VZCZCXRO0243
PP RUEHAST RUEHCN RUEHGH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM
RUEHVC
DE RUEHBJ #4603/01 3540302
ZNR UUUUU ZZH
P 190302Z DEC 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 1481
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE PRIORITY
RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 4693
RUEHKO/AMEMBASSY TOKYO PRIORITY 2332
RHEHNSC/NSC WASHDC PRIORITY
RUEAEPA/HQ EPA WASHDC PRIORITY
RUEHOS/USMISSION OECD PARIS FR PRIORITY

UNCLAS SECTION 01 OF 03 BEIJING 004603 
 
STATE FOR EEB/ESC/HENGEL, EEB/ESC/PSECOR/JKOPP, OES, 
OES/EGC, OES/ENV, EAP/CM/HABJAN/FLATT, 
TREASURY FOR OASIA/ISA/DOHNER/HOLMER/WRIGHT 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ENRG EPET ECON EMIN SENV CH
SUBJECT: IEA/CHINA: DAS HENGEL DISCUSSES IEA, BILATERAL 
ENERGY COOPERATION WITH CHINESE OFFICIALS 
 
¶1. (SBU) Summary:  Chinese energy experts and government 
officials explained their views on bilateral energy 
cooperation and China?s engagement with the International 
Energy Agency (IEA) with EEB DAS Douglas Hengel December 
3-5.  On bilateral energy cooperation, National Energy 
Administration International Cooperation Director General 
Wu Guihui praised the accomplishments of the Strategic 
Economic Dialogue (SED) and other fora, but noted that 
several bilateral energy cooperation mechanisms have 
overlapping responsibilities, but are led by different 
ministries, leading to institutional obstacles in some 
cases.  Energy Research Institute (ERI) Director General 
Dr. Han Wenke suggested that the U.S. and China establish 
a policy coordination mechanism, which could improve 
market stability.  On IEA cooperation, all interlocutors 
agreed that China should continue to strengthen its 
cooperation with the IEA, but several noted concerns 
about the possibility of China joining the IEA. DG Wu 
stated that it is ?premature? for China to pursue IEA 
membership, as the IEA would need to revise its criteria 
for membership if China were to join.  ERI DG Han noted 
that the Chinese government is currently studying how it 
can best work with the IEA.  On membership, he said that 
if the IEA were to issue a formal invitation for China to 
join, China would be obligated to respond.  Development 
Research Council (DRC) DG Dr. Feng Fei said he also 
supports closer cooperation with the IEA, but pointed out 
that China would struggle to meet the IEA?s membership 
criteria at this time.  End Summary. 
 
¶2. (SBU) In conjunction with participation in the 
Strategic Economic Dialogue in Beijing December 3-5, EEB 
DAS Douglas Hengel discussed bilateral energy cooperation 
and China?s engagement with the International Energy 
Agency (IEA) with National Energy Administration (NEA) 
International Cooperation Director General Wu Guihui, 
Energy Research Institute (ERI) Director General Dr. Han 
Wenke, Director for the Center of China Studies at 
Tsinghua University Dr. Hu Angang, and Development 
Research Center (DRC)of the State Council Department of 
Industrial and Economic Research Director General Dr. 
Feng Fei. DAS Hengel solicited Chinese views on how to 
improve bilateral energy cooperation mechanisms and how 
best to pursue China?s coordination with the IEA, noting 
that the U.S. has been a strong advocate for Chinese 
participation in IEA activities and that the U.S. would 
support Chinese efforts to become an IEA member. Such 
efforts would be assisted by an expression of interest by 
China in joining the IEA, he explained. 
 
U.S.-China energy relationship ?at a crossroads? 
--------------------------------------------- -- 
 
¶3. (SBU) NEA DG Wu Gui Hui, DRC DG Dr. Feng Fei, and 
NDRC-affiliated Energy Research Institute (ERI) DG Dr. 
Han Wenke praised bilateral efforts to strengthen energy 
cooperation through the Energy Policy Dialogue, the SED, 
the Ten Year Framework, and exchanges between U.S. and 
Chinese research institutions.  Wu said the bilateral 
energy relationship now ?stands at a crossroads.?  He 
pointed out that existing cooperation mechanisms reflect 
the needs of both countries at the time they were created. 
Some of these mechanisms now overlap with one another, 
but are led bydifferent ministries, resulting in 
institutional obstacles in some cases.  DRC DG Feng noted 
that while bilateral energy cooperation remains a top 
priority for the Chinese government, it is easiest for 
China to contribute to efforts at the regional level. 
 
¶4. (SBU) DG Han suggested that the U.S. and China 
establish a policy coordination mechanism.  For example, 
the U.S. could inform China if it planned to increase its 
strategic petroleum reserves or China could inform the 
U.S. in advance of changes to domestic fuel prices.  Such 
a mechanism would contribute to international market 
stability, he explained. 
 
 
BEIJING 00004603  002 OF 003 
 
 
U.S. should be flexible on technology transfer 
--------------------------------------------- --- 
 
¶5. (SBU) NEA DG Wu recommended that the U.S. and China 
focus on substantial cooperation on environmental 
protection, climate change, and renewable energy. 
Opining that U.S. IPR concerns hinder the transfer of 
clean energy technology to China and other developing 
countries, Wu stated that the U.S. should promote a ?more 
flexible environment? for technology transfer.  Wu said 
China welcomes U.S. enterprises and institutions that 
want to invest in new energy research and development in 
China. This could also benefit U.S. companies weathering 
the economic crisis in the United States, he argued.  DRC 
DG Feng also suggested that the United States should 
offer greater support for the transfer of clean energy 
technology to China.  Feng acknowledged U.S. IPR concerns, 
but argued that China relies heavily on coal-fired power 
generation and the transfer of clean coal technology 
would be in the interest of both countries. 
 
¶6. (SBU) ERI DG Han also noted that the U.S. and Chinese 
governments should make efforts to improve enterprise- 
level cooperation on clean energy and energy efficiency. 
He noted that many U.S. clean energy firms already 
operate in China and more would like to do so.  China, on 
the other hand, has many clean energy companies that have 
not yet entered the U.S. market.  By encouraging clean 
energy enterprises to enter one another?s markets, the 
U.S. and China could speed up technology transfer and 
stimulate more investment in clean energy technology, he 
stated. 
 
Chinese NOCs? overseas activities benefit us all 
--------------------------------------------- --- 
 
¶7. (SBU) DRC DG Feng noted said he is concerned that the 
U.S. misunderstands Chinese national oil companies? (NOCs) 
overseas exploration and production objectives.  In 
Feng?s view, the U.S. and China must work to establish 
?common trust? regarding Chinese NOCs overseas activities. 
The U.S. should not assume that Chinese NOCs intend to 
control overseas resources.  Rather, Chinese NOCs? 
overseas activities contribute to increased production 
and greater market stability.  He pointed out that 
African oil, for example, is expensive to transport back 
to China and a portion of Chinese NOCs? production in 
Africa is sold on the international market.  This 
benefits all oil importing countries including the U.S., 
he argued. 
 
U.S., China need to lead on climate change 
------------------------------------------ 
 
¶8. (SBU) Director for the Center of China Studies at 
Tsinghua University Dr. Hu Angang asserted that China 
should play a more active role in international energy 
cooperation, including through the IEA and other 
organizations.  The U.S. and China should also assume 
more responsibility and leadership in international 
discussions on climate change, he suggested.  On this 
issue, Hu opined that Chinese leaders remain reluctant to 
commit to specific emissions reductions targets.  In Hu?s 
view, this is because central government authorities 
worry that if they make a commitment, local government 
leaders will be unable to follow through effectively. 
 
Supportive of IEA cooperation, but cautious on membership 
--------------------------------------------- ---------- 
 
¶9. (SBU) NEA DG Wu welcomed the IEA?s cooperation with 
China and acknowledged U.S. support for Chinese 
membership in the IEA.  He argued, however, that it is 
still premature for China to seek membership, as China 
does not belong to the OECD and does not meet the IEA?s 
membership requirements.  Wu noted that the IEA would 
have to revise its membership criteria if China were to 
 
BEIJING 00004603  003 OF 003 
 
 
join.  Wu explained that China will continue its 
cooperation with the IEA and said that NEA 
Administrator/NDRC Vice Minister Zhang Guobao would 
consider participation in next October?s IEA ministerial. 
 
¶10. (SBU) ERI DG Han, echoed Wu?s views on IEA membership, 
noting that China would have to overcome several legal 
obstacles -- in particular OECD membership -- in order to 
join the IEA.  Han explained that Chinese government 
agencies are now in the process of studying how China 
could best work with the IEA.  As part of this process, 
China is reviewing the obligations that IEA membership 
would entail.  It will be another 3-5 years before China 
reaches a decision on whether to pursue IEA membership, 
he stated.  Han explained that earlier this year, he had 
told IEA President Tanaka that IEA member countries 
should first reach internal consensus on whether to 
invite China to join.  If the IEA were to issue a formal 
invitation for China to seek membership, China would be 
obligated to respond, he clarified.  Hengel responded 
that the U.S. supports changing the OECD membership 
requirement, which would be easier to do if China 
expressed an interest in joining. 
 
¶11. (SBU) DRC DG Feng also welcomed closer cooperation 
between China and the IEA and agreed that Chinese 
participation in IEA activities enhances global energy 
security.  On membership, however, Feng emphasized that 
China must carefully review the costs and benefits of 
joining the IEA.  He also pointed out that China is far 
from meeting the IEA?s membership requirements. 
Insufficient collection of energy data, for example, 
would make it difficult for China to meet the IEA?s rules 
on transparency.  ?The government itself does not know 
the true cost of energy,? he explained.  OECD membership 
and 90-day petroleum reserves requirements would also be 
challenges for China.  Feng noted that IEA voting weights 
would need to change if China joined, which may be 
problematic for some European members. 
 
Comment 
------- 
 
¶12. (SBU) Comment:  Chinese officials expressed a strong 
interest in further cooperation with the IEA, but 
remained cautious about pursuing membership.  They noted 
that China will not qualify for IEA membership in the 
near future, pointing out that China will not become an 
OECD member any time soon, 90 days of petroleum reserves 
remains a long-term goal, and IEA voting weights would 
need to be changed to reflect China?s large and growing 
oil imports.  One official expressed concern that Chinese 
membership in the IEA would result in obligations to 
reduce greenhouse gas emissions.  Hengel explained that 
this was not the case. End Comment. 
 
¶13. (U) DAS Hengel has cleared this cable. 
 
RANDT