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DE RUEHTC #1999/01 3230711
ZNR UUUUU ZZH
O 190711Z NOV 07
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0709
INFO RUEHMO/AMEMBASSY MOSCOW PRIORITY 1758
RUCPDOC/USDOC WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY 0585
RUEHAT/AMCONSUL AMSTERDAM PRIORITY 3833

UNCLAS SECTION 01 OF 03 THE HAGUE 001999 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR/WE (TSMITH), EUR/RUS (AGREENSTEIN) 
STATE ALSO FOR EUR/ERA, EUR/AGS, EEB/ESC/IEC/EPC (JLWRIGHT) 
MOSCOW FOR ESCHULTZ, AJALILI, GLYON 
USDOC FOR 4212/USFCS/MAC/EURA/OWE/DCALVERT 
PARIS ALSO FOR OECD 
 
E.O. 12356: N/A 
TAGS: ENRG EPET EINV ECON RS NL
SUBJECT:  NETHERLANDS/RUSSIA: DUTCH EXPAND ECONOMIC TIES DURING 
MOSCOW VISIT 
 
REF: A) THE HAGUE 1992 
B) THE HAGUE 1994 
 
THE HAGUE 00001999  001.3 OF 003 
 
 
THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE 
ACCORDINGLY. 
 
¶1.  (SBU)  SUMMARY:  Dutch trade and energy officials are claiming 
success following Prime Minister Balkenende's recent Russia visit 
and the conclusion of Dutch-Russian business deals that build on 
existing bilateral trade and business ties.  The Dutch hope that a 
Gasunie-Gazprom pipeline deal will reinforce their efforts to become 
a gas hub for Europe.  The Dutch claim the deal is consistent with 
EU energy sector liberalization rules.  Meanwhile, a Dutch-Russian 
business proposal to develop energy resources on the Yamal peninsula 
underscores the continued interest of companies like Shell in 
pursuing deals with Russia despite questions about Russia's 
reliability as a business partner and gas supplier.   END SUMMARY. 
 
¶2.  (U)  Dutch Prime Minister Jan Pieter Balkenende made his first 
official visit to Moscow November 5-8, accompanied by CEOs from 13 
large Dutch companies, including Shell CEO Jeroen van der Veer (see 
ref A for reporting on Balkenende's views on the visit).  Dutch 
Trade Minister Frank Heemskerk also participated in the visit and 
led a separate delegation of 34 small- and medium-sized enterprises. 
 Upon Balkenende's departure, Heemskerk and his delegation proceeded 
to Yekaterinburg, returning to the Netherlands on November 12. 
 
Dutch View Russia Visit as a Great Success 
-------------------------------------------- 
 
¶3.  (SBU)  Tanita Nieuwenhuizen, Russia Policy Officer, Directorate 
of Foreign Economic Relations, Dutch Ministry of Economic Affairs 
(MEA), told Econoff November 13 that all delegation participants 
were extremely satisfied with the visit.  Nieuwenhuizen, who 
traveled with Heemskerk, noted in particular the attention Vladimir 
Putin paid to the Dutch delegation, which met with the Russian 
President for over two hours even though the original meeting was 
only scheduled for 45 minutes.  Femke Hoogeveen, Senior Policy 
Advisor for Energy, Economic and Environmental Affairs Department, 
Dutch Ministry of Foreign Affairs (MFA), said the visit and its 
associated business deals had had a "positive effect" on an already 
"good bilateral relationship."  Business highlights from the visit 
included: 
 
-- A highly publicized November 6 agreement between the Dutch 
company Gasunie and the Russian company Gazprom, under which Gasunie 
will receive a 9 percent share in Nord Stream AG, the company 
constructing the Nord Stream Pipeline from Russia to Germany.  In 
return, Gazprom will receive an option to acquire 9 percent in the 
Balgzand Bachton Line (BBL) between the Netherlands and the U.K. and 
permission to use the Gasunie transport network. 
 
-- A joint proposal by Russian companies and Dutch enterprises 
Shell, Gasunie, GasTerra, Boskalis, Van Oord, and Royal Haskoning as 
well as the Port of Rotterdam to develop gas and oil resources on 
the Yamal Peninsula in northern Siberia.  Nieuwenhuizen said this 
proposal was the "first of its kind," as Putin had never accepted 
and approved a business plan at this level from a visiting 
delegation. 
 
-- The signing of a letter of intent between the Dutch mail carrier 
TNT and the Russian Post and a multimillion euro deal for the Dutch 
firm Custers to provide machines to the Russian Central Bank for the 
destruction of old banknotes. 
 
¶4.  (U)  The Dutch are the second largest investor in Russia after 
Germany.  At the end of 2006, accumulated Dutch investment in Russia 
totaled 11.5 billion euros ($16.9 billion), up from 8 billion euros 
($11.7 billion) in 2005.  In 2006, Dutch exports to Russia totaled 
5.3 billion euros ($7.8 billion), with imports, predominantly crude 
oil, at 10.9 billion euros ($16 billion).  While Nieuwenhuizen said 
these figures were substantially lower than those reported in the 
Russian press ($42 billion in trade volume and $12 billion in 
investments in 2007 alone), she said the Dutch were pleased that the 
Russians thought the bilateral trade and investment relationship was 
so substantial. 
 
THE HAGUE 00001999  002.3 OF 003 
 
 
 
Dutch-Russian Framework for Business Cooperation 
--------------------------------------------- --- 
 
¶5.  (SBU)  According to Nieuwenhuizen, Dutch and Russian businesses 
have been formally cooperating since 2006 under a Joint Business 
Dialogue led by the VNO-NCW (largest Dutch employers association), 
and the RSPP (Russian Union of Industrialists and Entrepreneurs). 
Under the Dialogue's framework, working groups on Energy, 
Agribusiness, Transport, and Financial and Technological Cooperation 
meet regularly to discuss opportunities and to advise both the GONL 
and GOR on how to realize those opportunities.  It was the working 
group on energy, Nieuwenhuizen added, that presented the Yamal 
proposal to Putin and the Russian Industry and Energy Minister 
Viktor Khristenko. 
 
¶6.  (SBU)  Nieuwenhuizen said the GONL and GOR also cooperate under 
an official economic framework agreement, which includes a committee 
led by Dutch Economic Minister Maria van der Hoeven and Russian 
Minister for Agriculture Aleksey Gordeyev.  The committee will meet 
next in Spring 2008, when Nieuwenhuizen expects another business 
delegation to accompany Dutch officials to Moscow. 
 
Dutch Don't Share EU Concerns Over Gasunie-Gazprom Deal 
--------------------------------------------- ---------- 
 
¶7.  (SBU)  Recent press reports indicate the EU could block the 
Gasunie-Gazprom deal over concerns that the agreement with Gazprom, 
an integrated energy producer and distributor, is inconsistent with 
EU efforts to liberalize the energy market and unbundle the 
ownership of transmission, distribution, and retail networks.  In 
separate discussions with Econoff, officials from both the Dutch MEA 
and MFA discounted EU Commission fears, while also noting that the 
Commission had not communicated officially with the GONL about the 
visit.  Bert Roukens, a Senior Advisor responsible for energy 
security and energy market liberalization at the MEA's Directorate 
General for Energy, said there was "still discussion" on the 
question of unbundling and whether the EU's proposal would apply to 
cross border pipelines or foreign companies without controlling 
shares (such as Gazprom in the case of the BBL).  Hoogeveen also 
said Nord Stream could not be classified as a transmission network. 
She commented that the Dutch instead see Nord Stream as an upstream 
or production pipeline and not subject to the EU regulations.  This, 
she said, was consistent with Dutch support for the EU's unbundling 
proposal, which "matches" the GONL policy of keeping transmission 
networks in government hands while putting distribution and retail 
in the hands of industry and restricting foreign distribution and 
retail companies from owning transmission networks. 
 
¶8.  (SBU)  Both Roukens and Hoogeveen said the GONL shares EU 
concerns about over-reliance on Russian energy, but that the issue 
is less urgent because the Dutch have their own gas reserves.  To 
resolve this issue and diversify energy sources, they said the GONL 
is looking to conclude energy agreements with third countries such 
as Algeria while supporting other pipelines such as Nabucco. 
 
Comment:  A Risk....Will There Be a Reward? 
------------------------------------------- 
 
¶9.  (SBU)  While some in the Dutch government have expressed great 
pleasure with the outcome of the visit, others have privately 
conveyed concerns about the business deals concluded with the 
Russians, noting that the Netherlands appears to have put business 
interests ahead of concerns over Russia's human rights record (see 
ref B).  It also remains to be seen whether the EU will formally 
oppose the Gasunie-Gazprom deal or cite energy security concerns. 
Meanwhile, two other developments will complicate Dutch gas hub 
plans and point to increasing reliance on Russia in the future. 
First, Dutch hopes for a gas export pipeline between Norway and the 
Netherlands were extinguished October 19 by Norway's decision not to 
favor gas over oil production at its giant Troll field.  Second, 
Algerian Minister for Energy Chakib Khelil announced November 15 
that Algeria could not provide gas to the Netherlands for the coming 
five years. 
 
¶10.  (SBU)  For Shell, the visit and Yamal proposal demonstrate the 
 
THE HAGUE 00001999  003.3 OF 003 
 
 
company's continued interest in Russia, in spite of its experience 
at Sakhalin II.  Contacts at both Shell and GasTerra have 
underscored the importance of Russia to meeting future European 
energy requirements and the importance of maintaining a presence in 
Russia to meeting their corporate objectives.  In response to 
queries about Russia's reliability as a business partner and gas 
supplier, these contacts have questioned Gazprom's willingness to 
risk the loss of high-paying European customers and its ability to 
secure loans from Western financial institutions to fund needed 
investments. 
 
GALLAGHER