VZCZCXYZ0015
RR RUEHWEB

DE RUEHMD #0569/01 1440718
ZNR UUUUU ZZH
R 230718Z MAY 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 4815
INFO RUEHBS/AMEMBASSY BRUSSELS 5299
RUEHFR/AMEMBASSY PARIS 1496
RUEHBS/USEU BRUSSELS

UNCLAS MADRID 000569 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: AMGT ASEC BEXP OREP AFIN SP FR PO
SUBJECT: SCENESETTER FOR CODEL PETERSON VISIT TO MADRID 
 
REF: SECSTATE 053737 
 
¶1. (SBU)  Summary:  Embassy Madrid warmly welcomes your 
visit.  The Government of Spain (GOS) shares your interest in 
the development of renewable energy, including biofuels. 
However, what once promised to be a booming industry with 
plans for construction of 30 biodiesel and 20 ethanol plants, 
has stalled as a result of delays in passing a mandatory 
blending requirement and very high raw material prices. 
Nearly all of the existing biofuel production capacity in 
Spain sits idle, including the Abengoa cellulosic ethanol 
plant in Salamanca that you will be visiting on Sunday, June 
¶1.  High-level GOS officials have raised concern over the 
distortion in biodiesel production caused by the previously 
existing "splash and dash" regime in the U.S. and should 
react favorably to recent developments to remove this 
provision.  Within the Doha round context, Spain is aligned 
with France in supporting protection for non-wine 
agricultural products.  Spain is the only large producer of 
agriculture biotechnology in Europe, and continues to be its 
strongest supporter within the EU.  End Summary. 
 
----------------- 
Biofuels in Spain 
----------------- 
 
¶2. (U)  The socialist government reelected in March has 
remained consistently committed to the development of Spain's 
renewable energy industry, including biofuels.  In December 
2006, the Spanish Ministry of Industry announced plans for a 
new regulation making a two percent biofuels blend mandatory 
in calendar year 2007.  Although approved by the Spanish 
Congress in June 2007, the new regulation establishing 
mandatory blending does not take effect until 2009.  The new 
law includes a voluntary 1.9 percent blending in 2008, a 
mandatory 3.4 percent blending in 2009, and a mandatory 5.83 
percent blending in 2010. 
 
¶3. (U)  The uncertainty and delay in implementing the new 
mandatory blending requirement caused significant delays in 
development of the once-promising biofuel industry in Spain. 
Combined with very high raw material prices, the absence of a 
mandatory mixing requirement has caused all of the major 
biodiesel and ethanol plants in Spain to halt production. 
Although some small plants currently produce biodiesel with 
used oil, and a small amount of ethanol is being distilled 
from surplus wine, most of Spain's currently available 
production capacity sits idle.  Additionally, the significant 
investment plans that various companies announced in recent 
past, which could have led to as many as thirty biodiesel and 
twenty ethanol plants in production by the end of calendar 
year 2008, have either been postponed or terminated all 
together. 
 
¶4. (SBU)  The issue of "splash and dash" has been raised by 
high-level GOS officials with the USG.  (Note: The EU alleged 
that U.S. biodiesel exports to Europe benefited from domestic 
U.S. subsidies under the splash and dash scheme.  End Note) 
The GOS' former Secretary of State for Tourism and Commerce, 
Pedro Mejia, shared his concern over this issue with Senator 
Grassley during CODEL Martinez's visit to Madrid in January 
2008, and with several U.S. Senators during a meeting with a 
Spanish renewable energy delegation on Capitol Hill in 
February 2008.  The recent decision by the House Ways and 
Means Committee to end the provision will be received 
favorably by the GOS.  Embassy recommends that the CODEL be 
prepared to discuss the issue, particularly the positive 
aspects of this recent development. 
 
--------------------------------------------- -------- 
Doha Round: 
Domestic Farm Supports and Agricultural Biotechnology 
--------------------------------------------- -------- 
 
¶5. (SBU)  The Spanish Ministry of Environment, Rural 
Development and Marine Affairs and the Spanish farmers they 
represent stand clearly with France regarding the European 
Commission's (EC) negotiating mandate in the Doha Round of 
negotiations.  They believe that the EC has already exceeded 
the negotiating mandate agreed by all 27 Member States (MS). 
They are particularly sensitive to further tariff reductions 
that might be part of a comprehensive negotiating outcome, 
believing that with the current Common Agricultural Policy 
(CAP) reform, they have become too exposed to competition 
from imported commodities.  Many Spanish producers use 
geographical indications to differentiate regional 
production.  They align themselves with the French on the 
demand that protection for non-wine agricultural products be 
part of the Doha Round outcome. 
 
¶6. (SBU) Regarding CAP reform, the Spanish have fought hard 
to protect domestic producers to the extent possible within 
the CAP-reform parameters decided upon in Brussels.  In all 
cases, they have successfully insisted that the EC continue 
to provide the same level of (or greater) monetary support, 
even when they agreed to change the financial delivery 
mechanism.  At home, the Spanish negotiators have been very 
vocal about their negotiating success, which may be one of 
the contributing factors in the President effectively 
promoting the former Minister of Agriculture to run a 'super 
ministry' composed of the two former Ministries of 
Agriculture and Environment.  The new ministry is called the 
Ministry of Environment, Rural Development and Marine 
Affairs. 
 
¶7. (SBU)  Spain continues to be our strongest ally within the 
EU on agriculture biotechnology and the only substantive 
producer within the European Union.  Spanish corn farmers 
have exercised their option to grow biotechnology corn during 
the last 12 years, and during the last two campaigns have 
doubled planted acreage each year.  In 2007, Spanish corn 
farmers planted about 75,000 hectares.  Spain is a 
feed-deficit market, so it has a clear need to produce and 
source as much raw material as possible. 
 
 
---------------- 
Political Update 
---------------- 
 
¶8. (SBU)  The general elections in March 2008 were a hard 
fought affair that saw President Zapatero's Socialist party 
(PSOE) defeat Mariano Rajoy's Popular Party (PP).  The PSOE, 
which needed 176 seats in the 350-seat Congress to gain an 
absolute majority, won 169 seats or about 44 percent of the 
vote.  The Popular Party won about 40 percent of the vote, 
which translated into 155 seats.  Smaller regional parties 
from Catalonia, Galicia, and the Basque Region all received 
enough votes to gain congressional representation but lost 
seats to the two main political parties, the PSOE and PP. 
Voter turnout nationwide was over 75 percent.  The slowing 
Spanish economy, the terrorist threat from both the Basque 
terrorist group ETA and Islamic extremist groups, regional 
autonomy, and immigration were all major topics during the 
election.  Foreign affairs did not play a major role in the 
campaign, but the PSOE reminded voters that it removed 
Spain's troops from an unpopular war in Iraq. 
 
¶9. (SBU)  Since winning reelection, Zapatero has named a new 
government, created new ministries and combined others. 
Zapatero's new cabinet notably has more female ministers (9) 
than male (8), including Spain's first female Minister of 
Defense, Carme Chacon.  Two new ministries have been added: 
The Ministry of Equality and the Ministry of Science and 
Technology.  The Ministry of Agriculture has taken on the 
additional responsibility of Marine Affairs and has been 
combined with the Ministry of the Environment.  The GOS' 
First Vice President for the Presidency, Second Vice 
President for Economy and Finance, and Ministers of Foreign 
Affairs and Interior remain the same. 
 
--------------- 
Economic Update 
--------------- 
 
¶10. (U)  Spain has had one of Europe's fastest-growing 
economies over the last decade.  It has the world's eighth 
largest economy and is the world's second largest tourism 
destination and eighth auto manufacturer.  Its GDP per capita 
is expected to pass Italy's in 2010.  The next year or two 
will be more difficult.  A housing boom that spurred growth 
for several years ended abruptly in 2007.  Construction has 
slowed dramatically, and unemployment has risen to almost 10 
percent.  Inflation is higher than the EU average, which 
hurts competitiveness. 
 
¶11. (U)  U.S. investment has long been important to the 
Spanish economy (more so than bilateral trade), and U.S. 
firms employ over 220,000 Spaniards.  The growth of Spanish 
multinationals and the strong Euro have led to a surge of 
Spanish investment in the U.S. in the last few years.  In 
2007, Spain was the fourth largest foreign investor in the 
U.S., with particular emphasis in banking, toll road 
construction, and renewable energy.  Spanish firms now own 
wind farms in at least 14 U.S. states, as well as solar power 
and biofuels plants. 
 
----------------------------------- 
Diplomatic Cooperation and Security 
----------------------------------- 
 
¶12. (SBU)  U.S-Spain relations were seriously damaged by 
President Zapatero's decision soon after his election in 2004 
to abruptly withdraw Spanish forces from Iraq.  However, over 
the last several years, both countries have made a concerted 
and successful effort to rebuild the relationship based on 
strong mutual interests in counter-terrorism, fighting 
narcotics trafficking and organized crime, and rapidly 
expanding economic ties.  The real bilateral story is found 
in novel initiatives such as the HSPD-6 agreement we signed 
last September to facilitate the sharing of information 
between our national counter-terrorism authorities. 
Following the March 11, 2004 train bombings, Spain remains a 
target of Islamic extremists. Al-Qaeda leaders often call for 
the recapture of the medieval "Al Andalus," and the recent 
uncovering of a cell allegedly sympathetic to Al-Qaeda and 
operating out of Barcelona has shown the Spanish that this 
threat is not an idle one. 
 
¶13. (SBU) Spain is no stranger to terrorism, having fought 
the domestic Basque terrorist group ETA for almost 40 years. 
Spanish political leaders are currently showing a united 
face, as - for the first time in several years, 
representatives of all political parties in the Spanish 
Congress issued a joint statement on March 15 - announcing 
that all would work together to defeat ETA.  Interior 
Minister Rubalcaba said in late March that "we are entering a 
long cycle of violence" with ETA and, according to Spanish 
media, the Spanish National Intelligence Center (CNI) has 
informed the government that ETA has no plans to negotiate 
for at least the next 18 months. The Basque terrorist group 
has been active in recent months, detonating explosives on 
several occasions, including one that resulted in the death 
of a Spanish Civil Guard Officer on May 14.  ETA also 
assassinated a former PSOE city councilman on March 7 (two 
days before national elections), and two Spanish Civil Guard 
officers in France in December 2007.  Spanish security forces 
are concerned that ETA has established new bomb manufacturing 
centers and techniques that will enable the organization to 
launch more attacks. 
 
¶14. (SBU) Narcotics trafficking is another area of common 
concern and excellent cooperation.  Spanish authorities 
acknowledge that Andean cocaine is a serious problem here, 
and Colombian trafficking organizations are active in Spain. 
Money laundering is another serious issue.  We are eager to 
find ways to increase bilateral cooperation and to encourage 
Spain to engage more aggressively with law enforcement 
authorities in key Latin American countries.  Spain has 
recently taken steps in this direction.  Within the last two 
months, the Director General of Spain's Police and Civil 
Guard traveled to Colombia to sign a cooperation agreement to 
fight drug trafficking and its related crimes through 
increased personnel and information exchange. 
 
¶15. (SBU) Spain, second only to the U.S. in terms of 
investment, is actively engaged in Latin America.  In 
addition to cultural and historical ties, Spain shares our 
interest a strong democratic and free market institutions in 
the region.  Regarding Cuba, we share with Spain the 
objective of a peaceful transition to democracy but differ 
markedly on how to achieve this end.  Spain's socialist 
government has opted for engagement, claiming it can 
encourage regime elements who want change.  We take every 
opportunity to remind the Spanish that the Cuban regime is 
only interested in survival and that the Cuban dissidents 
need and deserve the active and visible support of 
democracies everywhere. 
 
¶16. (SBU) Spanish military cooperation matters.  The bases of 
Rota and Moron are strategic hubs, midway between the U.S. 
and Afghanistan and Iraq.  U.S. planes and ships account for 
around 5,000 flights and 250 port calls a year in Spain.  The 
Spanish military is pro-U.S. and pro-NATO. We need to keep 
this relationship strong.  Spain has nearly 800 personnel in 
Afghanistan and runs a provincial reconstruction team in 
Badghis province.  Spain has contributed some 150 million 
Euros in Afghan reconstruction funds.  Planning is underway 
to allow the Spanish to train and equip an Afghan Army 
company, which we hope will be a prelude to the training and 
equipment of a full battalion.  Spain has nearly 1,100 troops 
with UNIFIL in Lebanon and about 700 in Kosovo.  On Iraq, 
Spain has contributed $22 million to the Basrah Children's 
Hospital and a further $28 million in development funding for 
Iraq.  Spain's total commitment to the Iraq Compact was USD 
225 million.  The Spanish Foreign Ministry says that Spain 
has disbursed all of its pledge except for its concessional 
loans, which are pending completion of project proposals.  It 
also has provided through UNHCR over 800,000 euros for 
refugee and displaced persons relief in Jordan and Syria. 
Spain is an active participant in EU-Iraq negotiations on an 
economic cooperation agreement that would provide additional 
funding for training and development activities. 
------------------- 
Security Assessment 
------------------- 
 
¶17. (U)   In general, Spain is safe.  However, Madrid, 
Barcelona and other large cities in Spain attract a large 
number of criminals and pickpockets and frequent incidents of 
crime of opportunity against the unwary do occur.  It is best 
to carry only essential items including a photocopy of your 
passport's photo page.  Visitors can protect themselves 
against crime by being street-smart, alert and aware of their 
surroundings.  Travelers are encouraged to review the most 
recent Worldwide Caution issued by the Department of State. 
As the Department of State continues to develop information 
on any potential security threats to Americans overseas, it 
shares credible threat information through its Consular 
Information Program documents, available on the Internet at 
http://travel/state.gov.   Additional information regarding 
safety and security in Spain is available on the U.S. 
Department of State's website (www.embusa.es). 
Aguirre