VZCZCXRO8551
PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHBM #0431/01 1540900
ZNY CCCCC ZZH
P 020900Z JUN 08
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC PRIORITY 8333
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY 0015
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHMCSUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 BUCHAREST 000431 
 
SIPDIS 
 
DEPT FOR EUR - JGARBER, MBRYZA 
DEPT FOR EEB - SMANN, SGALLOGLY 
USEU BRUSSELS FOR SPECIAL ENVOY GRAY 
NSC FOR LCATIPON 
STATE PASS TO USTDA DSTEIN 
USDOC FOR ITA/EUR/OEERIS/CEED/KNAJDI 
ENERGY FOR TTILLER 
 
E.O. 12958: DECL: 06/01/2018 
TAGS: ENIV ENRG PGOV PREL RO
SUBJECT: ROMANIA: STATE COUNSELOR BRIEFS ON ENERGY SECURITY 
ISSUES 
 
Classified By: DCM Mark A. Taplin for reasons 1.4(b) and (d) 
 
 ¶1. (C) Summary.  In a May 19 meeting with EconOff, State 
Counselor to the Prime Minister for Economic Affairs 
Constantin Ciupagea shared the Romanian Government's current 
thinking on LNG, pipelines, and the proposal for a 
consolidated state energy company.  Ciupagea reiterated 
Romania's support for an LNG terminal in Constanta, but also 
said that South Korea has expressed interest in developing a 
smaller project near the port of Mangalia.  On pipelines, 
Ciupagea added his assessment that Turkey is "playing a 
waiting game" to see how the supply situation works out.  The 
proposed state energy "national champion" company is gaining 
ground within the Government of Romania (GOR) and appears 
unlikely to encounter any significant obstacles on the part 
of the EU.  End summary. 
 
LNG 
--- 
 
¶2.  (C) Ciupagea opened the meeting with a discussion of LNG 
and the GOR's desire to import it by way of the Black Sea. 
Mentioning the proposed feasibility study for an LNG terminal 
in Constanta (USTDA is in the preliminary evaluation phase of 
a project proposed by U.S. developers ETG/UGI), he said that 
the GOR has every interest in getting the project done as 
quickly as possible.  He said that several investors have 
already expressed interest in project development as soon as 
the feasibility study is completed.  (Comment: The fact that 
other investors are interested in the project may explain 
some of the reluctance ETG has encountered in finalizing a 
deal with the state-controlled project beneficiary, Romgaz. 
End comment). 
 
¶3.  (C) Without naming specific companies, Ciupagea indicated 
that the GOR and potential investors have had preliminary 
discussions on LNG supply with Egypt, Qatar, UAE, and other 
Persian Gulf countries.  He was positive on the likelihood 
that Romania would be able to obtain sufficient LNG supplies 
to make a terminal at Constanta feasible.  However, Constanta 
is not the only project under consideration.  Ciupagea also 
mentioned a South Korean proposal to develop a smaller (3 
bcm) LNG facility in the port of Mangalia, south of Constanta 
near the Bulgarian border.  The benefit is that such a 
facility could be serviced by smaller size vessels, which he 
asserted are less problematic with regard to Bosporus transit 
according to what the Turks have indicated in bilateral 
meetings with Romania. 
 
Pipelines/Regional Cooperation 
------------------------------ 
 
¶4.  (C) Ciupagea said Romania perceives little short-term 
forward movement on any of the proposed "southern corridor" 
pipeline projects.  He offered his assessment that Turkey is 
playing a waiting game to see how the upstream supply 
situation works out before throwing their weight 
significantly behind Nabucco or another project.  Romania is 
still pursuing internal cooperation on energy issues within 
the EU.  One example of this involvement is that Romania is 
angling to host the new EU electricity regulatory body when 
this institution is established.  The hope is that Romania 
will be able to leverage the existing energy exchange to 
become a bigger player in the broader European electricity 
market. 
 
State Energy "Champion" 
----------------------- 
 
¶5.  (C) Asked about the GOR proposal to merge the remaining 
state-owned energy companies into a single national 
"champion," Ciupagea said he believes this would allow the 
GOR to eliminate disadvantageous long-term supply contracts 
and remove the ability of certain politically-connected 
enterprises to obtain preferential rates on energy supplies. 
He said that Romania is receiving positive signals from the 
European Commission (EC) in terms of developing a national 
energy champion.  This was confirmed by the EC's Chief 
Representative to Romania, Niculae Idu, who told EconOff in a 
separate meeting that the current EU emphasis on energy 
 
BUCHAREST 00000431  002 OF 002 
 
 
security means the EC would likely not oppose a merger of 
state-owned companies on competition grounds.  In order to 
comply with existing competition rules, the GOR proposes to 
establish a holding company under outside management, but 
refrain from directly integrating supply and distribution 
companies.  (Note:  As an interesting aside, Prime Minister 
Calin Popescu-Tariceanu told visiting former Secretary of 
State Madeleine Albright on May 22 that the GOR would welcome 
foreign investment in a consolidated state energy company, 
particularly in the area of energy distribution.  End note). 
 
¶6.  (C) Comment:  Ciupagea is a good contact on energy issues 
and has been a reliable and open source on internal GOR 
thinking.  Post is somewhat surprised that the proposed 
energy "national champion" appears to be gaining 
institutional support.  The existing state-owned assets, 
which would be merged into a holding company, are not by 
themselves exceptionally attractive from a business 
perspective.  Consolidation would be a step back from the 
privatization drive that accompanied Romania's run-up to EU 
membership and has the potential to create anti-competitive 
conditions for the private sector.  However, the proposal 
does reflect a sense within the GOR that Romania needs to 
more actively assert its national interests in energy 
security, including through more direct state involvement. 
That same determination is driving Romania's interest in 
developing LNG facilities on the Black Sea coast.  While 
Romania has welcomed U.S. initiatives to assist, particularly 
through possible USTDA funding of an LNG feasibility study 
for Constanta, the reluctance of Romgaz to embrace ETG/UGI as 
its partners, and the news about South Korean interest, 
suggest that the GOR will go with whomever offers the best 
deal, U.S. or otherwise.  End Comment. 
TAUBMAN