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OO RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHRL #0153/01 0390928
ZNR UUUUU ZZH
O 080928Z FEB 08
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0392
INFO RUCNFRG/FRG COLLECTIVE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 1906
RUEHKB/AMEMBASSY BAKU 0074
RUEHTA/AMEMBASSY ASTANA
RUEHAH/AMEMBASSY ASHGABAT 0118

UNCLAS SECTION 01 OF 02 BERLIN 000153 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR EEB U/S JEFFERY AND EUR/FO DAS BRYZA 
 
E.O. 12958: N/A 
TAGS: ENRG EINV PREL PGOV GM
SUBJECT: GERMAN ENERGY GIANT RWE JOINS NABUCCO 
 
ENTIRE TEXT IS SENSITIVE BUT UNCLASSIFIED.  NOT FOR 
INTERNET DISTRIBUTION. 
 
¶1.  (SBU) SUMMARY: After negotiations lasting nearly 
a year, German energy giant RWE became the sixth 
member of the Nabucco Gas Pipeline consortium.  RWE 
joins energy companies from Austria, Bulgaria, 
Hungary, Romania and Turkey in the EU-supported 
project to pipe gas from the Caspian region to 
Europe by 2013. Nabucco is expected to make final 
decisions on planning and construction during the 
first half of 2008 amid concerns that the recently 
announced Gazprom supported Southstream project to 
link the Caspian region via Russia to Europe may 
jeopardize its viability.  Although a prime goal of 
the project was to reduce dependence on Russia and 
break Gazprom's monopoly on pipelines feeding into 
the European energy grid, Nabucco CEO Mitschek 
announced that the pipeline could also transport 
Russian gas.  END SUMMARY. 
 
¶2.  (SBU) After protracted negotiations with the 
Nabucco consortium, the CEO of RWE's newly formed 
RWE Gas Midstream, Stefan Judisch, signed the 
contract to join the project on February 5 in 
Vienna.  Existing members are Austrian OMV, 
Hungarian MOL, Romanian Transgaz, Bulgarian Bulargaz 
Holding EAD and Turkish Botas. Talks are reportedly 
underway with Gaz de France as a potential seventh 
member.  Azerbaijan is also seen as a potential 
partner and has reportedly expressed interest. 
 
¶3.  (SBU) RWE upstream activities are currently 
focused on Germany, the UK, Norway, Denmark, 
Northern Africa and the Caspian region.  Its 
relationship with Gazprom is currently limited to 
buying gas and does not have an interest in any 
pipelines or other forms of joint ventures with the 
Russian energy giant.  It thus sees participation in 
Nabucco as an opportunity to diversify supplies and 
reduce dependence on Russian gas.  A senior RWE 
official told Embassy Berlin that RWE participation 
in Nabucco is based on the expectation that Iranian 
gas would not be needed to make the project 
economically viable. 
 
¶4.  (SBU) Originally planned to reduce European 
dependence on Russian gas and pipelines, the $7.4 
billion EU-sponsored Nabucco project to construct a 
3,300 km pipeline to carry 31 bcm natural gas per 
annum from the Caspian region to Europe has been 
dogged by ill fortune since its foundation in 2002. 
Russia has been eager to lock up gas via long term 
contracts from other major suppliers in the region 
such as Turkmenistan, Khazarkstan and Azerbaijan. 
This has led many experts to question the pipeline's 
viability, especially if Iranian gas remains 
politically unfeasible.  It what many view as a 
further blow to Nabucco, Gazprom was recently 
successful in reaching agreement with Italian ENI, 
as well as Bulgaria and Serbia, on the competing 
South Stream pipeline. 
 
¶5.  (SBU) The Nabucco Consortium reacted to the 
Russian Southstream announcement by issuing a nine 
million euro-contract to a British engineering 
company to coordinate technical planning with the 
goal of the pipeline being operational by 2013. 
However, the latest announcement by CEO Mitschek 
that the pipeline could also carry Russian gas is a 
complete reversal of previous policy and could be 
seen as a last ditch stand to save the pipeline. 
However, our contacts with the major German gas 
competitors said that although they view Southstream 
as a competing project, the demand for gas in Europe 
will be so large that both pipelines could be 
viable, provided other supplies from the region 
(e.g., Iraq or Iran) become available.  They also 
saw a potential for linking the two projects. 
 
¶6.  (SBU) With a turnover of approximately 10 
billion euro per annum in gas and 10 million 
customers, RWE is currently Europe's sixth largest 
 
BERLIN 00000153  002 OF 002 
 
 
gas company.  Its market share ranges from seven 
percent in the Netherlands, eight percent in Germany 
and the UK to 41 percent in Hungary and 82 percent 
in the Czech Republic.  RWE Gas Midstream was formed 
to consolidate gas procurement, supply, trading and 
sales as well as commercial responsibility for LNG 
and non regulated gas transport, transit and 
storage. RWE DEA is now responsible for consolidated 
upstream oil and gas activities. 
 
¶7.  (SBU) COMMENT: Russian moves to undermine EU 
attempts to reduce dependence on Russian gas and 
pipelines can be seen as a pincer movement with the 
Baltic Sea Nordstream Pipeline in the north and the 
Southstream pipeline to Italy and the Balkans in the 
south.  Given that the Russians have also 
successfully contracted Caspian gas, there are 
serious doubts about the ability of the Nabucco 
consortium to obtain enough gas to feed the 
pipeline.  A side-effect of Russian support for Iran 
could be to polarize the EU in its efforts to obtain 
non-Russian gas.  In this light, the sudden 
announcement that Russian gas may also be acceptable 
for the Nabucco pipeline could be seen as a 
strategic move by Nabucco to defuse Russian 
resistance.  Whether this succeeds or merely 
emboldens Gazprom further remains to be seen. 
Gazprom's agreement with Italian ENI on the 
Southstream project also highlights the apparent 
inability of the European Union to achieve a common 
position in developing a common energy policy.  END 
COMMENT. 
 
TIMKEN, JR