with Minister of Productive Activities Bersani 
--------------------------------------------- -------------- 
 
¶6.  (U) Your meeting the afternoon on November 13 with 
Economic Development Minister Pierluigi Bersani will be your 
only meeting with the Italian government during your time in 
Rome.  Because of the weakness of the center-left coalition, 
high-level meetings such as yours are essential to shoring up 
GOI support for initiatives such as the Global Nuclear Energy 
Partnership (GNEP).  Bersani will sign the GNEP Statement of 
Principles during your meeting. 
 
¶7.  (U) Bersani is involved in the newly formed Democratic 
Party,the largest political party in Prodi's coalition. 
Bersani previously served as Minister of Industry from 1996 
to 1999, during the previous Prodi and D'Alema (now Deputy 
Prime Minister and Foreign Minister) governments.  As 
Minister of Industry, Bersani was responsible for passing 
legislation that forced ENEL, the Italian electricity 
parastatal, to use electricity-generating subsidiaries, thus 
opening up the Italian electricity sector to competition. 
 
¶8.  (U) As Minister of Economic Development, Bersani has 
spoken out in favor of construction of additional LNG 
regasification facilities, which he sees as central to 
efforts to improve the diversity of Italy's natural gas 
supplies.  He has also spoken out in support of Italian 
participation in nuclear power research, but has stopped 
short of endorsing the resumption of nuclear power generation 
in Italy, which was halted following a 1987 referendum. 
Bersani's efforts regarding LNG facilities have been halted 
by environmental interests within the Prodi government, 
including parliamentarians belonging to the Green Party, and 
local "not in my backyard" opposition.  Because of the 
governing coalition's one-vote majority in the Senate, this 
opposition has political clout disproportionate to its actual 
numbers, and is exceedingly difficult to overcome. 
 
¶9.  (U) ExxonMobil's efforts to build an LNG regasification 
facility near Rovigo (on Italy's Adriatic Coast near Venice) 
illustrates the opposition that energy infrastructure 
projects can face here.  ExxonMobil's project, in which 
Edison Italia and Qatar Gas are investors, has been delayed 
for almost a decade by local opposition and regulatory 
changes. 
 
Your Breakfast with Edison Italia Senior Executives 
--------------------------------------------- ----- 
 
¶10.  (U) You will have breakfast the morning of November 14 
with the Umberto Quadrino, CEO of Edison Italia, and Edison 
Vice president Roberto Poti.  Edison is partially owned by 
Gaz de France and is a key investor in three projects which 
will enhance Italy's energy security by introducing new 
sources and routes for natural gas to the Italian market: the 
Turkey-Greece-Italy (TGI) natural gas pipeline, ExxonMobil's 
Rovigo regasification facility, near Venice, and the GALSI 
pipeline, which will bring Algerian natural gas to the 
Italian mainland via Sardinia. 
 
¶11.  (U) The State Department has worked especially closely 
with Edison on the TGI project, which will link natural gas 
fields in Azerbaijan directly to European energy consumers. 
Upon its completion in 2012, TGI will bring 8 billion cubic 
meters (bcm) of Caspian Basin natural gas annually to Italian 
consumers, and will be the first natural gas pipeline to 
deliver Caspian Basin gas to Europe outside of the Gazprom 
pipeline system.  TGI still faces some challenges which 
Quadrino and Poti may be able to comment on.  First, there 
have been questions raised about the adequacy of Azeri 
natural gas production, and whether the Azeris will be able 
to meet the demand for natural gas from TGI and the Nabucco 
pipeline.  Second, the companies building TGI (Edison, DEPA 
(Greece), and BOTAS (Turkey) entered into an agreement in 
July regarding the transit and pricing of Azeri natural gas 
via the TGI pipeline.  The Azeri government objects to the 
agreement because it includes a "net back" pricing system 
which the Azeris argue will force then to sell natural gas to 
the TGI companies at below market prices and disclose their 
confidential commercial arrangements.  Edison has been 
 
SIPDIS 
working to address these concerns.  Quadrino and Poti may be 
able to shed light on the success of their efforts to address 
Azeri concerns, which are important because they may set the 
tone for future negotiations for Trans-Caspian natural gas 
contracts. 
SPOGLI