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R 011154Z OCT 08
FM USEU BRUSSELS
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INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA
RUEHAH/AMEMBASSY ASHGABAT
RUEHKB/AMEMBASSY BAKU
RUEHSI/AMEMBASSY TBILISI

UNCLAS SECTION 01 OF 03 BRUSSELS 001532 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EPET EU
SUBJECT: SPECIAL ENVOY GRAY'S MEETINGS WITH EU OFFICIALS 
 
¶1.  (SBU) Summary.  On September 23-24 Special Envoy for 
Eurasian Energy C. Boyden Gray met with EU officials to 
discuss the way forward on the EU's Southern Corridor 
strategy.  Energy Commissioner Piebalgs said that the Nabucco 
project remains a high priority for the EU but that 
negotiations with Turkey have not been encouraging.  Piebalgs 
realizes the importance to Turkey of opening the Energy 
Chapter and plans to lobby Cyprus and the Council to this 
end.  Ambassador Edmund Duckwitz, German Permanent 
Representative to the European Union, told SE Gray that 
Germany still views Russia as a reliable partner and argued 
that Germany needs all three pipelines -- Nord Stream, South 
Stream, and Nabucco.  Dr. Klaus Gretschmann, High 
Representative Solana's Energy Advisor, gave a starkly 
different view from Duckwitz saying that Russia fears a 
public criticism over Gazprom's dominance.  He also doubts 
that Competition Commissioner Kroes will take any action 
against Gazprom.  Commission Director General for Enlargement 
Michael Leigh (Please Protect) told SE Gray that while 
opening the Energy Chapter with Turkey would not change much 
in concrete terms, it would be symbolically important in 
terms of demonstrating momentum in the EU-Turkey relationship 
and timely in light of high level EU discussions on energy 
security. End Summary. 
 
¶2.  (SBU) On September 23-24 Special Envoy for Eurasian 
Energy C. Boyden Gray met with EU officials to discuss the 
way forward on the EU's Southern Corridor strategy. 
 
Energy Commissioner Piebalgs 
---------------------------- 
¶3.  (SBU) EU Energy Commissioner Andris Piebalgs told SE Gray 
that the Nabucco pipeline will have a high priority in the 
Commission's Strategic Energy Review, which is to be 
completed this fall.  Politically, Piebalgs is not giving up 
on ambitions for Nabucco, but getting Turkey to back away 
from their current lift-off demands for a transit deal is 
critical.  Piebalgs stressed that giving Turkey lift-off 
rights for transit gas is a dead end with the Azeris. 
Piebalgs said the Commission has no problem with Azerbaijan 
and Turkey reaching a bilateral agreement for gas, but said 
he could not accept Turkey "stealing" the gas through a 
lift-off clause.  Piebalgs feels that Turkey must agree to 
some sort of a transit-tariff-plus arrangement.  He also 
believes that using the "Caspian Development Corporation" 
idea would enable the EU and Turkey to go together to 
Turkmenistan to get additional gas supplies. 
 
¶4.  (SBU) Piebalgs acknowledged the Turkish desire to open 
the Energy Chapter and said he was going to work with Cyprus 
and the Council to see if he can push this forward. 
According to Piebalgs, lift-off rights are the red line for 
the EU.  The opening of the Energy Chapter is a priority 
under the French presidency, but Cyprus remains the principal 
impediment to this process.  Piebalgs said he planned to work 
on persuading the Cypriots.  On Azerbaijan, Piebalgs said the 
Russians are putting immense pressure on them to sell their 
gas to Russia, but that Azerbaijan is not as vulnerable to 
Russian pressure as it looks.  Piebalgs emphasized that 
Azerbaijan is key to any Caspian strategy and that "if we 
loose in Azerbaijan, we can forget about Turkmenistan." 
 
¶5.  (SBU) Piebalgs said the Southern Corridor negotiations 
are coming to a crisis point.  If the Southern Corridor 
concept is to move forward to reality he feels negotiations 
must succeed this year.  Piebalgs said the EU is willing to 
do whatever it needs to help Turkey with its electricity 
generation needs, but stressed that Turkey has a history of 
announcing big plans for nuclear energy projects but then 
fails to deliver.  Piebalgs downplayed Turkish objections to 
burning coal on environmental grounds.  He said the Turks did 
not join the Energy Charter treaty and aren't subject to EU 
environmental constraints.  He added that the EU and the U.S. 
could use Turkey as a testing ground for carbon capture and 
storage (CCS) technology for coal-fired power plants and 
Turkey could always buy Clean Development Mechanisms (CDMs) 
for the plants.  In any scenario, Piebalgs feels gas will 
always be more expensive than coal. 
 
¶6.  (SBU) The EU is willing to discuss alternatives on the 
transit negotiations with Turkey, but so far there is nothing 
new coming out of the Turkish side.  Piebalgs had hoped that 
the CDC idea would help win over the Turks and said that the 
EU was willing to pursue it even though it would go against 
the EU's competition laws. 
 
 
BRUSSELS 00001532  002 OF 003 
 
 
¶7.  (SBU) Publicly Piebalgs is continuing to push the Nabucco 
pipeline; privately he doesn't care if the solution ends up 
as Nabucco, TGI, or TAP.  To Piebalgs, the game is not about 
volumes.  The game is about the principal of moving Azeri gas 
to Europe and the important thing is to get the gas flow 
started.  Piebalgs spoke briefly about the proposed White 
Stream gas pipeline from the Caspian through Ukraine.  The 
Ukrainians are pushing for this pipeline, but realistically 
Piebalgs doubts that Azerbaijan would ever agree to ship its 
gas via Ukraine. 
 
¶8.  (SBU) Commenting on the EU's support for the 
Trans-Saharan gas pipeline from Nigeria, Piebalgs said the 
project is getting big headlines but faces immense 
difficulties, and he does not believe it is realistic. 
Piebalgs said his advice to companies and member states is to 
forget about Iranian gas for now, because of the obvious 
political problems.  Likewise, Piebalgs believes that Iraqi 
gas will not be available to Europe in the short term. 
Piebalgs said that in the short term "all we really have is 
Azerbaijan." Turkmenistan is not in a hurry and is watching 
carefully what happens in Azerbaijan. 
 
German Permanent Representative 
------------------------------- 
¶9.  (SBU) In a meeting with Ambassador Edmund Duckwitz, 
German Permanent Representative to the European Union, 
Duckwitz echoed the position that Germany (Europe) needs all 
three pipelines -- Nord Stream, South Stream, and Nabucco. 
Duckwitz said the EU needed to diversify its gas routes as 
well as its gas sources and stressed Russian/European 
codependence as gas supplier and consumer.  According to 
Duckwitz, Germany continues to view Russia as a reliable gas 
supplier.  He said he understood that some countries in 
Eastern Europe have more concerns about the Russians, but 
that this was not something that affected Germany. 
 
¶10.  (SBU) Duckwitz stressed that Germany is not overly 
dependent on Russia, getting only 23 percent of oil and 21 
percent of its gas from Russia.  (Note:  Eurostat, the 
Commission's statistical arm, reports Russia's share of 
German oil imports at about 30 percent and that of German gas 
imports at about 42 percent.  End Note.) Duckwitz views the 
Russian actions in Georgia as a "complication," but hoped 
this would be resolved with EU observers on the ground and 
continued negotiations with Russia. 
 
Klaus Gretschmann 
----------------- 
¶11.  (SBU) Dr. Klaus Gretschmann, High Representative 
Solana's Energy Advisor, told SE Gray that the EU is sticking 
to its Southern Corridor Strategy post Georgia.  The Council 
is concerned, however, about the potential for Russian 
control over pipelines in Georgia.  Whether or not Russia 
targeted pipelines during the conflict is immaterial, the 
important thing is the threat that they could have and could 
do so in the future.  Gretschmann has heard from several 
member states who believe the attack on the BTC pipeline in 
Turkey prior to the Georgia conflict was at the very least 
encouraged by Russia, if not planned and executed by Russia. 
The Council will be holding discussions on how to react to 
this threat. 
 
¶12.  (SBU) Gretschmann said that the next European Council 
will focus on security.  Despite French Presidency desires to 
move forward on the Climate and Energy Package few member 
states want to discuss green house gases as they are 
preoccupied with security.  According to Gretschmann, "Nobody 
gives a damn about CO2, they all want to have their energy 
safe."  As such, Gretschmann expects the October 14-15 Energy 
Council to focus only on security of supply both in 
geostrategic terms and in terms of energy solidarity. 
According to Gretschmann, member state positions on these 
issues are fluid at the moment.  They could reach a general 
agreement and move forward on the Third Energy Package, or it 
could all fall apart. 
 
¶13.  (SBU) Queried about using EU competition policy against 
Gazprom, Gretschmann confirmed the story that EU President 
Barroso had raised the subject with then President Putin and 
"had his head taken off." According to Gretschmann, the 
Russians fear a public debate more than they fear any 
potential action the EU might take.  Gretschmann stressed 
that the EU is not convinced of the value of using the 
"hammer" approach in negotiations with Russia.  Gretschmann 
also candidly commented that EU Competition Commissioner 
 
BRUSSELS 00001532  003 OF 003 
 
 
Neelie Kroes is on her way out (not expected to be part of 
the next Commission) and Gretschmann does not expect her to 
be willing to take any bold action against Gazprom before she 
leaves. 
 
Opening the Energy Chapter with Turkey 
-------------------------------------- 
¶14.  (SBU) Special Envoy Gray also met with Commission 
Director General for Enlargement Michael Leigh (Please 
Protect) in Brussels September 24.  Gray told Leigh the 
Turkish Deputy Foreign Minister wanted the EU to open the 
Energy Chapter of the acquis (chapter 15) for negotiations 
with Turkey.  Leigh responded that the Commission and the 
French presidency would like to open the Energy Chapter.  The 
hold-up is the Cypriots, who have dug in their heels since 
the EU began to discuss the possibility of opening the 
chapter last Spring.  Cypriot objections initially involved 
licensing fees and other technicalities, but have become a 
matter of principle ) essentially a political block on the 
opening of the chapter.  Leigh said that given the fact the 
other 26 member states have no objection to opening the 
chapter, perhaps concerted pressure on the Cypriots could 
help. 
¶15.  (SBU) Gray asked whether the U.S. could help with this, 
to which Leigh responded that quiet, behind-the-scenes 
discussions with the French presidency and other member 
states might be worthwhile.  He noted in particular the 
Greeks, who have the ability to lean on the Cypriots and who 
stand to benefit from improved dialogue with Turkey on energy 
issues.  (Note: a UK contact (Please Protect) separately told 
USEU that Greece might be reluctant to push Cyprus on opening 
this chapter because of territorial sea concerns.  However, 
the contact noted rumors that French President Sarkozy might 
be willing to lean on Cypriot President Christofias to open 
the chapter, as France would like to improve its bilateral 
relationship with Turkey, especially on energy.  End Note.) 
Leigh said that, while the opening of the energy chapter 
would not change much in concrete terms, it would be 
symbolically important in terms of demonstrating momentum in 
the EU-Turkey relationship and timely in light of high level 
EU discussions on energy security. 
 
¶16.  (SBU) Comment.  The remarks by Duckwitz are 
disappointing but not unexpected.  The EU focus on energy 
security laid out by Piebalgs and Gretschmann, on the other 
hand, are encouraging.  Piebalgs appears to have a hard task 
ahead on trying to get the EU to open the Energy Chapter with 
Turkey.  And whether or not the EU can move forward on the 
Third Energy package and on energy security in general will 
depend on just how much control over energy supplies the 
member states are willing to cede to Brussels.  End Comment. 
 
Silverberg 
.