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DE RUEHBS #1862/01 3451402
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R 101402Z DEC 08 ZDK
FM USEU BRUSSELS
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INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
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RUEHKB/AMEMBASSY BAKU

UNCLAS SECTION 01 OF 02 BRUSSELS 001862 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EPET EUN
SUBJECT: BARROSO LETTER TO POTUS ON ENERGY SECURITY 
 
¶1.  (SBU) EU Commission Officials provided USEU with a copy a 
letter dated November 27, 2008 from EU Commission President 
Jose Manual Barroso's to POTUS in response to the POTUS 
letter to President Barroso on Energy Security.  Text Follows: 
 
             Begin Text. 
--------------------------------------- 
 
Dear Mr. President, 
 
Thank You for your letter of 17th October 2008 concerning the 
issue of the security of energy supplies and the importance 
of actively promoting the Southern Corridor to facilitate the 
transit of Caspian gas to Europe. 
 
I agree with you that the Southern Gas Corridor linking the 
European Union to the Caspian Sea and the Middle East is a 
strategic priority, of course, not only for us but also for 
producer states which themselves need to diversify in order 
to get the benefits of real pricing mechanisms and spread 
their risks. 
 
In our Central Asia Strategy, we have clearly underlined the 
importance of Central Asian energy sources and the necessity 
to develop the Southern Corridor.  This has been confirmed by 
the European Commission as recently as 13 November in its 
Second Strategic Energy Review.  As highlighted at the recent 
European Council, the Commission will be organizing, under 
the upcoming Czech Presidency, a high level political event 
in the spring of 2009 with the Caspian Sea countries and the 
transit countries, to which Azerbaijan, in particular will be 
invited. 
 
You may rest assured that we share your view of the 
importance of increasing political engagement with 
Azerbaijan.  Building on existing bilateral energy 
cooperation, we are also currently examining, in the 
framework of our new Eastern Partnership initiative, what can 
additionally be offered to Azerbaijan and the other countries 
of our Eastern Neighborhood, including Armenia, Belarus, 
Georgia, Moldova and Ukraine, with a view to enhancing the 
security of energy supplies and transit routes. 
 
To have a viable Southern Corridor, we need in the first 
place a clear, transparent and cost-based transmission regime 
along the length of the corridor and we need to take 
seriously the supply concerns of the transited countries, 
including Turkey and Georgia. 
 
The Commissioner for Energy, Mr. Andris Piebalgs, recently 
visited Turkey and Azerbaijan.  He met the respective 
Presidents Gul and Aliyev, and Prime Minister Erdogan. From 
these discussions, it is clear that the transit regime 
currently offered by Turkey is not acceptable to Azerbaijan 
and thus, cannot serve as a basis to connect the Caspian Sea 
states to the EU.  Moreover, this transit regime does not 
appear to be compatible with the system within the EU, which 
Turkey intends to adopt. 
 
The gas transit system should not be at odds with the EU 
Internal Market rules.  We will, with Turkey, try to resolve 
outstanding issues of gas transit in the immediate future, 
including of course Turkey,s concerns on energy security 
which we feel will be best dealt with by other means. 
 
We will also need larger volumes of gas for the Southern 
Route.  Realistically, we have only Turkmenistan as near-term 
new supplier. To get over the Caspian Sea, we have proposed 
in our recent Strategic Energy Review a concerted private 
sector-led initiative (the Caspian Development Corporation) 
that will combine political, legal and commercial resources 
to make the link across the Caspian Sea.  Both Turkey and 
Azerbaijan are very interested in this idea.  The feasibility 
study for this project is to be spearheaded by the World 
Bank, together with the European Investment Bank and European 
Commission. 
 
Europe will continue to source substantial and indeed 
increasing quantities of its oil, gas and uranium supplies 
from Russia.  Hence cooperation on energy with Russia remains 
essential.  We are clearly in a situation of 
"inter-dependence" with Russia that, if prudently managed 
through a transparent regime of rules, can provide the basis 
for a more diverse and mutually beneficial economic 
relationship between us.  Rules in the field of energy are as 
important to Russia as they are to us; only with transparent, 
 
BRUSSELS 00001862  002 OF 002 
 
 
applied rules will both sides be able to invest. 
 
The European Union,s internal energy market is a rules based 
system, with fully regulated natural monopoly elements. 
Regulatory and competition law will be applied when there is 
a case to answer.  Countries that wish to join the European 
Union must appreciate that fact, as must our most important 
suppliers.  We have enforced competition rules against 
supplier companies when there has been a breach and we will 
continue to do so. 
 
To conclude, I think that we can now achieve the right 
conditions for the Southern Corridor.  Gas will get to Turkey 
but a considerable quantity must transfer through Turkey to 
the EU.  This should engender new gas field developments that 
will be sufficient for current and future needs.  The 
Southern Corridor, and its members, will increase in 
political importance.  It is that prize that Turkey must 
focus on. 
 
I am grateful for your interest in this important topic. We 
look forward to continuing our constructive dialogue and 
cooperation with the United States on energy issues. 
 
Yours sincerely, 
 
Jose Manual BARROSO 
 
             End Text. 
--------------------------------------- 
 
¶2.  (SBU) Comment.  Barroso's remarks on EU-Russia 
"inter-dependence" echo the oft repeated Commission line, 
that Russia needs the EU more than the EU needs Russia. 
Reading between the lines on Barroso's comments on using EU 
competition policy in the Energy field, what he does not say 
is that the EU is unwilling to aggressively pursue Gazprom on 
the basis of its market dominance and anti-competitive 
behavior.  Barroso's remarks about the "transit regime 
currently offered by Turkey" refers to the 15 percent 
lift-off model agreed to by the Turkey-Greece-Italy 
Interconnector (TGI) pipeline partners.  Commission officials 
have told us they view this agreement as problematic and not 
in agreement with EU rules which Turkey will have to comply 
with if it wants to join the Energy Community or eventually 
seek EU membership.  End Comment. 
 
MURRAY 
.